Implementing the definitive VAT system

Key points

The EESC:

• welcomes the Commission's proposal to replace the transitional VAT system for the taxation of trade between Member States put in place more than 25 years ago and still in force. Going beyond the transitional regime is a crucial step to completing the move to the definitive destination principle-based VAT system for taxing goods in B2B;
• urges the Commission to explore how a common system for both services and goods can be rolled out as quickly as possible;
• stresses the importance of continuing the work towards the second step, since treating goods and services in the same way for VAT purposes would be more conducive to growth and more effective against fraud;
• highlights that the proposed system would benefit from clear provisions or clarity laying down the rules for bad debt and refunds management within the One-Stop Shop (OSS);
• notes that the proposed system will trigger cash flow effects due to VAT on cross-border B2B supplies of goods, resulting in a cash flow income for the seller and a cash flow cost for the buyer. However, the cost of capital will in general be greater, since the time for recovering VAT will always be longer than the time the VAT is held by the seller;
• asks for clear and proportionate criteria regarding the concept of "certified taxable person" (CTP) to be implemented across Member States, in order to facilitate the broadest possible access to CTP status. The Member States should process a CTP application promptly in order to enable businesses to continue operating without unnecessary interruptions, delays and administrative burdens due to uncertainty;
• is concerned that the current proposal may turn out to be a prohibitive obstacle for both SMEs and start-ups. The Committee believes that the system of reverse charge should be granted to all cross-border supplies of goods B2B, until the definitive system is fully in place and reimbursement of VAT is done in a timely manner;
• recommends an adequate investment in IT hardware/software assets to properly develop a solid and reliable OSS able to efficiently manage a considerable amount of sensible information, guaranteeing a swift and secure functioning of the system to the benefit of both European companies and fiscal administrations;
• recommends greater collaboration between national fiscal and enforcement authorities in order to make the new destination-based VAT system more effective in terms of both effectiveness against fraud and reliability in favour of European enterprises;
• deems that European enterprises would benefit from an extensive communication action carried out by the Commission in order to adequately explain, in clear and practical terms, the main features of the new VAT system, as well as the concrete advantages the VAT reform is expected to deliver in favour of European businesses and their growth.