Commission’s plans to strengthen the role of the VAT Committee

The VAT Committee consists of representatives of the member states and of the Commission and examines the application of EU provisions raised by the Commission or a member state. However, because it is an advisory committee, it can currently only agree non-binding guidelines on the application of the VAT Directive.

The EU Commission published, at the end of last month, a proposal to empower the Committee to adopt implementing acts by turning it into a ‘comitology committee’ which would allow it to interpret and clarify provisions of the VAT directive. This proposal was contained in the Commission’s 2020 Tax Package Action Plan published in July last year and was the subject to a ‘roadmap’ consultation in October last year. The objective of the proposal is uniform interpretation of VAT rules in all member states to avoid discrepancies potentially leading to double taxation, distortions of competition, and additional costs for businesses.

The proposal specifies that the powers would only be applied in connection with a limited set of rules implementing the provisions of the VAT Directive, for which a common interpretation is required. The proposal also identifies articles in the VAT Directive concerning which the Committee could exercise the proposed powers for providing a common interpretation.

DLA Piper comment: Local EU tax authorities sometimes have different (sometimes opposing) views on the interpretation of VAT Directive provisions. At present, a taxpayer may seek out a cross-border ruling or start legal proceedings (e.g., ultimately possibly leading up to a Court ruling). The proposed committee is therefore a welcome development as it provides more certainty to taxpayers.