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EU: agreement on quick fixes, domestic reverse charge, e-books and administrative cooperation  

On 2 October 2018, the European finance ministers agreed to adopt several proposals from the European Commission to reform the current EU VAT system.

2 October 2018

Agreement was reached regarding the following policy measures:

Four quick fixes

Implementation of four ‘quick fixes’ to improve the current cross-border VAT regime from as of 1 January 2020:

  • Simplified and uniform treatment for call-off stock arrangements;
  • Uniform criteria to simplify the VAT rules on chain transactions; 
  • Common framework for documentary evidence of proof of transport required to claim a VAT exemption (zero rate) for intra-EU supplies.; and 
  • The substantial requirement to formally check the validity of a VAT identification number in the VIES system.

Important to note is that the concept of the Certified Taxable Person has been removed and is no longer a condition to apply the first three of the four quick fixes.

E-publications

Member States are permitted to apply the reduced VAT rate (or some Member States even a super-reduced or zero VAT rate) to electronic publications (electronic books and subscriptions to online newspapers and journals), thereby allowing alignment of VAT rules for electronic and physical publications.

Now the EU Member States agree, the directive will take effect almost immediately, which is 20 days after publication in the Official Journal of the European Union.
The new rules will apply temporarily, pending the introduction of the definitive VAT system, allowing Member States more flexibility than at present in setting VAT rates. The definitive VAT system is expected to be introduced on 1 July 2022.

Generalized, temporary reverse charge mechanism

EU Member States that are most severely affected by VAT fraud are allowed to apply a trial of the domestic reverse charge mechanism in order to curb the endemic VAT carousel fraud. Member states will only be able to use the generalized reverse charge mechanism for domestic supplies of goods and services above a threshold of € 17,500 per transaction, and only up to 30 June 2022, and under very strict technical conditions.
Now the EU Member States agree, the directive will take effect almost immediately, which is 20 days after publication in the Official Journal of the European Union.
The general reverse charged mechanism will only offer a short-term solution for containing fraud by the most affected Member States, pending the introduction of the definitive VAT system. The definitive VAT system is expected to be introduced on 1 July 2022.  

Strengthening administrative cooperation

The regulation will tackle the most widespread forms of cross-border fraud by improving how tax administrations cooperate amongst themselves and with other law enforcement bodies.  

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