Generalised reverse charge mechanism
In order to combat VAT fraud, the European Council is adopting a generalised reverse charge mechanism, implying that all domestic supplies between two VAT taxable persons will be subject to the reverse charge mechanism if the value of the supply exceeds the amount of EUR 17,500.
For the implementation of this regulation, the EU member states have to comply with a number of strict conditions, e.g. the requirement that VAT carrousel fraud corresponds to 25% of the VAT cut in the member state concerned. The qualifying member states have to file a request with the European Council and need to impose adequate reporting requirements to all VAT taxable persons in their member state, but mostly to the VAT taxable persons concerned.
After approval by the European Council, the regulation applies until 30 June 2020.
To address a number of practical issues in cross border transactions under the current European regulations, the European Council has introduced so-called ‘quick fixes', as suggested by the European Commission, such as measures for:
- The simplification of VAT rules for VAT taxable persons that keep a stock in another member state;
- The simplification of allocation rules for transport in cross border chain transactions;
- The simplification of the proof of transport within the EU;
- The presence of a valid VAT identification number as a requirement for documentary evidence of intra-Community supplies (i.e. in absence of a valid VAT number, there is no longer an argument for the application of the exemption).
The first three measures would still be linked to the capacity of 'Certified Taxable Person', but the practical modalities are yet still unknown.
More details are available in our previous newsflash 'European Commission launches a reform of the European VAT system'.
The short term measures will apply from 1 January 2018.
Reduced VAT rate for electronic publications
Taking into account the digitising economy, the European Council has also approved the European Commission’s proposition to apply the reduced the VAT rate to electronic publications (books, magazines, newspapers). The member states which already apply super-reduced or zero VAT rates to ‘physical’ publications, will be able to extend their existing regulations to electronic publications.
To be continued…
The propositions of the European Commission still have to be submitted to the European Parliament. It is expected that the European Council will adopt the guidelines without further discussions as soon as the text is available in all official languages.
Questions regarding this subject can be addressed to one of our VAT specialists, or you can send an e-mail to [email protected] :