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ECOFIN supports VAT action plan

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ECOFIN supports VAT action plan

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ECOFIN supports initiatives linked to the VAT action plan

Last 25 May all Finance ministers of the European Union met at the ECOFIN to review, among other measures, the changes to the VAT action plan proposed by the Commission last April. The ECOFIN has now supported the initiative from the EC and encouraged this institution to provide further details and legislative proposals on the suggested changes.

The changes proposed by Commission are summarized as follows:

  • Revised intra-Community VAT rules: The EC proposed to implement the destination principle on all intra-Community supplies of goods. VAT collection and reporting would follow similar rules to those applicable in electronic services.
  • E-commerce VAT changes: The current Mini One-Stop-Shop on electronic services will be extended to supplies of goods (distance sales).
  • VAT rate changes: Currently, reduced VAT rates can only apply to goods and services in Appendix III of the VAT Directive. The Commission proposed two options: a) regularly reviewing appendix III of the Directive to make sure it is up to date or b) giving total freedom to Member States on the decision of goods and services that are subject to reduced VAT rates.

Further changes to the VAT action plan

The ECOFIN has supported all these initiatives. In practice, however, the revision of intra-Community VAT rules and VAT rate changes will require further discussions and a more detailed proposal from the Commission. On the contrary, the EC will publish a legislative proposal on e-commerce VAT changes by the end of this year. Any of these changes will need unanimous approval by the EU Finance Ministers.     

You can double check the current VAT rules on e-commerce in our article E-commerce VAT and distance sales obligations and compare them with the upcoming changes published this month. We also published a detailed explanation of the intra-community VAT changes and VAT rate developments announced by the Commission.