Norway signs VAT agreement with EU to cooperate in tackling VAT fraud
On 6 February 2018, Norway became the first non-EU country to sign an agreement with the EU that provides them with a legal framework for administrative cooperation in the field of VAT. Norway is the first country with which the EU has an agreement in this field. As a member of the European Economic Area (EEA), it has a similar VAT system to the EU. In this alert we discuss the contents of the agreement.
9 February 2018
Norway and the EU have been negotiating the new bilateral agreement since 2014 due to the fact that at that moment the legal framework was deemed insufficient by the EU for effective cooperation.The EU-Norway agreement will provide the tax authorities of the EU member states and the Norwegian tax authorities with more legal tools for cooperation in relation to:
- exchanging information that may help to effect a correct assessment of VAT, monitor the correct application of VAT and combat VAT fraud; and
- assisting each other in the recovery of VAT claims.
The agreement follows the same structure that is currently used for cooperation between EU member states and regards the same instruments, such as electronic platforms and electronic services. Fraud schemes often exploit weaknesses in the way VAT transaction chains are controlled when they include counterparts located in third countries.
Administrative cooperation and recovery assistance
The agreement's main objective is to establish a framework of rules and procedures for administrative cooperation that would allow competent authorities to assist each other in the implementation of the VAT legislation. The document envisages the exchange of information on VAT to be on request, spontaneous and automatic.
Noteworthy is the provision that administrative cooperation does also include providing the dates and values of any relevant imports of negligible value, services connected with immovable property and telecommunication services, radio and television broadcasting services and electronically supplied services over the previous two years, even if the requested tax authority refuses an administrative enquiry into the amounts declared by a taxable person in connection with these supplies.
The document also intends for Norway to participate in the Eurofisc network without having direct access to the databases of the individual EU Member States. As a result of the new agreement the authorities of the contracting states will exchange information and set up a communication system to do so, with the exception of information that is accessible through the VIES system.
Another objective of the agreement is providing rules and procedures for the assistance concerning the recovery of VAT claims (including administrative penalties, fines, fees and surcharges, and the interest and costs relating to such claims). Furthermore, the notification of documents and imposition of precautionary measures relating to claims is part of the agreement. The statute of limitation restricts the time in respect to claims to a period 10 years.
For the purpose of its implementation and ensuring the proper functioning, a Joint Committee with representatives from the EU and Norway will be set up. The Committee will meet at least once every 2 years. By 30 June of each year the Committee will receive statistical data on both the administrative cooperation and recovery assistance.
Now the agreement has been signed, the agreement must be approved by the EU and Norway in accordance with their own internal legal procedures. It will enter into force on the first day of the second month following the date that the parties notify each other of the completion of the relevant procedures.
The agreement is set to be in effect for an indefinite period and to be complemented by technical arrangements.
Pending proposal to strengthen administrative cooperation between EU Member States
On 30 November 2017 the European Commission unveiled new tools to make the EU's VAT system more fraud-proof and close loopholes which can lead to large-scale VAT fraud. The new rules aim to build trust between Member States so that they can exchange more information and boost cooperation between national tax authorities and law enforcement authorities.
The proposed measures follow up on the 'cornerstones' for a new definitive single EU VAT area proposed in October 2017 and the VAT Action Plan towards a single EU VAT area presented in April 2016.
This proposal is still pending and currently under scrutiny of the Member States.
The EU-Norway agreement will not have the effect that Norway will be more bound by the EU’s VAT policy than before. However, we believe that the agreement will be a blueprint for future negotiations and agreements with other non-EU countries, such as other members of the EEA, and may also have great value for the relationship between the UK and the EU Member States after the Brexit.
We will keep you updated with the developments regarding the pending proposals of the European Commission.