Brussels, 13/02/2008 (Agence Europe) - On Tuesday 12 February, European finance ministers adopted without debate the legislative package aimed at modernising and simplifying VAT (value added tax) obligations as of 1 January 2010. This final stage brings to a close the legislative procedure lasting three years. The VAT package comprises the following legislative texts: - a draft directive on the place of supply of services; - a draft directive on procedures for VAT refunds to non-established businesses; - and a draft regulation on improved administrative cooperation as regards VAT and the exchange of information between member states. In particular, it brings in a one-stop-shop which will enable service providers to fulfil in their home member state a single set of obligations for VAT registrations.
In the case of service provision between businesses liable to tax (B-to-B, business to business), the future European legislation provides for taxation to be levied where the consumer is located and no longer in the service provider's state of establishment. When services are provided to a person who is not subject to VAT (B-to-C, business to consumer), the general rule is that the place of taxation will be that where the provider is established. Exceptions have been introduced to this general rule for B-to-C services and concern the following: - restaurant services; the hiring of means of transport; cultural, sporting, scientific and educational services; and telecommunications, broadcasting and electronic services. For all these services, taxation will be at the place of consumption in order to prevent distortions of competition between member states operating different VAT rates.
We would point out that the difficulties which peppered talks on the VAT package ended with Luxembourg's refusal to accept any changes to the place of provision, and hence of taxation, for electronic, telecommunication and audiovisual diffusion services (see EUROPE 9557). The Grand Duchy feared it would lose the fiscal attractiveness that had allowed it to attract companies such as AOL and Skype. For these services, the agreement reached unanimously by the Ecofin Council in December 2007 sets out: - entry into effect of the new rules in 2015; - introduction between 2015 and 2019 of a degressive sharing mechanism of tax receipts authorising the member state where the service provider is established to keep part of the tax receipts (30% in 2015 and 2016, 15% in 2017 and 2018).
The VAT package provides a new procedure for VAT reimbursement to companies liable to tax and established in another member state. “I am particularly proud of the new procedure to allow businesses to electronically claim VAT refunds from other member states in which they are not registered but have paid VAT. This change from a paper-based to an electronic system means that refunds for businesses will be faster and easier”, said Lászlo Kovács, European Commissioner for Taxation, in a press release. (M.B.)