TaxCorporate TaxEC moves to clarify VAT rules

EC moves to clarify VAT rules

New legislation proposed by the European Commission will remove many of the contentious 'areas of interpretation' in the European Union's sixth directive on VAT, replacing them with precise legal regulations.

Link: Digital VAT plans are ‘tax dodgers’ charter’

Since 1997 the EU member states, meeting in the VAT Committee, have agreed ‘guidelines’ to cover the VAT regime but these are not compulsory, do not apply to all countries and are not in the public domain.

The Commission, seeking to simplify and modernise the VAT system, believes there should now be clear and binding rules. Specifically they will allow for a clear definition of the ‘place of supply’ – a key matter as there is a growing danger of double taxation on cross-border transactions because of differences in applying the provisions of the sixth directive governing the place of supply.

Also to be clarified is the term ‘electronically supplied services,’ as well as the types of goods and services that should be VAT-exempt and the amount that should be liable for VAT.

The new system would also have the advantage of ‘publicising’ the rules ‘so that traders and tax administrations would be able to see directly how the directive should be interpreted and how they would be affected,’ a Commission official said.

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