EU VAT Reform – the 4 quick fixes arriving in 2020 and what about Brexit implications

As part of this EU VAT reform, 4 Quick fixes will change the VAT rules for EU cross border supply of goods in all EU member countries from 1st January 2020.

We had previously outlined in our 2017 tax newsletter detail of the EU reform proposals and action plan for VAT in Europe.
The published proposals outlined fundamental changes to the EU VAT system and a move further towards a definitive system based on the destination principle which sought to replace the current VAT rules introduced in 1993.

The EU Commission objective is to reduce VAT fraud while at the same time simplifying and modernising the European VAT system.

As part of this EU VAT reform, 4 Quick fixes will change the VAT rules for EU cross border supply of goods in all EU member countries from 1st January 2020.

What are the 4 quick fixes and what is intended?

  • Simplification of the rules dealing with sales of goods stored in another Member State (i.e. call-off stock arrangements)
  • The change and simplification of rules to ensure legal certainty regarding chain transactions which entail the movement of goods from one EU Member State to another.
  • Simplified proof that goods have been transported cross-border within the EU; and
  • For cross-border movement of goods, in addition to proof of transport, the VAT number of the business at the receiving end is required for the cross-border VAT zero-rating to be applied- mandatory VAT ID number checks for Intra-community supplies. In addition, the zero-rating will be dependent on the supplier filing their VIES Returns.  

Implications for businesses owners and stakeholders    

On the upside, the proposed simplification and harmonisation of VAT rules for business to business (b2b) supplies across borders should lead to a reduction in exposure to opposing tax authorities each seeking to tax the same cross border transaction. Less ‘red tape’ bureaucracy

There is also a benefit from access to call off stock relief in all EU Member States that does not currently apply. This will facilitate the adoption of consistent and uniform processes in meeting EU wide VAT compliance obligations. Reduced administration

The 4 quick fixes will however have a cost and resource impact on current cross border supply chains. Understanding

Client businesses and stakeholders will need to action and prioritise changes relating to administrative and logistical reporting, IT support, legal and tax reporting implications. Cost and Resource prioritisation

The broader impact risk of Brexit and the exclusion of the UK trading market from these provisions needs also to be considered and addressed as part of wider business contingency planning. Protecting business opportunity

To address the separate reporting requirements involved with trading into Europe and the UK will generate costs and additional administration/ IT demands.  Planning

Recommended steps to be taken

Business managers need to familiarise themselves with the implications and impact that these changes will have on existing supply chains to customers

Assess the benefits of these changes and factor into business plans

Identify and prioritise required support resources to implement changes

Initiate the business changes without delay if not already in hand as 1st January 2020 is imminent

Consult and seek support from your advisors. Mazars will assist in helping you understand these rule changes and what actions are required.

On the horizon

The EU Parliament has published its draft report supporting new rules to make Online Marketplaces responsible for VAT on sales of goods that they facilitate and Extending the EU VAT MOSS into a one-stop-shop (OSS) to cover the sale of goods as well as services from 2021.

Online Marketplaces

The new rules will treat online marketplaces (e.g. Amazon, eBay etc.) as the seller in respect of goods with a value up to €150 sold via their platforms by non-EU businesses to customers in the EU. The same rules will apply when non-EU businesses use online platforms to sell goods from fulfilment centres in the EU, irrespective of their value.

Extension of EU VAT MOSS

The existing EU VAT mini one-stop-shop (VAT MOSS) which currently covers telecommunication, broadcasting and e-services will be extended into a one-stop-shop (OSS) covering all types of services, as well as distance sales of goods (both intra-community and imports from non-EU countries) with effect from 1 January 2021.

It is noteworthy that above proposals will extend to the UK suppliers supplying into the EU Market post Brexit as they will fall under the definition of non-EU businesses.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars VAT team below:

Staff Member

Position

Email

Telephone

Frank Greene

Tax Partner

fgreene@mazars.ie

01 449 6415

Alan McManus

Tax Director

amcmanus@mazars.ie

01 512 5525

 

September 2019

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