1. Malta Institute of Management VAT Conference Malta 15 October 2014
Implementation of the Commission's work programme Update Donato RAPONI DG TAXUD Head of VAT Unit
Malta Institute of Management VAT Conference
Malta 15 October 2014

2. The Future of EU VAT
As a follow up to the Green paper, the Communication of December 2011 lays down the fundamental features of the future VAT system:
A EU system based on the destination principle: Doing business across the EU must be as simple and as safe as engaging in domestic activities
Simple: A single set of simple, clear and modern rules and obligations
Efficient and neutral: Restricted use of exemptions and reduced rates, equal rules governing the right of deduction
Robust and fraud proof: Modern methods of collecting and monitoring VAT

3. Destination vs. origin principle EU concepts
Destination: goods are taxed where consumption takes place
Different options for implementing such a system:
Option N° 2a: Adapting current rules whilst still following the flow of the goods with supplier charging the VAT of the MS
Option N° 4b: Aligning with the rules governing the place of supply of services with the reverse charge mechanism
Option N° 5a: Aligning with the contractual flow with the supplier charging the VAT of the Member of destination
And options b ……

4. Destination vs. origin principle EU concepts
Important question: person liable for payment of VAT?
Supplier liable for payment of VAT and charges VAT on all intra-EU transactions. Requires a broader One-Stop-shop
Customer liable for payment of VAT when the supplier is not established: Reverse Charge
In-depth technical work with all stakeholders involved (VAT Expert Group) and MS (Future of VAT)
Study EY, completed first quarter 2015
Conference in March 2015

5. The Future of EU VAT: other issues
Towards a simpler VAT system
Standardisation of VAT obligations
First step: an EU VAT return:
proposal adopted by the Commission on 23 October 2013, ongoing discussion in the WP of the Council
Agreement possible
application in 2020,
standardisation: main priority

6. Digital Economy
Global debate on ensuring taxation from the Digital Economy.
Technology now means that business can make transactions into markets without the need for a physical presence.
Applying VAT to B2C transactions can ensure that revenues accrue to the country of destination – by applying the destination principle.
The EU has been the leader globally on applying the destination principle.

7. International debate BEPS Action Plan
One specific horizontal action is devoted to the digital economy (Action 1)
Identify the main difficulties that the digital economy poses for application of existing international tax rules
Develop detailed options to address these difficulties

8. BEPS addressing B2B and B2C issues
B2B: VAT/GST guidelines endorsed by the Global Forum on VAT on 18 April 2014
B2C: work in progress, absence of effective international framework (creates tax planning opportunities, distorsions of competition and revenue losses).
Consensus on allocation of taxing rights to the juridiction of the consumer
VAT collection challenges
Consumer self assessment
Compliance by non-resident suppliers (voluntary)
Appropriate mechanism for registration/payment of foreign suppliers

9. Issues related to VAT Clarification from a VAT perspective
Transactions in the digital economy
Supply of electronic services: supplies delivered over the Internet without any need for a physical presence, such as electronic music, books or videos
(list of these services defined in the EU VAT Directive
Supply of goods ordered on line
The VAT treatment will depend on the type of supply, the recipient (customer is business or an end consumer), the place of supply and the deductibility of the VAT

10. 2015 Place of Supply Rules
Agreed by EU Council in 2008 as part of a phased reform to place of supply rules.
From 1 January B2C supplies of electronic services, broadcasting and telecommunications will be taxed where the customer is established (Destination Principle).
Significant development in EU Tax legislation.
Place of supply: proxies
High priority for the Commission and Member States.
3 Implementing Regulations agreed which give a sound legal footing.
Communication plan being rolled out.
How to apply the rules in practice?
Implementing Regulation agreed in June 2013.
Extensive guidelines were published in 2014
Covers who accounts for the tax, where is the customer located i.e. where is the tax due, what is an electronic service, how to apply the MOSS etc.
Objective is to give certainty to business and tax administrations, even the
instrument is not binding.
Limits opportunities for double taxation and non-taxation

11. Mini One Stop Shop to support the 2015 Rules
Vendor registration and remittance - business will be able to account in one MS in respect of supplies to other MS (where they don’t have an establishment).
MOSS will be a simple web interface with quarterly tax returns.
2003 scheme (non-union scheme) will be integrated into the new system.
There will be revenue sharing in initial stages.
30% in 2015 and 2016
15% in 2017 and 2018.
MOSS Guidelines for Business published in all languages of the EU as well as Russian, Chinese and Japanese.
Measures to coordinate audits are being developed in coordination with MS.
The Commission is monitoring the IT implementation in each MS.

12. Where next? – Possible EU Policy options
The natural next step is a broader One Stop Shop to include all B2C distance supplies of goods and services – already included as an action in the EU Commission Communication on the Future of VAT (December 2011).
Registration thresholds for distance sales of goods should be unnecessary as it will be simple for business to comply.
Audit and compliance regime – home country auditing, mutual assistance, joint audits, revenue sharing.
Commission services consider that there is a need to revisit the small consignment exemptions for B2C supplies into the Community. Provide a level playing field.
Commission expert group on taxation of the digital economy will report in June 2014.

13. Digital economy: conclusion
VAT is part of the solution to ensure taxation from the Digital Economy in Europe and elsewhere.
Vendor registration/remittance through a simplified (web-enabled) mechanism is a proven means by which business can account for the taxes due. 
Ensuring compliance is evolving (as it does for every tax).
Need to consider Revenue Sharing

14. The future of VAT: others issues
An EU VAT web portal
Providing business with more accurate and reliable information on Member State rules and obligations
step by step approach, linked with standard VAT return
Ecofin conclusions
Improving the governance of VAT at EU level
Tripartite EU VAT forum and VAT Expert Group
Project group: intra-Eu ruling
Guidelines and explanatory notes
- invoicing
- Place of supply of services
- services related to immobable property: consultation launched, Fiscalis seminar in Madrid in November

15. The Future of EU VAT: other issues
Towards a more efficient VAT system
Broadening the tax base
Public bodies : gradual approach towards taxation
Studies: copenhagen Economics: economic effects (published on Taxud Web site)
Seminar with stakeholders and MS
Public Consultation: closed: 600 contributions
Preparation of the impact assessment and proposal (begining 2016)
Passenger transport: more neutral and simpler rules
Study launched end 2012: assessment of the present system: distorsion of competition, results expected November 2014, followed by a public consultation and conference f

16. Review of the reduced rates
Review of the reduced rates based on 3 criteria:
Abolition of those reduced rates which are not compatible with the single market
Abolition of reduced rates on goods and services for which consumption is discouraged by other policies
Similar goods and services should be subject to the same VAT rate, convergence between on-line and physical environment
Launching of public consultation on 8 October
Targeted consultation of a technical nature
Written comments received
Studies: e-bools and structure on VAT reduced rates
IMPORTANT: part of the assessment process and no policy decisions have been taken !!

17. The Future of EU VAT: other issues
Towards a more robust and fraud-proof VAT system
Quick reaction mechanism (to combat VAT fraud)
Directives adopted
1st request: refused
Better cooperation with third countries (key issue: supply of services): mandate presented end of 2013: Russia and Norway
Improve the efficiency of tax administrations of the EU
Report on art. 12 presented end of 201
Reviewing the way VAT is collected and monitored
Study to be launched in 2015 on Split payment system ?

18. Vouchers Vouchers are not mentioned in the VAT Directive.
Vouchers can have an impact on:
The time of taxation
The place of taxation
The taxable amount
Compliance obligations ……

19. Vouchers Defining vouchers for purposes of VAT Time of taxation
Dealing with the distribution of multi-purpose vouchers
Dealing with discount vouchers
Possible agreement on limited solution
Distribution services and the related taxable amount in the distribution chain of MPV: further discussions

20. Conclusion
EU VAT harmonised legislation applied across Europe (28 countries, 500 million inhabitants,35 million taxable persons)
Main drivers:
Internal Market: facilitates the integration of cross-border trade in the EU
Fiscal consolidation: billion revenue
Main difficulties:
Business: compliance costs, legal certainty (EU trade)
Member states: fraud (VAT gap 18 %)

21. Conclusion
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