VAT news

European Commission

EU VAT reform – VAT Expert Group comments on the “quick fixes”

carolineheath 1 May 2019 No comments

At their last meeting the VAT Expert Group (VEG) discussed the EU “quick fixes” legislative package which is due to be implemented from 1 January 2020.

What are the “quick fixes”?

The short-term quick fix measures are designed to improve the day-to-day functioning of the current VAT system, until the definitive regime has been fully agreed and implemented.  See our earlier blog articles here and here for more information on the proposed definitive VAT system and the “quick fixes” package.

The quick fix measures cover:

  • A simplification for call-off stock arrangements (where a business moves goods from one Member State to hold as stock in another Member State for an intended customer whose identity and VAT identification number are known at the time of transport).
  • A simplification of chain transaction situations identifying the supply with which the intra-Community transport of goods should be linked.
  • A simplification relating to the proof of transport of goods between two Member States needed for the application of the exemption to intra-Community supplies.
  • Clarification that, in addition to the proof of transport, the VAT number of the commercial partners as recorded in the electronic EU VAT-number verification system (VIES) is required in order to apply the cross-border VAT exemption under the current rules.

What is the VAT Expert Group (VEG)?

The VEG assists and advises the European Commission on VAT matters. The group is composed of:

  • individuals appointed in a personal capacity with the requisite expertise in VAT, and
  • organisations representing businesses and tax practitioners which can assist in the development and implementation of VAT policies.

The European Commission papers on the quick fix package

The European Commission has provided the VEG with two working papers outlining the provisions within the legislative package for their discussion.

The papers are:

  • VEG No 079 on the VAT quick fix relating to call-off stock arrangements.
    The document discusses the VAT treatment of different transaction scenarios involving a call-off stock arrangement under the respective quick fix rules.
    The call-off stock simplification applies to intra-Community B2B supplies of goods and allows the supplier to avoid a registration obligation in the Member State of destination.
    The scenarios covered are: standard call-off stock arrangement, substitution of the customer (where the new customer also applies the call-off stock regime), supply to a third party (who does not apply the call-off stock regime), return of goods to the supplier (to the Member State of dispatch), exceeding the time period granted for the simplification, transporting goods to a third Member State, exporting goods to a third country, and the destruction or loss of goods.
  • VEG No 080 on the VAT quick fixes relating to chain transactions and the conditions and proof need to apply exemption to the intra-Community B2B supplies of goods. The document provides detailed explanations relating to these quick fixes.
VEG comments

The VEG has produced a paper with comments from its members on the VEG No 079 and 080 papers.  The document, which is not a formal position paper, includes numerous issues and points which in their view need further clarification.

The following extract from the paper highlights that, rather than being a simplification, many VEG members view the new measures as actually increasing the burden for businesses:

“It is important to remember the starting point for the quick fixes. The objectives of the quick fixes are:
– short term measures to simplify the current system,
– less burden for business,
– consistent application of the rules.

Do the newly adopted regulations by the Council achieve these objectives?

When looking in more detail at what the Council adopted it rather feels that the quick fixes are far from being a simplification but rather create major complexities and a considerable increase in processes and formalities. Some see it even as a “step backwards” for business. We would hope that existing and more beneficial simplification regimes should be maintained as much as possible.

To ensure that the quick fixes are a real simplification in practice it is highly important that the Commission is clarifying and communicating the unclear points addressed by the business community in explanatory notes, to support legal certainty and a uniform application of the new provisions across EU 28.”

What businesses should do  

All three papers are useful reference material for any business involved in the B2B intra-EU movement of goods. Businesses affected by the changes should familiarise themselves with the new requirements to ensure they meet the relevant conditions needed to benefit from the measures from January 2020.

It will be interesting to see how the European Commission responds to the VEG’s comments, and if as recommended they produce explanatory notes to help businesses ahead of the implementation date.