1. BDO Malta Client name - Event - Presentation title Page 1 Proposal for Standard EU VAT return Josef Mercieca 16 th October 2015 MIM VAT and EU Conference

2. Page 1 Proposal for Standard EU VAT Return

3. Page 2 Proposal for Standard EU VAT Return

4. Page 3 Proposal for Standard EU VAT Return

5. CONTEXT OF THE PROPOSAL VAT system requires completion of periodic VAT returns detailing info for the payment & control of VAT. However, it allows flexibility for MS to determine info needed – disparate rules and procedures. Complex when submitting VAT returns in different MS due to; different info requirements, info not having harmonised definitions, the lack of good common guidance, different rules and procedures for the submission and corrections, and needing to use the national language. VAT declaration is identified as an area where divergences constitute an obstacle to EU trade. Page 4 Proposal for Standard EU VAT Return

6. RESULT OF CONSULTATIONS & IMPACT ASSESSMENTS Options considered: a) Benchmark (do nothing); b) Compulsory standard EU VAT declaration; c) Standard VAT declaration optional for all business; d)Standard VAT declaration optional for those businesses submitting VAT returns in more than 1 Member State; or e) Compulsory standard VAT declaration with limited flexibility for Member States to determine the information from a standardised list. These options can be looked at in terms of: Contents of the standard VAT declaration; Periodicity and due date; Annual VAT return; and Other issues (E-filing, corrections). Page 5 Proposal for Standard EU VAT Return

7. RESULT OF CONSULTATIONS & IMPACT ASSESSMENTS Of the options evaluated to solve this issue, the preferred option is for a standard VAT return, mandatory for MSs and for business, which provides a list of standardised information of which only a small number of items are required in all cases. Proposal suggests the establishment of a standardised list of additional info that may be requested. Maximises the burden reduction for businesses while limiting the cost for Member States. Facilitate the control of VAT returns by the MSs. Page 6 Proposal for Standard EU VAT Return

8. PREAMBLE AND INTRODUCTORY SUMMARY To allow MSs to adjust their systems for the compilation of statistics concerning supplies and acquisitions of goods within the EU, info on the total value of supplies of goods and of acquisitions of goods within the EU should be part of mandatory information set out in the standard VAT return until 31 December 2019. The tax period should be monthly for all businesses except for micro enterprises which should submit standard VAT returns quarterly. It should still be possible for MSs to extend this period for up to one year in order to reduce the administrative burden. Page 7 Proposal for Standard EU VAT Return

9. PREAMBLE AND INTRODUCTORY SUMMARY Common minimum deadline for submitting the standard VAT return set at the end of the month following the tax period to create a minimum standard but with flexibility for MS to extend that period by a further month to avoid increasing burdens on business. Payment deadlines harmonized - net amount of VAT should be paid when submitting the standard VAT return or in any event at the expiry of the deadline by which the standard VAT return must be submitted. To encourage electronic filing, the submission of the standard VAT return should be allowed by electronic means. Page 8 Proposal for Standard EU VAT Return

10. PREAMBLE AND INTRODUCTORY SUMMARY Dispense with the specific requirements for the importation of goods and for an annual summarising VAT return. For new means of transport and goods subject to excise duty, the info required is specific and limited in nature. The standardisation of such info in the standard VAT return is not appropriate. Thus info should be collected through a separate additional return so as to reduce the burden for the majority of businesses. Page 9 Proposal for Standard EU VAT Return

11. PREAMBLE AND INTRODUCTORY SUMMARY Commission to be given power to regulate as regards the provision of the technical details, including a common electronic message for the transmission, a common set of definitions and procedures for the submission, common procedures by which corrections can be made and common electronic methods offering a sufficient level of security for the submission of the standard VAT return. Page 10 Proposal for Standard EU VAT Return

12. EXPLANATION OF PROPOSAL AND SUBSTANTIVE PROVISIONS Why a standard VAT return? Allow all businesses to provide standardised info to each MS submitted in a common, preferably electronic, format. In this way a business submitting a VAT return in one Member State can easily complete and submit a VAT return in another Member State because the information and submission is standardised. The Proposal for a standard VAT return addresses 4 main points: the content (both in terms of amount of info and standardising thereof), submission in terms of when and how, and corrections to the standard VAT return. Page 11 Proposal for Standard EU VAT Return

13. EXPLANATION OF PROPOSAL AND SUBSTANTIVE PROVISIONS Proposal lists a max of 26 boxes to be completed by businesses for which MSs may exempt businesses from all but 5. Consistent info and determined in same way in all MSs. Additionally MSs may require extra info for the control and administration of VAT for specific regions, territories, or special regimes allowed exceptionally in VAT legislation. Only in these duly justified cases may MS require businesses to provide more than the 26 standard boxes of info. Submission: all businesses should be allowed to submit monthly VAT returns, with VAT being due & paid by the end of the month following the VAT return period. Beyond that MS may allow for longer VAT return periods of up to one year and to extend the due date for submission and payment by up to a further month. Page 12 Proposal for Standard EU VAT Return

14. ART 178, 185, 211, 271 & 381 (COSMETIC CHANGES) Where the Council Directive 2006/112/EC uses the term "VAT return" this has been replaced with the term “Standard VAT return“. To avoid confusion Chapter 5 in Title XI has been split into two sections, namely "Standard VAT return" and "Other returns and information". The definition of "VAT return" in Art.357 (5) and Art.358 (4) from 1 January 2015 is specific to the Chapter relating to the special schemes for non- established taxable persons supplying telecommunications, broadcasting and electronic services to non-taxable persons and is left unchanged. Page 13 Proposal for Standard EU VAT Return

15. VAT 206 & 252 (VAT PAYMENT DEADLINE) Article 206 in its current form allows MSs to opt for a different payment deadline than the one of submitting the VAT return and to require interim payments. Such a provision which allows the coexistence of different payment deadlines would partially remove the benefits of the proposed standard VAT return. The general rule that the VAT payment is made when the standard VAT return is submitted is maintained in Art.206. Removal of the possibility for Member States to choose any other payment date. Page 14 Proposal for Standard EU VAT Return

16. Art 206 & 252 (VAT PAYMENT DEADLINE) The standard VAT return period is set at one month in Art. 252. However, to prevent businesses having to submit more frequent standard VAT returns than is currently the case Member States can allow businesses to submit standard VAT returns for a period of up to one year. Micro enterprises with an annual turnover < €2 million can submit quarterly VAT returns unless there is a risk to the control and collection of VAT. Standard VAT return is to be submitted by the end of the month following the standard VAT return period. MSs are allowed to extend the deadline for submission by a further month. Thus the VAT return and payment are both due at a minimum of one month and a maximum of two months after the end of the VAT return period. Page 15 Proposal for Standard EU VAT Return

17. ART 250 (STANDARD VAT RETURN) Five items of information are required on all standard VAT returns: (a)The tax that has become chargeable (Output VAT); (b)The tax for which deduction is made (Input VAT); (c)The net amount of the VAT to pay or to be refunded; (d)The total value, exclusive of VAT, of the transactions for which the tax has become chargeable, including the value of any exempt transactions; (e)The total value, exclusive of VAT, of the transactions for which deduction is made; and (f)The total value of ICSs and ICAs for tax periods up to 31 December 2019 (The total value of ICSs and ICAs of goods can be established on the basis of the EU sales lists and thus should not be included in the standard VAT return). Page 16 Proposal for Standard EU VAT Return

18. ART 250 (CORRECTIONS TO STANDARD VAT RETURNS) Common rules for the correction of VAT returns are necessary to achieve the desired level of standardisation. MS should however be allowed to determine their own correction period as these periods are closely linked to national audit procedures. Therefore - principle of allowing taxable persons to correct VAT returns under a time period determined by MS. Page 17 Proposal for Standard EU VAT Return

19. ART 251 (OTHER INFO FOR RISK ANALYSIS AND CONTROL) For control and risk analysis purposes, MSs may require additional info extra to the reduced mandatory info for the standard VAT return; Additional info requirements standardised and kept to a minimum; 2 sections: Art. 251 (1) - 8 items of info re sales and VAT due Art. 251 (2) -13 items of info re purchases Page 18 Proposal for Standard EU VAT Return

20. ART 251 (OTHER INFO RE SALES) MS may require the standard VAT return to show: (a) Net amount + VAT of supplies of goods and services for each rate; (b) ICSs even for tax periods after 31 December 2019; (c) The total (net) value, of supplies of services, other than services that are exempt in the MS where the transaction is taxable, where recipient is liable to pay the tax pursuant to Art 196 (B2B services); (d) The total (net) value, of supplies of goods/services not covered in point (c) for which the recipient is liable to pay the tax; (e) The total value of the supplies of goods referred to in Art. 146(1)(a) & (b) (exports); (f) The total value of any other exempt transactions not covered under points (b) to (e) (exempt without credit); and Page 19 Proposal for Standard EU VAT Return

21. ART 251 (OTHER INFO RE SALES) MS may require the standard VAT return to show: (g) The tax on: (i) Intra-Community acquisitions of goods, or transactions treated as such, pursuant to Articles 21 or 22; (ii) Supplies of goods or services received for which the recipient is liable to pay the VAT; (Reverse Charge Mechanism);and (iii)The importation of goods where the Member State exercises the option under the second paragraph of Article 211 – Onward Supply Relief Page 20 Proposal for Standard EU VAT Return

22. ART 251 (OTHER INFO RE PURCHASES) MS may require the standard VAT return to show: (a) Net amount + VAT of supplies of goods and services received for each rate; (b)ICAs even for tax periods after 31 December 2019; (c) The tax on ICAs of goods, or transactions treated as such; (d)The tax and the (net) value of supplies of goods/services received for which the recipient is liable to pay the tax pursuant to Art. 199 or 199a (Reverse Charge Mechanism); (e) The tax and the (net) value of supplies of services received, other than services that are exempted from VAT in the MS where the transaction is taxable, for which the recipient is liable to pay the tax pursuant to Art. 196; Page 21 Proposal for Standard EU VAT Return

23. ART 251 (OTHER INFO RE PURCHASES) MS may require the standard VAT return to show: (f) The tax and the (net) value of supplies of goods/services not covered by points (c) and (d) for which the recipient is liable to pay the tax; (g) The tax and the (net) value of the importation of goods; and (h) Any adjustment of deductions as covered by Art. 184. Where MSs apply special rules in certain regions/territories or for special schemes applying to certain taxable persons or transactions, they may require additional info which however will be standardised through the comitology procedure. To provide transparency and to facilitate business compliance where MSs require additional info this should be notified to the appropriate committee. Page 22 Proposal for Standard EU VAT Return

24. NEW ART 252A (ELECTRONIC VAT RETURNS) MSs to allow (and may require) the standard VAT return to be submitted by electronic means. This shall include the possibility to use electronic file transfer. Authenticity of the origin and the integrity of the VAT return content to be ensured by an advanced electronic signature based on a qualified certificate and created by a secure signature creation device or by other methods offering a similar level of security. Page 23 Proposal for Standard EU VAT Return

25. DELETION OF ART 252 AND 254, AND 255 AMALGAMATION Article 253 - Deleted as specific measure applicable only to Sweden and therefore contrary to the aims of a standard VAT return. Article 254 - Content moved to a new Article 257a since it relates to specific info required from the seller of a new means of transport which should not be included in a standard VAT return but the information is nevertheless still needed. Article 255 - Replaces Articles 255, 256 and 257 and brings them together in a single article. There is no change of substance. Page 24 Proposal for Standard EU VAT Return

26. NEW ART. 257A Old Article 254 is moved to a new Section 2 on "Other returns and information" as the information on the sale of new means of transport is not included in the standard VAT return. In the case of supplies of new means of transport carried out by a taxable person identified for VAT purposes to a customer not identified for VAT purposes, Member States shall take the measures necessary to ensure that the vendor communicates all the information needed for VAT to be applied and its application checked by the tax authorities. Page 25 Proposal for Standard EU VAT Return

27. NEW ART. 258 AND 259 Page 26 Proposal for Standard EU VAT Return Art. 258 - Member States shall lay down detailed rules for the submission of returns in respect of intra Community acquisitions of new means of transport and intra-Community acquisitions of products subject to excise duty. Art. 259 - Member States may require persons who make intra-Community acquisitions of new means of transport to provide, when submitting the return, all the information needed for VAT to be applied and its application checked by the tax authorities. Summary – info still required but submitted in different return.

28. DELETION OF ART. 260 AND 261 Page 27 Proposal for Standard EU VAT Return Article 260 The information on the importation of goods is now included in Articles 251(1)(g) and 251(2)(g) and consequently this article will be deleted. Article 261 MSs are no longer allowed to require taxable persons to submit an annual summarising VAT return that details all the transactions declared in the previous year's periodic VAT returns and which provides the information necessary for any adjustments. The adjustments are included in the standard VAT return through Article 251(2)(h) and Article 261 will, therefore, be deleted.

29. ART 272. AND 273 (NON-FILING OF VAT RETURNS POSSIBILITY Page 28 Proposal for Standard EU VAT Return Article 272 In order to ensure a consistent application of the standard VAT return MSs should only be allowed to release taxable persons from the requirement to submit a VAT return in certain limited cases, such as when the taxable person is not subject to VAT on his ICAs or is covered by the exemption for small enterprises or the common flat rate scheme for farmers. Article 273 To ensure that the standard VAT return is indeed standardised MSs should not be allowed to impose additional standard VAT return obligations on businesses other than those mentioned and therefore the option to do so in Article 273 is excluded as regards the standard VAT return.

30. FURTHER CONSIDERATIONS Page 29 Proposal for Standard EU VAT Return 1. What about Art. 12 VATA returns? Will there still be different returns for persons registered under Art. 10 and Art. 12? Not excluded that the return for Art. 12 would change and the standard VAT return will start applying for Art. 12 with limitations. The boxes that are not necessary would then be blocked(easy as submitted online). Still under discussion.

31. FURTHER CONSIDERATIONS Page 30 Proposal for Standard EU VAT Return 2. What about Art. 11 VATA returns? Will they need to change? At this stage it does not appear necessary. Member States should still be allowed to exempt from the Standard VAT Return, certain categories of tax payers, including Article 11. 3. What about the box for excess credits brought forward? How would one offset them in the future?

32. WHAT WILL HAPPEN NOW? Page 31 Proposal for Standard EU VAT Return Still a Proposal (being discussed at Council level). To be implemented by 31st December 2016. Some of the proposed provisions may still (and probably will) change. In particular the number of optional boxes could still change (upwards) to accommodate the demands of Member States since certain MSs consider 5 obligatory + 21 optional boxes as not sufficient for their requirements. EU Politics – not all MSs agree with the Proposal (in some cases even in its entirety) as certain MS believe its up to particular MS to decide. Impact on Maltese VAT return should be minimal.

33. Thank you! Any Questions? Page 31 Proposal for Standard EU VAT Return