The EC is considering whether to introduce a standard VAT return form to improve tax compliance for businesses across member states although experts warn that it will not eliminate the complexity of the current cross-border VAT issues, report Harris & Co chartered accountants.
The proposal of a new VAT return to standardise VAT reporting obligations across all 28 EU member states will remove one of the biggest obstacles for companies to expand their business opportunities in the single market, especially small European businesses, claims the EU.
The standard VAT return – which will replace national VAT returns – will mean a uniform set of requirements for businesses when filing their VAT returns, regardless of the Member State in which they do it. It will ensure that businesses are asked for the same basic information, within the same deadlines, across the EU. Given that simpler procedures are easier to comply with and easier to enforce, the proposal should also help to improve VAT compliance and increase public revenues.
Businesses will file the standard VAT return on a monthly basis, while micro-enterprises will have to report on a quarterly basis. The recapitulative yearly VAT return, which some member states currently demand, will also be abolished. It will also be possible to submit the standard VAT return by electronic filing throughout the EU.
The announcement received a cautious welcome from the ICAEW, which said any measures to simplify pan-European VAT collection would help business, but cautioned that this would not eliminate all cross-border VAT problems.
Ian Young, ICAEW international tax manager, said: ‘A standard VAT return form for EU businesses should reduce errors and costs, allowing both businesses and EU tax administrations to increase efficiency, which is critical at a time when growth and public spending are great challenges.
‘Reducing unnecessary red tape where possible is critical to allowing businesses to focus their efforts on actually doing business. However, introducing a standard VAT return form across the EU will not automatically fix the EU VAT system. Further changes are required to make the system simpler and more coherent.’
According to ICAEW, other changes that should be considered include simplifying the rules for VAT compliance to ease trading within the Single Market, abolishing requirements to register and maintain a VAT registration in other member states than the home country, and reducing the complex set of VAT exemptions that currently exists.
Every year 150m VAT returns are submitted to EU tax administrations. However, the reporting obligations vary in all 28 member states making it difficult for companies that do business in more than one state to comply with so many different rules.
Algirdas Šemeta, commissioner for taxation, said: ‘The standard VAT return presents a win-win situation. Businesses will enjoy simpler procedures, reduced costs and less red tape. Governments will have a new tool to facilitate VAT compliance, which should increase the revenues they collect.’