In Luxembourg on Tuesday 2 October, the Council of the European Union reached a unanimous political agreement on three legislative texts concerning value-added tax (VAT).
With effect from December this year, the member states will be permitted to apply reduced rates of VAT - in other words, less than 15% - to electronic publications (books, journals, periodicals), to re-establish equal treatment with physical publications (see EUROPE 11750). However, only countries that already apply super-reduced (below 5%) or zero rates to physical publications will be able to do likewise for electronic ones.
Spain, France, Italy and Luxembourg apply super-reduced rates to physical publications, whilst Belgium, Denmark, Ireland, Sweden and the United Kingdom apply zero rates.
The Federation of European Publishers (FEP), the European Newspaper Publishers' Association (ENPA) and the organisation News Media Europe immediately welcomed the decision.
The text of the agreement can be seen at: https://bit.ly/2QjrrTS.
Reverse charge. The Council of the EU decided to grant a temporary authorisation for member states to apply a reverse-charge VAT mechanism to tackle so-called 'carousel' fraud more effectively.
This mechanism, which the Czech Republic ardently wishes to apply, consists of transferring the responsibility for paying the VAT from the supplier to the final recipient of the goods in question, removing the fractionated payment that is typical of the tax.
During the debate, the Austrian finance minister, Hartwig Löger, stressed that the future pilot projects must respect strict technical conditions: the mechanism will apply until the end of June 2022 at the latest to the provision of goods and services for transactions in excess of €17,500 and in member states in which carousel fraud represents at least 25% of the VAT gap. Furthermore, persons subject to the mechanism will be bound by specific reporting obligations.
Romania, which recently expressed an interest in the fledgling mechanism, finally lifted its reservations. As a token of compromise, the Romanian minister, Eugen Teodorovici, announced the country's agreement with the compromise proposal, but added that as it stands, the mechanism can apply to one member state only. Romania does not meet the VAT gap criterion.
The text is available at: https://bit.ly/2zMgUeJ.
Quick fix. The third unanimous political agreement concerns four 'quick fixes' to the problems noted in the application of the temporary VAT system, namely: - the simplification of the rules applicable to call-off stock arrangements; - the simplification, only for certified taxpayers, of chain transactions; - the simplification, only for certified taxpayers, of the proof of transport of goods between two member states, which is a requirement to qualify for the intra-EU supply exemption; - the clarification that in addition to the proof of transport, the VAT numbers of the commercial partners registered in the VIES system are required to qualify for the cross-border VAT exemption.
This agreement allowed the European Commission and the Council of the EU to make a statement concerning the treatment of independent groups of persons, a question raised by six member states (see EUROPE 12063). The Commission will study the matter in depth and present a legislative proposal if appropriate.
The four quick fixes will apply from January 2020, pending the introduction of a permanent VAT system. To this end, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, called on the ministers to push forward the work on a “more fraud-proof” VAT system, assessing cross-border fraud at €50 billion a year. “25 years of the temporary regime is enough”, he added.
The text of the agreement can be consulted at: https://bit.ly/2O1UaAg (Original version in French by Mathieu Bion)