As announced in the Action plan adopted by the European Commission in April 7, 2017, a definitive VAT system within the European Union (EU) should be in place with effect from 2022, replacing the transitional VAT regime in force since January 1st, 1993 (1).
Substantial changes will impact the intra community B2B supplies of goods first. The second step will consist in extending the new VAT treatment to all cross border supplies including supplies of services, the idea being finally that all the cross border transactions within the EU be taxable the same way those achieved in the territory of one single Member State.
The deadline seems faraway but in the meanwhile some first significant changes should impact the current regime as of 2018. The opportunity for the businesses to acquire the quality of “certified taxable person” (in other words the quality of reliable tax payer) is one of the new measure that should be taken among others.
The concept of certified taxable person in the field of VAT is modeled on the status of Authorized Economic Operator (AEO) existing for custom. As a matter of fact, the businesses who has been granted the AEO status should be deemed to meet the criteria to be satisfied to get the status of a certified taxable person. In addition to the absence of any serious tax infringement and financial solvency, the applicant for certification will have to demonstrate a “high level of control of his operations and of the flow of goods…” (2)
Get ready to obtain the certification is probably the next project that the businesses will have to launch. They will have interest in getting this certification quickly and encouraging their trade partners to do the same.
Indeed, by the end of 2018, only certified taxable person will be entitled to use simplification for some transactions complex to manage in the framework of the current VAT regime (3). So the sale on consignment stock between certified taxable people will not need VAT registration in the Member State where the goods are located as it is required very often. Likewise, some rules will simplify the VAT treatment of the supply chain when certified taxable persons are involved (4).
Similarly, harmonization and simplification for evidencing intra community transport are part of the solution that the Commission would like to adopt quickly. However those new rules will apply only when the seller (or the buyer) liable for transport is a certified taxable person (5).
For the further implementation of the definitive VAT regime, the quality of certified taxable person will be an essential element of the system at least in the first round (6). As a general rule, the intra community B2B supplies of goods will be taxable at the VAT rate of the ship to country, the seller being liable for invoicing VAT in force in this country. However, liability will be shifted to the buyer when he is a certified taxable person. VAT will be self assessed by the latter at the rate in force in the ship to country as it is today. Not only the certified taxable persons will continue not to pay VAT on theirs acquisitions of goods from other Member States but he will not need to significantly change the way they manage such a type of acquisitions as they will keep on self assessing VAT as they did in the past (7)
It should be noted that those new mechanisms will be implemented assuming that a single online web portal will be set up through which each business will be able to file VAT returns and pay VAT of any Member State where taxable operations are performed with no need for VAT registration. Whether VAT of the ship to country will be invoiced or self assessed, no vat registration will be required in this country.
The introduction of the status of certified taxable person is an opportunity for the enterprises to check they have efficient processes and internal control systems available. This is already a legal requirement (see regulation on internal audit trail in particular). This will be also in the near future the only way to be officially a reliable tax payer and anticipate the deep coming changes.
(1) “Action plan on VAT – towards a single EU VAT area – time to decide” adopted by the European commission – COM (2016) 148 final.
Communication from the commission to the European parliament , the council, and the European economic and social committee on the follow up of the action plan of VAT (towards a single EU VAT area – time to act”) – 4.10.2017 – COM (2017) 566 final.
(2) Proposal of October 4, 2017 for a council directive amending directive 2006/112/EC as regards harmonizing and simplifying certain rules in the value added tax system and introducing the definitive system for the taxation of trade between Member States COM (2017) 569 final – article 1 inserting an article 13a in the directive 2006/112.
(3) Proposal of October 4, 2017 for a council directive amending directive 2006/112/EC as regards harmonizing and simplifying certain rules in the value added tax system and introducing the definitive system for the taxation of trade between Member States COM (2017) 569 final – article 1 inserting an article 17a and 138a in the directive 2006/112.
(4) About the issue related to the chain transactions see our articles of September 18, 2017 “triangulation and VAT: must we say everything to his supplier?” (web site alain-renouf-avocat.com, heading: “articles”)
(5) Proposal for a council implementing regulation amending Implementing Regulation (EU) n°282/2011 as regards certain exemptions for intra-community transactions COM (2017) 568 final.
(6) Besides the commission has already proposed the integration of the certified taxable person status of the businesses by the Member states into the VAT Information exchange System (VIES) in the same way as VAT ID numbers (proposal for a regulation amending Regulation (EU) n° 904/2010 as regards the certified taxable person – COM (2017) 567 final)
(7) Only the legal grounds of the taxation will change. In the new VAT system, the certified taxable person will not assess VAT because he is liable for VAT on an intra community acquisition taxable by it-self but because he is liable for VAT on a supply of goods from another Member State.