As part of its package to aid economic recovery, the European Commission outlined several VAT initiatives to be formally proposed and implemented between now and 2024. They included:

  • amending ‘outdated’ provisions on financial services first put into place in 1977. The Commission said that proposal will take into account the rise of the digital economy and the increase in the outsourcing of input services by financial and insurance operators, as well as the way this sector is structured;
  • revising the special scheme for travel agents: according to the Commission, the current rules lead to a degree of distortion of competition between EU established and non-EU established travel agencies, exacerbated by digitalisation. Taking into account the outcome of its current consultation, the Commission will propose changes to simplify the scheme and to ensure a level playing field within the EU;
  • making proposals to further extend the scope of the VAT One Stop Shop to include all remaining business to consumer transactions not yet covered or to be covered from next year.
  • Making proposals regarding the rules for the platform economy to provide clarity around questions such as whether people offering services or goods on the platform are taxable persons and the (VAT) nature of the service. The role that platforms could have in securing the collection of VAT is also to be examined;
  • reviewing the existing VAT exemptions for certain types of passenger transport
  • making proposals for modernising VAT reporting obligations to ensure a quicker, possibly real-time, and more detailed exchange of information. E-invoicing is to be considered in this context;
  • moving towards a single EU VAT registration, which businesses would be able to use anywhere in the EU;
  • considering a dispute resolution mechanism for VAT; a mechanism to prevent and to solve disputes concerning the implementation of the VAT Directive;
  • beginning the process to negotiate administrative cooperation agreements in VAT with relevant third countries (similar to the one between the EU and Norway), starting from some of the main trade partners of the EU;

DLA Piper comment: Are the suggested reforms too ambitious? We think that it is too early to tell. But they are certainly a move in the right direction towards are more cohesive and effective VAT regime.

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