TaxCorporate TaxEuropean Union eases VAT rules

European Union eases VAT rules

European politicians have agreed on a directive that will simplify VAT rules, ensuring that electronic invoices are accepted throughout the Union.

The European Union Council of Finance Ministers agreed that under the policy, companies will only have to follow a single set of rules governing VAT invoicing, rather than the 15 which are currently in place.

‘This important measure will cut the cost of administrative red tape for firms and facilitate ecommerce,’ said Fritz Bolkestein, taxation commissioner at the European Commission. The EC estimates that the administrative costs for paper invoices are 88p compared to 25p for electronic invoices.

The finance ministers agreed that electronic invoices should be recognised provided that their authenticity is guaranteed through the use of electronic signatures or electronic data interchange.

Ministers also agreed on a list of 10 mandatory items of information that must be included in every invoice. It will also be permissible to store electronic invoices online. The proposals will be formally adopted shortly, with the Directive coming into force by 1 January 2004.

‘This will mean the UK has to make changes to the VAT Act,’ said John Salmon, a partner at law firm Masons.

No one from the government was able to comment on when such changes would be introduced.

The proposals were initially aired in June 2000 following complaints from traders in Europe.

Currently, the 15 member states have different rules governing the information that has to be contained within invoices. Some EU countries prohibit electronic invoices, or require them to be backed up by paper versions.

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