1. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference1 VAT in the internal market – Current issues and future developments Rolf DIEMER Head of Unit DG Taxation and Customs Union D1: Value Added Tax and other turnover taxes European Commission

2. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference2 Some topical issues  Background and history  VAT package  “Technical” Directive  Eliminating double taxation  Financial services  Vouchers  Fight against fraud  Invoicing  VAT grouping  Other topics  Longer-term reflections

3. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference3 Background and history Art. 93 of EC Treaty requires harmonisation “to the extent … necessary to ensure the establishment and functioning of the internal market “ 1 st and 2 nd VAT Directives (April 1967) Legal and Political commitment to the establishment of a common VAT system based on taxation at ORIGIN. 1977 6th VAT Directive (Common system of VAT) Recast: Directive 2006/112/EC (unanimity decision making)

4. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference4 Attempts to apply origin system in the 1980s and 1990s Rules and tax rate of country of origin (implying quasi-complete harmonisation) Receipts reallocated to country of consumption (macro-economic approach) Simplest system for business; true internal market concept

5. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference5 Why has origin system not been implemented? Reluctance to give up fiscal sovereignty and accept the necessary harmonisation of rates etc. Reluctance to rely on other Member States to collect a substantial portion of VAT revenue. Reluctance to trust “statistical” re-allocation system

6. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference6 What has happened since 2000? More pragmatic approach: Emphasis increasingly placed on taxing in country of consumption Harmonisation efforts concentrated on areas where compliance burdens could be reduced without undermining fiscal sovereignty Origin-system in principle remains long-term goal

7. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference7 Lisbon strategy Lower burden on businesses Increase competitiveness Maintain social cohesion

8. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference8 VAT strategy Launched in 2000 and updated in 2003 Seeks to –Modernise –Simplify –ensure more uniform application –increase administrative cooperation Work programme largely achieved but important remainders (public bodies, etc.) New VAT strategy 2010/11

9. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference9 Where are we now? Since 1993 (internal market!) B2C supplies of goods: above minimum threshold taxed in country of consumption (supplier required to register in country of consumption) B2B supplies of goods: taxed in country of consumption via I. C. supply plus I.C. Acquisition

10. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference10 Where are we now? From 2010: B2B supplies of services will be taxed in country of consumption using reverse charge mechanism From 2015: Certain B2C supplies of services will be taxed in the country of consumption using a (“mini”) one stop shop mechanism

11. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference11 VAT Package - major changes in place as from 1 January 2010 - practical impact of the new rules on the place of supply of services - new electronic procedure for refund of VAT

12. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference12 VAT package Achieved: –changing the rules governing the place of supply of (many) services –setting up a one stop mechanism for non-established traders for electronic B2C services –overhauling the VAT refund procedure to allow the use of modern technology Implementation work going on – urgent! “Comprehensive” OSS remains on the agenda, but de facto longer-term

13. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference13 VAT Package – change of main rule (1) Current ruleFuture rules General rule Article 43 – Place of supply where the supplier is established General rules Article 44 – Place of supply of B2B services where the customer is established Article 45 – Place of supply of B2C services where the supplier is established (no change)

14. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference14 VAT Package – change of main rule (2) Current ruleFuture rules Definitions Article 43 (new) – (1)a taxable person who also carries out activities or transactions that are not considered to be taxable supplies of goods or services in accordance with Article 2(1) shall be regarded as a taxable person in respect of all services rendered to him; (2)a non-taxable legal person who is identified for VAT purposes shall be regarded as a taxable person.

15. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference15 Some provisions modified - immovable property (new Article 47) Other provisions entirely new: - admission (new Articles 53/54) - catering and restaurants (new Articles 55/57) - hiring of means of transport (new Article 56) - telecom, broadcast and electronic services (new Article 58) VAT Package – changes of particular provisions (1)

16. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference16 VAT Package – changes of particular provisions (2) Particular rules introduced gradually over time –admission –hiring of means of transport –telecom, broadcast and electronic services

17. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference17 VAT Package – some consequences of new rules (1) New rules make it more important to correctly identify status of the person to whom services are supplied –taxable person or –non-taxable person (final consumer)

18. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference18 VAT Package – some consequences of new rules (2) Broader application of the B2B rule –via new Article 43 –issues clarified in relation to Article 44 Limitations to the B2B rule –resulting from wording of Article 44 (acting as such) –via recital 4 (services for personal use)

19. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference19 VAT Package – some consequences of new rules (3) Reverse charge for services supplied between Member States –when supplier is not established –new Article 192a to limit uncertainty relating to fixed establishment –when does such fixed establishment ‘intervene’

20. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference20 VAT Package – some consequences of new rules (4) Influence of general shift of B2B rule on scope of effective use and enjoyment rule –may potentially be used more widely after change

21. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference21 VAT Package – some consequences of new rules (5) Mini OSS –only from 1 January 2015 –will apply to telecom, broadcasting and electronic services –main features of the system

22. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference22 VAT Package – new administrative formalities for business (1) Liability –extension of reverse charge –taxable persons and non-taxable legal persons identified for VAT purposes usually liable for payment of VAT when receiving services from other Member State –follows from changes to Article 196

23. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference23 VAT Package – new administrative formalities for business (2) VAT identification –Member States obliged to register taxable persons who supply and receive services for which reverse charge applies –follows from changes to Article 214

24. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference24 VAT Package – new administrative formalities for business (3) Recapitulative statements –listing obligation extended to cross-border services within EU –no listing for exempt services –follows from changes to Article 262 –monthly as of 1.1.10 (Dir. 2008/117/EC)

25. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference25 Commission has undertaken various initiatives to ensure common understanding of the new rules on the place of supply of services as introduced by Directive 2008/8/EC to facilitate implementation of the new refund procedure as introduced by Directive 2008/9/EC Commission’s follow up initiatives

26. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference26 Place of supply of services (1) Fiscalis Seminar organised in November 2008 on some issues newly introduced such as hiring of means of transport, admission to various events, restaurant and catering services. Already in 2008 – and continuing during the first part of the year 2009 – extensive discussions with Member States have taken place in the VAT Committee, focusing on possible common guidelines on issues in the field of the VAT package.

27. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference27 Commission plans to make a proposal to the Council in order to transform the guidelines agreed in the VAT Committee into implementing measures. Implementing measures will need to be adopted unanimously. Place of supply of services (2)

28. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference28 Current problems for traders –burdensome administrative formalities –requests in official language of the country of refund –documents to be introduced by fixed time limits –languages use, etc… –increasing non-respect of refund time limits –formalistic approach leading to frequent rejections Refund of VAT – current situation (1)

29. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference29 Current problems for administrations –each refund requires physical intervention –stamping of documents which are to be returned –very time consuming, which often prolongs the proceedings –lack of effective verification as regards division of expenditure between taxed, exempt, outside scope activities –pro rata, actual attribution Refund of VAT – current situation (2)

30. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference30 New refund procedure –leaves principles mostly unchanged –modernises procedure by –introducing fully electronic procedure –giving more legal certainty for businesses and enhancing their position –providing for better control –encouraging more SMEs to apply for refund Refund of VAT – future situation (1)

31. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference31 Objectives of new procedure –simplification –refund application shall be sent to the Member State of establishment (Article 7) –new system provides more information and guidance –should be easier for the trader than the present system –speed and certainty –as the Member State of establishment will validate eligibility and completeness of application (Articles 15 and 18) Refund of VAT – future situation (2)

32. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference32 Refund of VAT – future situation (3) Objectives of new procedure –improve the system by utilising electronic procedures –notification by electronic means (Articles 18-20) –electronic simple contact point mechanism

33. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference33 Refund of VAT – future situation (4) What does the new procedure imply for business? –the system is mandatory –no need for VAT certificates or original invoices any more –but information per invoice has to be filed –internet required –electronic communication –repayment possible only to bank accounts within the EU –interests are to be paid after the deadlines

34. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference34 The Commission has been working closely with Member States to ensure that the new refund procedure will be in place by 1st January 2010. From a technical perspective, all the planning has been done for the IT system and the technicians from the Member States are confident of meeting the deadline Refund of VAT – follow up (1)

35. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference35 From an administrative perspective, there was a Fiscalis seminar held in Stockholm in September 2008 to discuss the administrative and technical challenges posed by the new Directive There was a discussion in the VAT Committee on 8th December on the open legal questions which arose subsequent to the Fiscalis event Refund of VAT – follow up (2)

36. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference36  No provision was made in the Directive for the role of agents (nor was there specific provision in the 8th Directive), but the simplicity of the new arrangements will mean that taxable persons should no longer feel the need to employ an agent (who can charge up to 20% of the VAT recovered) to exercise his right of deduction  The technical system will allow for claims to be submitted by and refunds made directly to agents – the Member State of establishment will set the rules (authorisation/power of attorney etc.) for the submission of claims by agents and the Member State of refund will set the rules regarding repayments made to agents Refund of VAT – follow up (3)

37. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference37 VAT package (B2C supplies telecoms, broadcasting, electronic services) For B2C supplies of telecoms, broadcasting and electronic services: –application of the new rules and the one-stop scheme will be deferred to 1 January 2015; –the member state of establishment will, until 1 January 2019, retain a proportion of VAT receipts collected through the one-stop scheme. This proportion will amount to 30% from 1 January 2015; until 31 December 2016, 15% from 1 January 2017 until 31 December 2018 and 0% from 1 January 2019 onwards; –the Commission will be asked to report on the feasibility of the new rules before their entry into force. The report, however, will not affect entry into force of the new rules.

38. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference38 VAT package (mini One Stop Shop) Commission proposal COM (2004) 728 included Full One Stop Shop (mini-OSS) Changes to Eighth VAT Directive (included) Restrictions on the right of deduction (excluded) Increased threshold for distance sales (excluded) Increased threshold for SME (excluded)

39. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference39 VAT package (mini One Stop Shop) General features of mini OSS -Based on existing e-commerce scheme -Option for taxable persons established within the EU -Making supplies of telecoms, broadcasting or e- services -Supplies are to non-taxable persons in EU -No establishment in the MS of consumption -Each fixed establishment can use the scheme (central model)

40. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference40 VAT package (mini One Stop Shop) Details of mini OSS – Identification -Only 1 identification -MS where established his business -If no establishment where he has a fixed establishment -With more than 1 fixed establishment can choose -Use existing VAT number

41. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference41 VAT package (mini One Stop Shop) Details of mini OSS – Exclusion Business is excluded if -No longer supplies telecoms, broadcasting or e-services (notification or info by tax authorities) -Not meet the conditions for using the scheme (has an establishment in MSC) -Persistently fails to comply with the rules

42. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference42 VAT package (mini One Stop Shop) Details of mini OSS – Returns Period -3 months -Submitted within 20 days of end of tax period -Details -VAT identification number -Amount for each MSC -Amount from each Member State of establishment -The VAT rates applicable -Submitted electronically Payment – made direct to MSI

43. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference43 VAT package (mini One Stop Shop) Details of mini OSS – Right of deduction Must use the Eighth Directive But can use VAT return if registered as non- established taxable person and make other supplies not in the scheme

44. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference44 VAT package (mini One Stop Shop) Excluded from mini-OSS (in full OSS) B2B supplies Goods Other services (in addition to telecoms, broadcasting and e-service) Each fixed establishment being able to use the scheme (decentralised model)

45. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference45 Updating SME scheme with equal access: proposed common and higher threshold of EUR 100 000 Compromise text –Threshold EUR 50.000 –Threshold EUR 100.000 for those MS already above EUR 50.000 No agreement, not in VAT Package VAT package (Other elements not included)

46. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference46 Simplifying distance selling rules: proposed EU-wide threshold of EUR 150 000 VAT package (Other elements not included)

47. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference47 Restrictions on the right of deduction: List of categories –Luxuries, amusements or entertainment –Travel, accommodation, food or drink (unless in business of supplying such items) –Cars (except car dealers, taxis, driving schools, car leasing) –Boats and planes (except for commercial transport) VAT package (Other elements not included)

48. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference48 “Technical” Directive Pending proposal (COM/2007/677): Supply of gas and electricity: technical update and extension to district heating and cooling Rules on right of deduction in the property sector (mixed-use goods) Concept of “international bodies” for VAT exemption (international organisations according to Art 151 VAT Directive vs. ‘joint undertakings’ according to Art. 171 EC Treaty) ECOFIN of 9 June 2009

49. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference49 Objective is to: avoid double imposition of cross-border transactions put in place mechanism which may respond to problem limit this to individual cases cover cases not arising from different interpretation of basic legislation possibly have recovery of tax suspended until double taxation is eliminated Instrument: change to VAT Directive? Regulation for administrative cooperation? Combine with direct tax arbitration?  Contact point/database at EU-level Member States very reluctant and requesting further evidence VAT package will reduce relevance Eliminating double taxation

50. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference50 Financial services (COM(2007)746 and 747) Modernising the definition of exempt financial services and insurances via Directive and Regulation –Respecting limits of the current exemption –Ensuring that text better reflects the complexity and diversity of the modern industries –Including a regulation of application to detail and make directly applicable new definitions –Keeping as much as possible ECJ orientations

51. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference51 Financial services New exemption for cross border cost sharing arrangements –enable institutions to develop cost sharing and efficiency- driven consolidation without creating any new tax burdens Extending the existing option to tax these services which is currently at the discretion of Member States. –more general choice for institutions to reduce exposure to non-recoverable tax –EU-wide

52. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference52 Objectives Create a European level playing field Increase neutrality of VAT Improve legal certainty Reduce cost and administrative charges for operators and administrations

53. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference53 Financial services Combination of Directive and Regulation Controversial questions: –How to deal with derivatives –Investment funds (regulated funds only?) –Intermediation –“constituent elements” of a service - change of the legal or financial situation of a party?

54. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference54 Financial services - derivatives Derivatives –How and to which extent exclude contracts that may result in delivery of goods –Distinguish firm and optional commitments –Sufficient for raw materials? –Need for a definition? –How distinguish from betting?

55. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference55 Option to tax Majority opposition to approach as such Preference: keep status quo (MS do what they want) Commission tabled paper as to feasibility EBF commissioned a study as to impacts For the Commission: –Politically an imperative because solution o choice –Only way to ensure level playing field –Support from EP and EESC

56. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference56 Cost-sharing Majority reluctant Fears about budgetary consequences Controllability Commission tabled paper as to feasibility and rationale

57. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference57 Financial services – state of play Technical progress is made Orientation as to option/ cost sharing Need for economic operators to actively accompany negotiations

58. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference58 Vouchers (1) Vouchers and promotion schemes New definitions, clear rules and legal certainty of certain types of vouchers Commission proposal 2009

59. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference59 Vouchers (2) Vouchers are an important tool in the present market (e.g. in distributing telecom services mainly to non taxable persons), used in varied and innovative ways to: –reward loyalty and behaviours –test new products/services –drive buying behaviour –enable secure and easy payment At present there are several kind of vouchers on the market (SPV and MPV; ‘free’ vouchers), e.g. ranging from cash-back (i.e. money refund), discount (money off) to gift vouchers via a ticket, token, card, e-message etc.

60. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference60 Vouchers (3) Those vouchers are actually receiving a different VAT treatment across the Community not only because of their different nature. 1)Treated as goods. 2)The payment occurring on purchase of a voucher is treated as a payment on account of future supplies of goods or services 3)Only supplies of goods and services occurring on redemption of vouchers are treated as tax point. Non-harmonised treatment is leading to: –double or non taxation. –obstacles to the appearance of new services and to the provision of cross border services.

61. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference61 Vouchers (4) Guiding principles for the Commission 1 Cross-border: The system must be able to cope with supplies in more than one country and with vouchers issued in one Members State and redeemed in other Member States. Tax neutrality should be ensured between different payment systems which deliver the same result in paying for goods and services; that is, the choice of payment instrument should not be a determining factor and the same tax charge would apply to a supply whether the customer uses cash, a voucher or any other form of consideration.

62. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference62 Vouchers (5) Guiding principles for the Commission 2 Tax administrations must be able to enforce the system effectively without creating disproportionate burdens for business, which means simple and practical rules. The system reasonably is able to cope with future developments in the areas under review.

63. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference63 Vouchers: Issues to addressed Issues: –Definitions (different type of vouchers) –Taxable amount –Time of supply –Chain distribution –Links between MPV, E-Money and Financial Services –VAT treatment (could all vouchers be treated in the same way?)

64. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference64 Fight against fraud (1) Fighting fraud is a clear priority for all Member States aimed at identifying appropriate measures at first focused on reverse charge as tool Anti-fraud strategy Communication “short term” action plan Longer-term reflections –generalised reverse-charge; –taxation of IC-supplies; –possibility of a pilot project pilot project –other?

65. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference65 Fight against fraud (2) Series of further “conventional” anti-fraud proposals –Proposal on reduced timeframe for recapitulative statement adopted –Proposal COM(2008)805 (import VAT; extended joint & several liability) – ECOFIN 9 June 2009 –Recovery of taxes & mutual assistance –Automated access to specific data –Common minimum standards for registration and deregistration of taxable persons in VIES (Value added tax Information Exchange System) –EUROFISC –Chargeability on Intra-Community transactions

66. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference66 Background to VAT invoicing proposal Legal requirement - Article 237 of VAT Directive “The Commission shall present, …, a report and, if appropriate, a proposal amending the conditions applicable to electronic invoicing…” Invoicing Directive (2001/115/EC) not fully achieve aim of simplifying, modernising and harmonising invoicing rules –Many options available to Member States –Uptake of e-invoicing still slow

67. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference67 Aims of VAT Invoicing proposal Reduce burdens on business –Help achieve target of 25% reduction of admin burdens by 2012 Promote SMEs –Part of Small Business Act Increase uptake of e-invoicing –Help businesses become more competitive Help Member States tackle fraud –Measure included in anti tax fraud strategy

68. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference68 Areas covered by VAT Invoicing proposal Issuance of an invoice Contents of an invoice Electronic invoicing Storage of invoices Other invoice related matters –Chargeability to tax for intra-Community supplies –Right of deduction –Cash accounting (payment not invoice creates tax point)

69. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference69 Principles of the VAT Invoicing proposal Remove, as far as possible, Member States options –Exempt supplies, outsourcing to 3 rd parties outside the EU Harmonise the invoicing rules –Storage periods, time limit of issuing invoices Clarify which rules are applicable –Member State of supplier or Member State of taxation Simplify the obligations –Self-billed invoices, VAT amount in national currency

70. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference70 Changes to the issuance of an invoice Requirement to issue an invoice Full VAT invoice –Exempt supplies (deduction at preceding stage) –B2B for taxable supplies Simplified VAT invoice –Credit notes –Small value less than €200 –B2C invoices (option for Member States) Distance sellers – required only if applicable to established businesses Payment on account for I-C supplies – not required

71. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference71 Changes to the issuance of an invoice When an invoice needs to be issued –15 th day of the month following the supply Summary invoices –all supplies within the same calendar month Self-billed invoices –mention “self-billed” on invoice –mention customers VAT number Outsourcing –3 rd party outside the EU

72. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference72 Changes to the content of an invoice Full VAT invoice Current Article 226 with some changes Customer’s VAT number compulsory Date tax becomes chargeable (replace date of supply) Codes for exempt (EX) and reverse charge (RC) supplies Simplified VAT invoice Current Article 238(2) Date of issue Identification of supplier Nature of goods or services supplied and value VAT amount Currency of VAT amount ECB rate when tax becomes chargeable

73. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference73 Electronic invoices Equality of treatment between paper and e- invoices Removal of Article 233 (EDI, e-signatures) Non-discrimination article 218a Acceptance by the customer removed

74. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference74 Changes to the storage of invoices Storage period Harmonised at 6 years Place of storage No restrictions, no notification Must be available without undue delay Electronic storage Paper invoices can be stored in electronic form Translation of invoices Member States must specify which particular invoices

75. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference75 Member State where rules are applicable Issuance of an invoice Member State where the supplier is identified for VAT and from where supply is made Member State of customer if cross border reverse charge Storage of invoices Issuer of invoice – Member State where the supplier is identified for VAT Recipient of invoice – Member State where the customer is identified for VAT

76. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference76 Other changes in the VAT Invoicing proposal Chargeability for I-C supplies When the supply takes place (no longer 15 th day of following month) Invoice no longer creates a chargeability to tax Same rule for EC acquisitions Right of deduction Must hold a valid invoice for right of deduction, even for reverse charge Cash accounting Derogation given to UK, Sweden and Slovenia extended to all Member States Optional scheme for supplier with turnover less than €2million Account for all supplies and purchases on cash basis Recipient can have immediate right of deduction

77. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference77 VAT grouping (Art. 11 of the VAT Directive) Member States’ consultations of the VAT Committee; wide divergences between the VAT grouping schemes. Divergences between the Member States VAT grouping schemes; potential impact on the internal market and on the basic principles of the Community VAT system. Given the advantages a VAT grouping scheme can offer to certain taxable persons, the scheme can, depending on its features, run counter to the principle of fiscal neutrality and may be a source of fiscal competition between Member States. A more uniform application of Article 11 is desirable. Commission will issue Communication setting out its views and guidance.

78. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference78 Other topics Dormant issues –Tour operators –Postal services (TNT case = new impetus) Further down the road: –VAT treatment of public bodies and related issues –(will be taken up more pro-actively 2009/10)

79. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference79 Longer-term reflections (1) Implementation and follow up to Communication on tax fraud Link to customs – increasing convergence of procedures? ECJ developments Reduction of administrative burdens (25% objective) Changes in technology Small Business Act VAT as policy tool?  Environment / climate change  Impact of the financial and economic crisis

80. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference80 Longer-term reflections (2) Subsidiarity debate? Increasing reliance on EU-wide centralisation of business structures – VAT grouping? Cost-sharing? Transfer-pricing? Or tax branch-to-branch transactions also in the EU? Tax competition? Changing the concept/system of VAT (fractional payments)? Experience in USA, NZL etc.? New VAT Strategy 2010/11 –  Wide business consultation  First wait for outcome of implementation process VAT package and fraud; VAT rates debate

81. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference81 Longer-term reflections – next steps on VAT fraud Technology is driving change: electronic reporting; e- auditing Tax partnerships (compliance/monitoring/communication in general) More administrative cooperation, more coordination of IT applications Commission to facilitate structured dialogue between TAs and business community?

82. European Commission / Taxation and Customs Union 15-16 June 2009 StockholmInternational Tax Conference82 Thank you for your attention Any question? Rolf.Diemer@ec.europa.eu European Commission VAT and other turnover taxes - Taxation and Customs Union DG