VAT to change?

The European Commission (EC) has published a paper presenting its first ideas on how to redesign the VAT system to ensure a simpler, more effective and more fraud-proof VAT system tailored to the Single Market in the EU say Harris & Co accountants Northampton #accountantsnorthampton

Developing a new definitive VAT regime suited to the modern economy and favourable to intra-EU trade is a high priority for the EC given that the existing transitional regime, which has been in place for over 20 years, has proven to be prone to fraud and highly complicated for cross-border businesses.

After much political and technical consultation, the consensus is that any definitive regime must be based on the principle of destination, i.e. VAT is due at the point of destination of the goods.

The Commission staff working document on the implementation of the definitive VAT regime for intra-EU trade sets out what the EC considers to be five feasible options which cover the range of achievable combinations of possible ways of addressing the two fundamental issues at stake , these being the place of taxation and the person liable for tax.

The five options are as follows:

Two of the options maintain and improve the current system, while the other three were included for further examination.

The EC says it is now undertaking an in-depth assessment to determine the impact of each of the options for businesses and for member states. It expects to present the possible way forward in Spring 2015.