The European Union (EU) is proposing a significant change to its Value Added Tax (VAT) processes that could revolutionise how businesses handle their VAT obligations. This proposal, known as the Single VAT Registration system, aims to streamline VAT processes for businesses selling goods and services to consumers across the EU.
In VAT in the Digital Age, Brian Hogan covers the measures currently proposed by the European Commission to modernise and make Europe's VAT system work better for businesses and more resilient to fraud. The proposals specifically address embracing and promoting digitisation for VAT.
Currently, businesses operating in the EU may have obligations to register for VAT in multiple jurisdictions. This can be a complex and time-consuming process, especially for businesses making electronically supplied services or distance sales of goods to private consumers. Each jurisdiction has its own set of rules and regulations, which can make VAT compliance a daunting task.
Enter the Single VAT Registration system. This proposed system builds on the existing 'One-Stop Shop' concept, which allows businesses to report their VAT obligations across multiple member states through their home revenue authority. The Single VAT Registration system extends this concept further, reducing the need for separate registrations and streamlining the VAT process.
Under the new system, businesses would only need to register for VAT in their home country. They would then report all VAT due across various EU member states through their home revenue authority, which would disseminate the VAT into the respective jurisdictions where it's due. This means an Irish business, for example, could manage its VAT obligations for all EU transactions through one Irish registration, rather than having to register separately in up to 27 EU jurisdictions.
The Single VAT Registration system also expands the range of goods and services covered by the One-Stop Shop. In addition to electronically supplied services and distance sales, the system would cover a wide range of other supplies such as supply installation, supply on board ships or aircraft or trains, supply of gas, electricity, heating and cooling, cross-border local B2C supplies, and more.
Moreover, the system proposes the introduction of a mandatory reverse charge accounting for B2B supplies of goods located in another EU member state. This means that instead of having to register for and charge VAT in the country where the goods are sourced, businesses can apply a domestic reverse charge, with the customer accounting for the VAT.
However, it's important to note that the One-Stop Shop does not cover all transactions. For instance, it doesn't cover supplies and acquisitions, export supplies, or give right to input VAT recording. Businesses will still need to refer to their domestic rules for these transactions.
The Single VAT Registration system promises to significantly simplify VAT processes for businesses operating in the EU. By reducing the need for multiple registrations and streamlining VAT reporting, this system could save businesses time and resources, making it easier for them to operate across borders within the EU.
To watch the full session, please click here. In the session, Brian covers the following topics;
- The proposal for a new real time digital reporting system based on e-invoicing.
- The proposed digital reporting system for Intra EU transactions.
- Updated VAT rules for the platform economy.
- A single VAT registration for businesses selling to consumers across the EU.
- The current status of the proposals generally.
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.