At present, businesses that take part in cross-border trade
within the EU face a complex and daunting process, requiring them
to pay VAT in the Member State where consumption of the goods they
supply takes place.
The result is that many businesses have to pay VAT in a Member
State where they have no permanent establishment, something that
can be very difficult when the trader is not fully acquainted with
the language and legislation of that other country. According to
the Commission, this is a major obstacle to the smooth functioning
of the Internal Market.
The Commission would prefer all companies to levy VAT at their
place of origin (or establishment), with the revenues then being
reallocated to the appropriate Member State. However, for political
reasons, this is unlikely to happen in the near future.
The Commission is therefore taking steps to simplify and
modernise the existing system, and the consultation launched on
Tuesday seeks views on one aspect of this.
The consultation proposes an optional and fully electronic
compliance scheme that would be open to every trader supplying
goods or services that are subject to VAT to customers in Member
States other than that in which it is established.
The Commission warns that the proposals are still very much in
the conception stage, and invites comments from all interested
parties before 31st July.
The scope of the scheme would be limited to supplies made by
businesses to consumers (B2C). Business-to-business (B2B) supplies
should, says the Commission, be dealt with separately – preferably
by changing the VAT rules so that the customer (if he is a trader)
rather than the supplier would be responsible for paying the VAT on
services supplied to him.
The B2C scheme would allow a trader to register only once, in
the Member State where it is established, and to use a single VAT
number for all B2C supplies made within the scope of the
scheme.
VAT declarations would be made to one single on-line portal and
would then be submitted automatically to the different Member
States to which the trader supplies goods or services. Member
States would still have different VAT rates and regulations, but
information on these would be made available to the trader when
completing the relevant declarations.
Payments would be made directly to the Member State of
consumption, possibly with the help of financial intermediaries,
according to the proposals.
