Below we set out the VAT highlights that are included in the Tax Action Plan.
Single EU VAT registrations and extension of the One Stop Shop
The EC announces a legislative proposal to introduce a single EU VAT registration and further extension of the One Stop Shop (“OSS”).
Under the current EU VAT rules, the general rule is that a taxpayer needs to VAT register in the Member State where the VAT is payable and report and remit the VAT in that Member State. For taxpayers with cross-border operations, this results in VAT registrations and compliance obligations in multiple Member States. There are exceptions to this general rule, such as the OSS, which gives taxpayers the possibility to register in a single Member State to report and remit all EU VAT through the Member State of registration. The One Stop Shop however is limited to specific supplies (e.g. electronically supplied services to B2C customers).
The EC announces an initiative that sees to introducing rules around a general single EU VAT registration and further extending the scope of the OSS to all B2C supplies that are taxable in the EU.
Financial Services and Tour Operators Margin Scheme
The EC acknowledges the need to update the VAT rules for financial services and the Tour Operators Margin Scheme (“TOMS”).
The VAT exemptions for financial services that are currently in place were introduced in 1977. Since then, the world of financial services has changed significantly. In practice, applying these exemptions to financial services leads to difficulties and uncertainty around the taxation of such services. The EC will therefore present a legislative proposal for updating certain provisions, taking into account the rise of the digital economy and the world of fintech.
Along the same lines, the EC intends to revise the TOMS, which is a special arrangement for travel agents and tour operators, which requires modernization.
Modernizing VAT reporting obligations and cooperation between Member State
To simplify reporting and to improve the accuracy of reported information, the EC will prepare a legislative proposal for modernizing certain VAT reporting obligations, possibly including real-time exchange of information between taxpayers and/or tax authorities, e.g. around cross-border transactions.
The Tax Action Plan further includes an initiative focusing on the verification and monitoring of data on transactions and administrative cooperation between Member States.