VAT Updates – European Union tax news overview of December 2016

January 11, 2017 Sovos Tax Research Team

Here is a summary of news and updates related to value-added-tax in the European Union during the month of December 2016.

Consultations on VAT Reform

On December 20, 2016, the European Commission opened public consultations on three aspects of its recently-introduced “Action Plan on VAT:”

  • Business-to-Business (B2B) transactions involving goods
  • Special schemes for small enterprises
  • Reform of VAT Rates

The “Action Plan on VAT” envisioned a robust, single EU VAT area, which would i) combat VAT fraud by treating cross-border transactions in the same way as domestic transactions; ii) reduce complexity for small and medium-sized businesses; and iii) introduce a modernized rates policy for Member States.

The three consultations above are intended to determine the scope and nature of measures needed to implement these goals. The consultations will run until March 20, 2017.

VAT Exemptions for High Value Business-to-Business Sales

According to recent reports, the European Commission is proposing a pilot program under which Member States could opt not to apply VAT on sales between businesses of more than 10,000 euros. This is a derogation from the general rule of charging VAT on all business-to-business (B2B) transactions.

The Commission has stated that this measure – which has been advocated by several central European countries, notably the Czech Republic – will only be applied temporarily, and will not be mandatory for Member States. The backing of all 28 Member States would be necessary for the measure to take effect.

Proposals for New Council Directives

On December 1, 2016, the European Commission published two proposals for new European Council Regulations. The first proposal would allow Member States to apply the same VAT rates on electronically supplied publications as on printed publications.

The second proposal would introduce a host of new rules for cross-border business to consumer (B2C) e-commerce, including:

  • Extension of the Mini-One-Stop-Shop (MOSS) scheme to tangible goods and services sold online in addition to electronically supplied services;
  • New simplified arrangements for reporting of import VAT where such VAT has not been paid via the MOSS system;
  • Removal of intra-Community distance sales thresholds;
  • Removal of VAT exemptions on small imported consignments from third-country suppliers;
  • New VAT threshold rules to help small start-up e-commerce businesses;
  • Greater application of home country rules for invoicing and record keeping; and
  • Greater coordination between Member States when conducting cross-border VAT audits.

The e-commerce proposal would provisionally take effect in 2018.

Greenhouse Gas Emission Allowances: Place of Supply

In Case C453/15, the Court of Justice of the European Union (CJEU) held that the place of supply for a business-to-business (B2B) transfer of greenhouse gas (GHG) emission allowances is the location where the customer has established his business.

The Court reasoned that transfers of GHG emission allowances could be categorized as “transfers and assignments of copyrights, patents, licenses, trademarks and similar rights” because GHG emission allowances, similar to the other listed rights, are immaterial, confer an exclusive right on the holder, and may be transferred to a third party for purposes of an economic activity.

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