European Union: Single EU VAT Return: Is The Endgame Really Near?

Last Updated: 3 September 2015
Article by Jacek Szufan

VAT payers around the world have been longing for an easier way to get cross-border reporting done, and they may be in luck. Maybe.

Right now, each EU member state has almost complete independence when it comes to the format of the VAT return form. A positive result of this can be the example of a UK VAT return, where only a handful of data is requested. However the polar opposite exists in Italy, where several pages of data must be submitted.

Enter the Standard EU VAT Return. Most VAT payers and VAT/tax managers have been following this topic with great interest and high expectations, and rightly so. The vision of one form that is standard across the EU, helping businesses - particularly ones that find it hard financially to expand and can't support large tax and compliance costs - can be exciting.

Suggested in 2013 and approved by the EU Parliament and member states in 2014, the single EU VAT return and initial work on the project has been moving faster than wildfire. The implementation is scheduled for 2017 so it needs to progress quickly. While the enthusiasm associated with this was at the beginning, on par with the anticipation for the next Game of Thrones season, it quickly became dampened as EU member states tried to agree on what was required. I am sure that no one interested or involved in cross-border EU Commission projects saw this one coming!

So where do the differences come from?

Let's ignore the fact that it may bring an estimated €3-6bn benefit when it comes to the removal of cross border trade obstacles. Let's also forget the €9bn that should result from the reduced administrative burden. Let's focus on the most important thing that EU member states can't agree on: how many boxes this single VAT return should have.

They began with five, but it quickly became apparent that this would not be enough. Selected EU member states requested more data. In almost an instant 21 more boxes were suggested to get the required information. However it would appear that even that was not enough, because after a year of "negotiating" (read: arguing about the contents of the form) EU member states and the EU Commission "agreed" (read: pretty much had no choice) on 60 boxes. This is probably due to the fact that the EU Commission made it clear that unless member states could agree on the details, it would stop supporting the initiative and potentially even drop it completely.

The above, together with costs of implementation is what currently stands in the way of the planned 2017 implementation.

A question of priority

Separately virtually every single EU member state will have to adapt local legislation to support this initiative and that is likely to take time. With a number of EU countries currently worrying about everything from paying debts to a migrant influx to bankruptcy, it does appear that priorities are changing, and the initiative of the standard VAT return may end up being sidelined with the implementation date pushed back.

After all, we are now well past the middle mark of 2015, and a template of the said return doesn't appear to be on the horizon. So right now we have 60 boxes. A large number of these are optional, which may lead to EU member states picking different ones for the format of their return. If that happens we may end up with rather different declarations across the EU. But wait? Isn't that what we have now? Simplification? Hardly.

While the single VAT return and the endgame for EU filing complexity is out there, it may still be a while before it becomes a reality. The 2017 deadline is certainly ambitious to say the least.

An alternative

Instead of focussing its efforts on standardising reporting, the EU Commission could look into changing the VAT system by changing the place of supply rules and introducing an EU-wide reverse charge of goods. This would not just limit - or stop - the necessity to register and pay VAT on a non-resident basis, but could also potentially make the single VAT return initiative somewhat pointless.

After closer consideration isn't that what the VAT Expert Group and Group on the Future of VAT are working on in partnership with the EU Commission? It is apparently scheduled for implementation in 2019, two years after the single VAT return...

Looking for some background? Here it is:

Proposal of amendment of the EU Directive - click here.

Opinion of the European Economic and Social Committee on the 'Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards a standard VAT return' COM(2013) 721 final — 2013/0343 (CNS) click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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