When to expect definitive VAT system for EU?
A long-awaited draft amendment to the VAT Directive, intended to specify the outlines of the definitive VAT system for intra-EU supplies of goods, was published by the European Commission on 4 October 2017.
The fact that the current VAT system for intra-community supplies of goods is temporary and requires radical changes has been generally known for a long time. The draft amendment was finally published: what news does it bring? While breathlessly expecting details of a new concept of the intra-community supply of goods, we are instead provided with only the basic pillars of the definitive VAT system. The draft deals with issues, further discussed below, that are largely connected with the definitive system. According to the draft amendment, EU member states should implement appropriate provisions into their legislations with effect from 1 January 2019.
The first issue the draft amendment elaborates on is the certified taxable person status. A new uniform system of attestation should be introduced, allowing for a particular business entity to be globally regarded a reliable taxpayer. The certified taxable person status can be compared with the authorised economic operator status known from the customs area. The criteria for obtaining both statuses will be similar. The certified taxable person status is associated with a number of VAT advantages and seems to be one of the preconditions for the smooth operation of business activities on a multinational basis.
The second issue put forth is the simplification of call-off or consignment stock scheme, which involves the delivery of goods via a warehouse to customers - determined in advance - in another member state. The simplification measures should only apply to certified taxable persons in all member states.
A novelty in the draft amendment, but nothing new for Czech VAT legislation is the application of a VAT exemption on intra-community supplies only by recipients registered for VAT and the supplier’s duty to check the recipient’s VAT identification number via the VIES system. The draft also responds to member states’ request for clear rules for determining the supply within a chain of transactions to which intra-community transport should be ascribed and determines the principles along which this should happen.
Finally, the draft proposal for the definitive VAT system confirms the destination principle, i.e. the taxation of an intra-community supply at its destination. The fact whether the supplier and the recipient are certified taxable persons will also be crucial. Taxation will be performed via the One-Stop-Shop (similar to the Mini-One-Stop-Shop, MOSS) when tax is collected in one member state and subsequently distributed to relevant member states. The legislative draft of the definitive VAT system should be prepared during the course of 2018.
Pressure to verify the reliability of business entities operating on a multinational basis and obtain the certified taxable person status will be substantial. It is necessary to get ready. The draft amendment is a significant step towards setting the definitive system but the road ahead of us is long.