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Document 52014SC0038
COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Seventh report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures
COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Seventh report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures
COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Seventh report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures
/* SWD/2014/038 final */
COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Seventh report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures /* SWD/2014/038 final */
COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE
COUNCIL AND THE EUROPEAN PARLIAMENT Seventh report under Article 12 of
Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures Contents Contents. 3 I............ INTRODUCTION.. 4 II........... ANALYSIS. 6 CHAPTER 1:
Selected Issues on Organisation of Tax Administrations. 6 CHAPTER 2:
VAT Identification, Registration and Deregistration. 10 A........... Threshold and Stratification of VAT Registrations. 10 B........... VAT Registration Procedures. 13 CHAPTER 3:
Customs Procedure 42. 19 CHAPTER 4:
Submitting VAT Returns (Filing) and Payment 22 CHAPTER 5:
VAT Collection and Recovery. 29 CHAPTER 6:
VAT Audit and Investigation. 36 CHAPTER 7:
Tax Dispute Resolution System.. 43 CHAPTER 8:
VAT Compliance. 50 III......... RECOMMENDATIONS. 54
INTRODUCTION
In
2011 the total amount of VAT revenue collected in the EU was around € 901
billion, which represented 7.1 per cent of GDP-EU-27 and 18.4 per cent of
total tax revenue, including social contributions.[1]
The EU VAT system embraced around 26.5 million VAT taxable persons. The
VAT-gap, which is the difference between the amount of VAT actually
collected and the theoretically collectable[2] amount of
VAT, is estimated at 18.4 per cent of GDP-EU-26[3].
In
2011, the VAT own resource represented 11 per cent of the EU revenue,
being around € 14 billion. For the calculation of the VAT own resource, as
a rule, a uniform rate of 0.30% is levied on the harmonised VAT base of
each Member State. However, this VAT base is capped at 50% of GNI for each
Member State. In addition, for the period 2007-2013, 4 Member States have
reduced VAT call rates: 0.225% for Austria, 0.15% for Germany and 0.10% for the Netherlands and Sweden. Some other corrections exist, in particular the UK rebate. The efficiency of VAT collection and control in the Member States may impact the
amount of VAT own resources due by the Member State concerned as well as
the relative share in total own resources of other Member States.
Article
12 of Council Regulation 1553/89[4]
on the definitive uniform arrangements for the collection of own
resources accruing from VAT requires the Commission to submit a report to
Parliament and Council every three years on the procedures applied in the
Member States for registering taxable persons and determining and
collecting VAT, as well as on the modalities and results of their VAT
control systems. This report should enable Member States to assess risks
and identify opportunities to improve VAT control and collection systems.
Six reports have been made since 1989.
The
current report, building on the recommendations of previous reports[5]
and taking into account progress already made at EU and national
level, aims at measuring improvements in VAT administration in Member
States within the framework of Article 12 of the above mentioned
Regulation. It takes into account recent developments in tax administration
with increased emphasis on preventive measures and promoting voluntary
compliance. It aims to identify good practices in the various steps of an
effective tax collection, measured against common benchmarks.
In
order to prepare this report, a questionnaire on selected issues has been
submitted to all Member States to pool the information needed for the
report[6].
The data submitted were discussed on several occasions with the Member
States. Generally, the data included in the report reflect the situation
up to 31 December 2011, unless otherwise indicated. Later developments are
covered only if information was made available by a Member State.
ANALYSIS
CHAPTER 1: Selected
Issues on Organisation of Tax Administrations
In
around half of the Member States the tax administration functions as a
semi-autonomous body.
Autonomy is essential to a good performance of a tax administration. Over
the last decades, tax administrations have been faced with the need to
deliver services more effectively and at a lower cost to citizens and to
address deficiencies in traditional procedures and structures seen as too
rigid to respond to the challenges confronted by government in modern
society. As a basic principle, autonomy can lead to better performance by
removing impediments to effective and efficient management while maintaining
appropriate accountability and transparency. As a result, there has been a
tendency for governments to increase the autonomy of its departments and
agencies. The OECD[7] has identified a number
of different categories of institutional arrangements for tax
administrations: (i) a single or multiple directorate(s) within the
Ministry of Finance; (ii) a unified semi-autonomous body, the head of
which reports to a Minister and (iii) a unified semi-autonomous body with
a board, the head of which reports to a Minister. Table 1 gives an
overview of the Member States tax administrations' position in this field
and compares the degree of autonomy in what concerns the: (i) budget; (ii)
management of human resources and (iii) organisational structure.
Table 1 - Autonomy of tax
administration[8] || AT || BE || BG || CY || CZ || DK || EE || FI || FR || DE || EL || HU || IE || LT || LV || LT || LU || MT || NL || PL || PT || RO || SK || SI || ES || SE || UK 1.The tax administration is: || || || || || || || || || || [9] || || || || || || || || || || || || || || || || || a) A department of the MoF || Y || Y || || Y || || || Y || Y || Y || || Y || || || || || Y || Y || Y || Y || Y || Y || || || || || || b) A semi-autonomous body || || || || || Y || || || || || || || || Y || || || || || || || || || || || || Y || || c) A semi-autonomous. body with a board || || || Y || || || Y || || || || || || Y || || Y || Y || || || || || || || Y || Y || Y || || Y || Y 2.Can the tax administration: || || || || || || || || || || || || || || || || || || || || || || || || || || || a) Design its' own organisational structure? || Y || Y || Y || Y || Y || N || Y || Y || Y || || N || N || Y || Y || Y || Y || Y || N || Y || N || Y || y || Y || Y || N || Y || Y b) Set the remuneration levels? || N || N || Y || N || Y || N || Y || Y || N || || N || N || N || N || Y || Y || N || N || N || Y || N || N || Y || N || Y || Y || Y c) Set its staffing levels? || N || Y || Y || Y || Y || N || Y || Y || Y || || N || N || N || Y || Y || Y || Y || N || N || Y || N || N || Y || Y || N || Y || Y d) Hire and fire staff? || Y || N || Y || N || Y || Y || Y || Y || N || || N || Y || Y || Y || Y || Y || N || N || N || Y || N || Y || Y || Y || Y || Y || Y e) Discretion over operating expenditure? || Y || Y || Y || Y || Y || Y || Y || N || Y || || N || Y || Y || Y || Y || N || Y || Y || N || N || Y || Y || N || Y || Y || Y || N f) Discretion over capital expenditure? || N || N || Y || Y || Y || Y || Y || N || Y || || N || Y || N || Y || N || N || N || N || N || N || N || Y || N || N || Y || Y || N
The
organisational structure of tax administrations and the position of the VAT
administration differ across Member States. Over the last decades, the
organisational structure of many tax administrations has been subject to
major reforms. There is a trend to aggregate direct taxes, indirect taxes
and customs. Customs is under the same management structure as VAT
in several Member States (AT, BE, CY, DK, EE, ES, IE, LV, MT, NL, PT, SI and UK). There is also a trend to create distinct units devoted to VAT
fraud. Currently, eight Member States do not have a specialised VAT fraud
unit. Generally speaking, there is an evolution from structures
based largely on "tax or legislation type" criteria, to a
process- or function-based organisation. A number of administrations have
evolved towards a "taxpayer type" approach. The taxpayer
approach embraces, inter alia, the creation of specific units for
large taxpayers, high wealth individuals and self-employed. Risk
management units support the tax payer approach. Table 2 gives an
overview of the position of the tax administrations of Member States in
this field.
Table 2 - Selected issues on
organisation of tax administration[10] Country || Structure of tax administration || Large taxpayer unit || Enforced debt collection unit || VAT fraud unit || High wealth individduals unit || Risk management unit AT || T, TP || Y || N || N[11] || N || Y BE || ALL || Y || Y || Y || N || Y BG || F || Y || Y || Y || N || Y CY || T || N[12] || Y || Y || N || N CZ || T,F || Y || Y || Y || N || Y DK || ALL || Y || Y || Y || N || Y DE || T, TP || Y || Y || Y || N || Y EE || ALL || Y || Y || N || N || N ES || ALL || Y || Y || Y || N || N[13] FI || MATRIX || Y || Y || Y || N || Y FR || TP || Y || Y || Y || Y || N EL || ALL || N || Y || N || Y || N HU || F || Y || Y || Y || N || N IE || TP || Y || Y || Y || Y || Y IT || F || Y || Y[14] || Y || N || N LT || F || Y || Y || Y || N || Y LV || F || Y || Y || N || N || N LU || T,F || N || Y || Y || N || N MT || ALL || N || Y || Y || N || N NL || F || Y || N || Y || N || Y PL || ALL || Y || Y || Y || N || N PT || F || Y || Y || Y || N || N RO || ALL || N || Y || N || N || N SE[15] || ALL || Y || Y[16] || Y || Y || N SI || F,TP || Y || Y || N || N || N SK || F || Y || Y || Y || N || Y UK || ALL || Y || Y || Y || Y || Y Conclusion
Although
autonomy is essential to a good performance by a tax administration, in
many countries there are still significant constraints on management. There is a trend towards
the creation of autonomous agencies (around 50 per cent of Member States).
This institutional arrangement offers, in general, more budgetary autonomy
as well as autonomy in the management of human resources and the design of
the organisational structure. However, there is no silver bullet solution
to this question, as some countries have granted a high level of autonomy
to the tax administration within the Ministry of Finance.
There
is a trend from a tax-type towards a taxpayers-type organisational
structure. Most
Member States have a large taxpayers function; however, very often it is
merely an audit centre and does not embrace filing, payment, enforced
collection or taxpayer services. Ten Member States have a distinct risk
management unit, supporting a holistic compliance approach. Very few
countries have a distinct function responsible for the compliance
management of high wealth individuals and self-employed.
CHAPTER 2: VAT Identification, Registration and Deregistration A.
Threshold
and Stratification of VAT Registrations
Within
the EU, on average in 2011, taxpayers are required to register for VAT
when total turnover exceeds threshold of € 30.611[17]. Businesses below
the threshold may voluntarily register to participate in the VAT system.
DE, ES, IT, MT, NL and SE do not apply a threshold for VAT registration of
their small businesses. In other Member States, thresholds vary greatly
from a minimum of € 5.000 (EL) to a maximum of € 83.802 (UK). Furthermore, some Member States apply specific thresholds and options depending on the
sector of activity on the basis of Directive 2006/112/EC of 28 November
2006 on the common system of value added tax (hereinafter "Directive
2006/112").
Graph 1 – Overview of VAT
registration thresholds[18]
Note: EL(a) threshold for provision of services; EL(b) threshold
for provision of goods. FR(a) threshold for provision of services and hotels;
FR(b) threshold for lawyers authors and artists; FR(c) threshold for sales;
IE(a) threshold for services; IE(b) threshold for goods.
Around
22 per cent of VAT taxpayers are below the threshold for mandatory
registration and have a net VAT liability[19] close
to nil. This
may indicate a loss-making activity in the segment or a compliance problem
resulting from overvaluation of deductible VAT (embracing private
expenditure) or undervaluation of turnover.
The
vast majority (around 65%) of the registered VAT taxable persons, have a
turnover not exceeding €100.000 and contribute little to VAT revenue.
Graph 2
shows the distribution of registered businesses by turnover and
contribution in terms of net VAT declared liability and compares it to the
typical segmentation of Taxpayers and Revenue Collections. It is
generally admitted that a small number of large enterprises (typically
less than 1 percent) are responsible for 60–70 percent of domestic tax
collections, while a very large number of smaller enterprises account for
less than 5–10 percent of domestic tax collections. Within the EU, most of
the taxpayers (65 per cent) are in the segment of micro firms[20]
but with a turnover even not exceeding € 100.000 and contribute only 2
percent of net VAT liabilities. Given the design of the VAT system, it is
possible that these small firms will take more from the VAT system than
what they pay in output tax (as part of the output tax will be deducted by
larger firms).
Graph 2 – Segmentation of Tax
Payers and Revenue Collection: Source: World Bank quoted in
Risk-Based Tax Audits Approaches and Country Experiences World Bank report 2011
– Simon York p. 40.
The
stratification suggests a compliance problem in voluntary registrations. As said, the extremely
low net VAT liability in this segment may indicate a loss-making
activity in the segment or result from overvaluation of deductible VAT or
undervaluation of turnover. The detailed analysis of negative VAT
liability for a selected number of Member States shows that deductible VAT
compared to declared turnover is relatively high for voluntary
registrations. It even results in a negative net VAT liability in a number
of Member States (CY, DK, EE, EL, FR, HU, LT, LU, LV, SI, SK and UK) (See Graph 3 below) as it amounts to a direct VAT subsidy to micro-firms.
This may indicate a compliance problem. Additionally, having a higher
registration threshold increases the risk that a significant number of
taxpayers will choose to opt out of the VAT system, not for business
reasons, but solely because they find themselves in a recurring VAT credit
position. This risk is illustrated in Graph 3 below, which shows a
trend of negative net VAT payable position for Member States where a
threshold is in place (CY, DK, EE, EL, FR, HU, LT, LU, LV, SI, SK and UK).
As a consequence, a drop in revenue may occur in case of higher
registration threshold, with little possibility for the Member States to
anticipate it, track it in a population with a wider range of turnovers
and monitor it.
Graph 3 - Number
of voluntary registrations and contribution to the revenue for Member States
with thresholds
A
higher registration threshold does not significantly reduce the number of
voluntary registrations, but may contribute to a drop in VAT revenue and
to less visibility.
There is no perfect correlation between the level of the threshold and the
number of voluntary registrations, as depicted in Graph 4 below. On
average, the segment of taxpayers whose declared turnover is below €
100.000 contributes 2 per cent more to the total VAT revenue, compared to
Member States with a threshold.
Graph 4 – Correlation between number of
volunteer registrations and the threshold Conclusion
In
the EU, small and micro firms contribute only around 2% of VAT revenue. In particular, voluntary
registrations below the registration threshold seems to indicate a
compliance problem. It can even result in a negative net VAT liability in
a number of Member States (DK, EE, EL, FR, HU, LT, SI, SK and UK).
Member
States should consider the desired threshold for mandatory registration
and the VAT treatment of micro businesses need to be further examined. In setting a threshold
for mandatory VAT registration, policy makers have to take into account
the fact that businesses below the threshold may decide to register
voluntarily to participate in the VAT system[21].
B.
VAT
Registration Procedures Overall Benchmarks
Registration
is transparent and taxpayers are well-informed about how, when and where
they can register for VAT. Accurate and up to date information is
available. There is access to services for taxpayers through helpdesks,
online systems and/or call centres. Non-established taxpayers can easily
get access to information through a website or a web portal and there is
an exclusive contact point for these taxpayers. Requests for registration
are dealt with one week. The registration process collects information
enabling the tax administration to detect and stop fraud and consequently
to limit substantially the level of fraud. From the start, the tax administration monitors VAT filing and payment
compliance in connection with risky registrations, embracing early and
on-going post-registration on-site visits. Deregistration
procedures are effective to deregister immediately missing traders from
the VAT system and to prevent VAT fraud at an early stage. The register is kept up
to date and measures are taken to ensure the quality and reliability of
the data in VIES. Tax Authorities and economic operators can rely on the
validity of the VAT identification numbers in the VIES system. In cases of suspicious
fraudulent intentions and when registration cannot be refused, the tax
administrations take precautionary and additional security measures as a
pre-requisite for registration.
Current Situation
In
most countries the registration process is transparent and taxpayers –
including the non-established taxpayers - are well-informed about how,
when and where they can register for VAT. In fact, only 3 Member States (BE,
EL and LU) do not provide specific information on national and VIES
registration to non-establish taxpayers. Almost all Member States (AT, BG,
CY, CZ, DE, DK, EE, ES, FI, HU, IE, IT, LT, LV, MT, NL, PL, PT, RO, SE,
SI, SK and UK) provide information (by means of a webpage, through a
leaflet, etc.) on VAT registration and specify the requirement in foreign
languages, English is the most common foreign language used. Nevertheless,
a more user-friendly approach could be taken when information is provided
in the language of neighbouring countries or to countries with which the
country in question establish a more active economic partnership (for
example, in the cases of FI and IT). A lot of efforts have been made in
many Members States to provide information on their VAT system to
non-established operators in English (AT, BG, CZ, DK, EE, ES, FR, HU, IT,
LT, LU, LV, MT, NL, PL, SK, SE and UK). Nonetheless, when more specific
and business-related issues emerge, the information given becomes scarcer
and the person is re-directed at the existing webpages in their national
language. Some Members States have specific offices dealing with
non-established companies, where the staff is proficient in different
languages. Still, and despite noticeable efforts made by many Member
States on their website, it remains difficult to know whether certain
businesses need to be registered or not and what the relevant obligations
concerning it are..
The
registration process seeks a balance between facilitating trade and
controlling the VAT system. Very few Member States have long deadlines for
registration of taxable persons (weekly - BE, ES and PT; monthly – EL).
The deadlines vary from immediate registration to a maximum of 30 days. In
most cases, the registration process takes less than 10 days. This means
that most Tax Authorities have a very tight deadline to perform
pre-registration checks.
The
majority of Member States systematically cross-check the registration application
against other sources of data. In addition to verifying the
information provided in the application form, it is essential that
supplementary information is collected from a range of accessible data
bases. Generally, tax administrations verify information included in an
application form through the national register of companies, as well as
information available in internal databases, such as income tax returns,
the social security register and customs declarations. EL, FR[22],
IT and PT do not cross-check registration data. These checks are
occasionally made in BE, CZ and PL.
Most
Member States focus on the identification of potential fictitious
businesses at the pre-registration stage. A registration process under which
the intended activity and the identity of the taxpayer are verified is
essential to prevent frauds associated with fictitious businesses (also
called “missing traders”). The registration process should collect
information to enable the tax administration to detect and stop frauds associated
with fictitious businesses at an early stage. This would limit
substantially the level of fraud. Most Member States systematically rely
on risk indicators in a pre-registration phase. On-site visits are not
frequent. Few Member States systematically carry out pre-registration
visits. Nevertheless, they do take place occasionally in the great
majority of the Member States. FR, IT, LT and PT have limited or no
pre-registration checks in place.
Registration
procedures rarely result in a rejection of the registration. In fact, a large number
of Member States do not have available data in this respect. For the
remaining Member States, in general, over the period 2009-2011, very few
applications have been rejected, when compared to their respective total
number of taxpayers (average of 0.16per cent[23]
and maximum of 1.2per cent over this period). Graph 5 depicts the
number of rejected registrations. More than half of the Member States (BE,
BG, DE, DK, EE, ES, FR, HU, IE, LT, MT, PL, SE, SI and UK) keep a record
of applicants for whom registration has been refused either for a national
identification number or VIES identification number. These records are not
always directly available to all registration offices.
Graph 5 – Rejected
registrations
Post-registration monitoring programs for
risky traders are implemented in half of the Member States. Modern Administrations
monitor from the start VAT filing and payment compliance for risky
registrations, including early analysis of the VAT returns and on-going
post-registration on-site visits where needed. Some Administrations even
set-up monitoring and visiting programs for a wider range of traders,
which include intermediaries, brokers, main dealers, exporters and freight
forwarders in high risk sectors. The main purpose of such programs is to
gather as much information as possible on new players in the
arena. Around
half of the Member States systematically analyse the VAT return of new
registrations. Not surprisingly, most of those Member States having put in
place automatic cross checks of data in the initial phase of registration
are also the ones proceeding to cross checks of the VAT returns with
available data bases. Also half of the Members States, occasionally visit
and audit companies at their premises. Only a few Member States (AT, LU
and SK) have a systematic, albeit risk-based, visiting programme in place.
There
is often little information available on deregistration. Almost half of the
Members States are not able to quantify the number of deregistrations following
post registration checks, at least at central level. Moreover,
around half of the Members States do not have data available on the
percentage of deregistrations from VIES. For the others, the
percentage varies from 0,1 per cent (IT) to 11,5 per cent (LV). The trend over the three previous years seems rather constant.
In many Member States, deregistration procedures are
too slow to stop VAT fraud at an early stage and are not very efficient as
regards deregistering missing traders quickly from the VAT system. It
is important to react quickly on detected frauds, in order to put an end
to VAT fraud. Therefore, a short and rapid procedure should be in place to
deregister or to cancel the VAT number. In case of suspicion of fraud, the
minimum time required to deregister from a VIES number varies greatly from
1 day to 134 days, the average being 13,4 days. Despite recent and
real progress, quick deregistration still seems to be a problem in many
Members States. The differences between the Member States are significant
and often adequate legislation and administrative processes supporting
deregistration are lacking.
The
interaction between registration for national purposes and for intra
community trade differs across Member States. The vast majority of Member States
provide identification for intra community trade together with the
national registration for VAT purposes. The other Member States have
separate registers. The percentage of registered taxpayers for intra
community transactions goes from 6 per cent (BG) to almost 100 per cent
(BE), with significant variations over the years in certain Member States,
due to changes in the registration system (BE, IT and RO).
Keeping
the information available in the VIES system up-to-date, complete and
accurate, can be improved for some Member States. Keeping proper and
up-to-date records in VIES, as well as in the VIES Web version is a
prerequisite to enhance legal certainty for legitimate business activities
and mutual trust between tax authorities in the EU. As to the updating of
the VIES data base, 5 Member States operate in real time (EE, IT, LU, PL
and SI); the gross majority (18) update the VIES system daily; 3 weekly
(BE, ES and PT) and only 1 monthly (EL). Most Members States have a
hotline where taxpayers can report errors in VIES. Nevertheless, 3 Member
States (ES, IT and PT) don’t have this facility.
A
total of 9 Member States use retroactive deregistration (CY, DK, EL, FR, IE, PL,
PT, RO and UK). Nonetheless, only 6 ensure that the effective date of
deletion from the system is visible (EL, FR, IE, PL, PT and RO) [24].
Conclusions
In
most countries the registration process is transparent and taxpayers –
including the non-established taxpayers - are well-informed of how, when
and where they can register for VAT. Accurate and up-to-date information
is available. Non-established taxpayers can easily get access to
information. However, on more specific issues, the information given
becomes scarcer in foreign languages.
The
focus on the pre-registration and deregistration process has increased
significantly with the implementation of the Council Regulation 904/2010[25],
however
not all Member States have developed end-to-end processes for
registration. An
end-to-end process embraces not only pre-registration checks, but also a
regular follow-up on the activities of the taxable person and
deregistration as soon as the conditions for registration fail to be
complied with[26], thus making VIES a more
reliable database.
The
number of deregistrations ex officio remains low and in many
countries the deregistration procedures are slow. Quick deregistration
still seems to be a problem due to the absence of adequate legislation and
supporting administrative processes.
Keeping
the information available in the VIES system up-to-date, complete and
accurate, may be improved for some Member States. In particular the long
timeframes for updating the system and the retro-active deregistration in
certain Member States may be problematic. In the latter case, according to
the principle of transparency and legal certainty, the real date of
deletion of the VAT number should be made visible to users in the VIES web
version.
CHAPTER 3: Customs Procedure 42 Overall
Benchmarks
Member
States have put in place a system to enable checking of VAT identification
numbers at the time of importation. This embraces an online access to the
VIES database containing all valid VAT identification numbers in the EU
database. Customs authorities systematically transmit data concerning
importations using the Customs Procedure 42 to the tax administration for
an efficient exchange of data. Importations using the Customs Procedure 42 are identified as an
additional risk in the tax administration's risk analysis system. Results
of this risk analysis are exchanged through Eurofisc[27]
working field number 3 "Customs Procedure 4200".
Box 1. Customs 42 procedure CUSTOMS PROCEDURE 42 is the regime an importer uses in order to obtain a VAT exemption when the imported goods will be transported to another Member State. The VAT is due in the Member State of destination. This procedure is commonly known as customs procedure 42 because in such cases the importer of the goods must indicate in box 37 of the Single Administrative Document (SAD) a code starting with the digits 42. When goods are re-imported, code 63 should be indicated instead. For the purposes of this report, references to customs procedure 42 include customs procedure 63. Current
Situation
A
significant number of Member States fail to systematically check both the
VAT identification number of the importers and the VAT identification
number of the customers. Although 24 Member States check the VAT identification
numbers of the importers at the time of importation, only 17
systematically also check the VAT identification numbers of customers
acquiring the goods in the Member State of destination. As a result, a
total of 9 Member States do not systematically check both of the above
mentioned VAT identification numbers - the number of the importers and
those of the customers (BE, BG, FR[28], HU, IE,
LU, NL, PT and UK).
In
a number of Member States there is no system for exchanges of information
between the Customs and the tax administration. Once the information is
made available to the Customs administration through box 44 of the SAD, it
should be transmitted to the tax administration of the Member State of importation. At that time the tax administration can monitor whether the
recapitulative statement has been filed by the importer or his fiscal
representative and the transactions can be further monitored using the
tools put at the disposal of Member States through the Regulation (EU) No
904/2010. In EE and IE this exchange of information can be easily
achieved, since these countries have a merged Customs and tax administration.
In ES the information is also ensured since both Customs and tax
administrations have one integrated database. There are still, however, at
least 5 Member States where such system for the exchange of information is
lacking (EL, IT, NL[29],
PL and SK).
Despite
the high loss of VAT revenue due to abuse of the Customs 42 procedure at
least five Member States indicated that they do not identify these imports
as an additional risk in their domestic risk analysis system. Since 2011, a specific
working field within Eurofisc has been set up to exchange rapidly
information on possible fraudulent transactions or traders misusing the
Customs Procedure 42. The information exchanged within this working
field relates to suspicious transactions identified and resulting from a
domestic risk analysis of these transactions. Currently, despite the high
amount of VAT revenue that is lost following the misuse of the above
mentioned Procedure (see Special Report of the ECA), 4 Member States (EE,
FI, LU and MT) are not participating in this working field, whereas 2
Member States (DE and PL[30])
participate only as an observer.
Several
Member States use specific tools to avoid the misuse of the Customs
Procedure 42. In
several Member States specific tools, such as licenses (LU, MT, NL and SK)
or guarantees (AT, DK, EE, ES, HU, IT, LU, MT, NL, RO and SK) are used in
order to prevent the misuse of the Customs Procedure 42. For example, in
AT, an electronic system automatically generates a recapitulative
statement from the data contained in the SAD. In PL the use of the Customs
Procedure 42 is dependent on the filing of the recapitulative statement.
MT only releases the guarantee once the recapitulative statement is filed.
Those Member States that use a guarantee only impose this in exceptional
or limited cases.
Conclusions
Not
all Member States ensure that the validity of the VAT identification
numbers listed in box 44 of the SAD are systematically checked at the time
of importation.
Those Member States that do not have yet done so - at least half of the
Member States (BE, BG, DE, EE, HU, IE, IT, LU, LV, NL, PL, PT, RO, SE and
SK) - should apply the necessary resources in order to guarantee automatic
access to VIES to the customs administration. Moreover, not all Member
States guarantee that all the information on importations using the
Customs Procedure 42 is transmitted domestically to the tax
administrations in order to ensure a proper follow up of the goods
movement within the EU. This situation seems to persist despite previous
recommendations on the matter – i.e. in FPG 29 of 2008, echoed by the
European Court of Auditors in its Special Report No 13 of 2011[31],
and also supported by the European Parliament and the Council.
Member
States should identify these transactions as additional risks in their
domestic risk analysis systems. It is crucial that transactions
misusing the Customs Procedure 42 are identified rapidly by all Member
States and that the information is passed on quickly between them.
Furthermore, in order to alert other Member States rapidly of fraudulent
transactions discovered or traders systematically misusing the Customs
Procedure 42, all Member States should actively participate in Eurofisc
working field 3.
The
use of a license or guarantee may prove useful to prevent the misuse of
the Customs Procedure 42, However, imposing an overall guarantee or license on
all traders or fiscal representatives that intend to use the Customs
Procedure 42 would be a disproportionate burden on honest business and
jeopardise the smooth functioning of the internal market, taking away the
flexibility and attraction of the simplification provide for by this
procedure. Therefore, Member States imposing such a license or guarantee
system should only target risky traders.
CHAPTER 4: Submitting VAT Returns (Filing) and Payment Overall
Benchmarks
Filing
VAT returns is the first step (after registration) in the end-to-end
process of establishing VAT liabilities. A disciplined and systematic
approach is in place to monitor and enforce filing obligations and ensure
on-time filing of returns. Highly automated business processes, embracing
electronic filing of VAT returns and recapitulative VIES statements, are
supported by taxpayer profiling tools to determine the most appropriate
follow-up action for stop-filers (e.g., phone call, e-mail, text messages,
demand notice, personal visit, default assessment or prosecution). VAT due
and VAT refunds are paid timely. Interest is charged or paid automatically
for late payments and refunds. Reasonable penalties support compliance
with filing and payment obligations.
Current
Situation
There
are significant differences in the filing ratio (the number of returns
received compared to the number of returns expected), across Member
States.
The median filing ratio for 25 Member States[32]
is around 96 per cent. The best performing Member States have a ratio of
VAT returns submitted reaching almost 100 per cent (DK, EE, NL, SE and
SI). The lower end quartile is around 90 per cent. The filing ratio will
depend, inter alia, on the efficiency of an automated and
end-to-end filing and payment system, the interest and penalties schemes
and the accuracy of the taxpayers register. In this context, IT is
significantly under-performing (47.5 per cent) as many "active"
VAT numbers are "dormant" and do not correspond to entities
carrying out an economic activity and do not submit VAT returns.
On
average, the results in terms of timely filing of the VAT returns could be
improved.
However, on average, those Member States with the best filing ratio have
also the highest delays in filing time, which reflects the efforts made to
collect the returns. Graph 6 depicts the delays and timely filing
of VAT returns. VAT returns are filed for more than 97 per cent within the
deadline in a minority of Member States (more specifically 5 Member
States: BG, EL, IT, PT and SK).
Graph 6 – Delays and timely
filing of VAT returns
Electronic
filing is increasing, but not in line with reasonable expectations. Only a small majority of
the Member States (see Graph 7 below) have appropriate legislation
in place providing for a compulsory electronic filing of VAT returns. For
the remaining Member States, so far, an option-based system is applicable.
There is a positive trend in this respect: a significant increase in the
effective percentage of electronic filing can be noted over the period
2009-2011 (average progression for 2009/2010 of 49 per cent and of 22 per
cent for 2010/2011). Nevertheless, the current figures are not satisfying
since, in countries where the electronic filing is compulsory, the
effective electronic filing reaches only 87 per cent on average.
Graph 7 – E-filing of VAT
returns[33]
Progress
could be made in 7 Member States on the development of an automatically
filing and payment system for VAT returns. A central monitoring of the
deadlines for filing and payment is in place in most Member States (See Graph
8). However, modern and automated follow-up systems are lacking in a
significant number of Member States. Automatic reminders are still not in
place in 7 Member States (BG, ES, IT, LV, NL, PL and SK).
Moreover, in 17 Member States (AT, BE, CY, CZ, DE, DK, FI, FR[34],
HU, IE, LT, LU, MT, PT, RO, SE and SI) reminders are sent out through a
written notification letter instead of more modern means of communication,
such as an e-mails or a SMS. Only a few Member States have taxpayer
profiling tools to determine the most appropriate action for stop-filers[35].
Graph 8 – Automated monitoring
of deadlines for filing and payment by an electronic system
Interest
and penalties for late filing and payment vary significantly across Member
States and their efficiency remains to be proven. All Member States apply
sanctions for late or non-filing. Most sanctions are for late payments -17
Member States-(AT, CZ, DE, EE, EL, ES, FI, HU, IE, IT, LU, MT, NL, PT, SE,
SK and UK). The range of penalty rate applicable
appears to be broad, takes different forms (monthly fixed, yearly or
periodic rate) and is not directly linked to the financial market rate.
The current data do not provide any guarantee that the sanctions
effectively impact and penalize the tax payers with overall cost that is
higher than what would have been incurred as part of third-party financing
Systematic
and immediate estimated assessment in case of non-filing is not a common
standard.
10 Member States (BG, EE, ES, HU, LT, LV, PL, RO, SI and SK) do not
calculate any estimated assessment in case of late filing and, for the
remaining Member States, only 6 Member States (DE, FR, IE, MT, SE and UK)
apply this assessment immediately. Graph 9 depicts the
timeframe for assessment in case of late filing.
Graph 9 – Timeframe for
assessment in case of late filing
The
timeliness of VAT refunds has improved over the period 2009-2011 with some
exceptions below 98 per cent (FR, HU, IE, IT, MT, RO and SI). In most Member States,
the refund of VAT claim requests is subject to a deadline (22 Member
States – AT, BE, BG, CZ, DE, DK, EE, EL, ES, FR, HU, IE, IT, LT, LV, MT,
NL, PL, RO, SI, SK and UK), the standard effective period being between
30-45 days (please refer to Graph 10 and 11 below). The
deadlines, if applicable, are generally respected, up to at least 95 per
cent in all Member States in 2011, except FR, IT, LV, MT and RO. Moreover,
the VAT refund process can be suspended in case of suspicion of fraud for
an undetermined period in a vast majority of the Member States (18 Member
States – AT, BE, CZ, DE, DK, EE, ES, FI, FR, HU, IT, LT, LU, NL, PL, PT,
SI and UK). There is little information on the amount of postponed refunds[36],
but these amounts seems to be stable or improving, over the period
2009-2011, for those Member States that disclosed the information (except
for EL, FR, IT, NL and RO).
Graph 10 –Percentage of VAT
refund claim paid within the deadline Graph 11 – Deadline for
payment of VAT refund claims under national law or procedures
A
majority of Member States do not automatically pay interest in case of
late refunds. The
number of Member States automatically paying interest in case of payment
of VAT refunds after the deadline is unsatisfactory (12 Member States-CZ,
DE, DK, EE, ES, FI, FR, HU, MT, PL, SI and SK), with 5 Member States per
cent not applying interest (AT, CY, LU, NL and UK[37]).
Graph 12– Payment of interest
in case of late VAT refund
Filing
compliance is decreasing for recapitulative VIES statements. The overall percentage
of recapitulative statements filed in time has decreased significantly
between the period of 2009 and 2010[38] (-6 per
cent) and has become stable since then to reach an average of 84 per cent
which remains low.
Graph 13 – Percentage of VIES
recapitulative statements filed in time Conclusions
Although
the median filing ratio in the EU is around 96 per cent, it can be
significantly improved in a number of Member States. Modern and
automatic end-to-end processes are often missing. A systematic and
immediate estimated assessment in case of non-filing would contribute to a
better filing ratio. The efficiency of interest and penalties schemes for
late filing and payment needs further examination. The register of taxable
persons is not being kept up to date may be another factor contributing to
a low filing ratio. Electronic filing is increasing, but not in line with
reasonable expectations.
The
timeliness of VAT refund of VAT claims has improved over the period
2009-2011. The
standard effective period is between 30-45 days. However, there are some
Member States where timely VAT refunds remain problematic. And the
majority of Member States do not pay automatically interest in case of
late refunds.
Filing
compliance is decreasing for recapitulative VIES statements[39], The forthcoming
Commission report on administrative cooperation in the field of VAT will
examine this issue in further detail.
CHAPTER 5: VAT Collection and Recovery Overall
Benchmarks
The
stock of tax debt is stable at less than 10 per cent of annual tax
revenues. The backlogs of old debts are regularly reviewed for
collectability and appropriate write-off policies are in place. A strong
headquarters develops debt collection policies and strategies and monitors
national debt collection performance. Debt collection operations are
consolidated into a small number of offices and conducted by a full time
work force of specialized collection staff. The function is highly
automated and includes: (i) computer generated notifications, reminders
and warrants; (ii) automatic identification of assets based on third party
information and (iii) automatic offsetting of tax credit entitlements
against outstanding debts. Debtor profiling tools assist in targeting the
most effective means of collecting overdue payments. Out-bound telephone
call centres make early contact with new debtors. The administration has a
structured and transparent approach for instalments schemes and there is
an automatic identification system of assets based on third party
information and debtor profiling tools. A holistic government approach is
taken to coordinating collection of tax and social security contribution
debts.
Current
Situation
The
stock of arrears is high and increasing in most Member States. The median for the stock
of debts is 11 to 13 per cent of annual tax revenues. However, the stock
of VAT debt at the end of the year in terms of percentage of annual
revenue is reaching 19 to 23 per cent on average over the period of
2009-2011. Considering the current financial and economic crisis, the
stock of VAT debt has increased in most of the Member States by an average
of 9 per cent. Only 6 Member States have reduced their stock by more than
4 per cent (AT, BE, HU, LU, SE and UK). This has not offset the position
of a few Member States which have significantly increased the same stock
by 19 per cent or more, particularly CY and MT (19 per cent), EL (21 per
cent), LV (27 per cent), SK (31 per cent) and SI (91 per cent). The growth
in VAT arrears is of concern, but can at least be partly explained by the
recession. Graphs 14 and 15 depict the situation and
evolution of the arrears inventory from 2009 onwards.
Graph 14 – Stock of VAT debt
at the end of the year Graph 15 – Stock of VAT debt
at the end of the year (growth)[40]
The
absence of debt write-off in a number of Member States gives a distorted
picture of the stock of tax debts that are truly collectible. The level of write-offs
is low and even close to zero in BG, CY, EL, FI and MT. Without an
on-going write-off programme, the tax administration risks wasting
valuable resources pursuing uncollectible amounts as attention is diverted
from collectible debt. Debts proven uncollectible at a reasonable cost
should be subject to a flexible write off procedure. Graph 16
depicts the position of the VAT write-offs in most Member States over the
period 2009-2011.
Graph
16 – Value of the VAT write-offs in percentage of vat revenue
In
a significant number of Member States the debt collection function is not
managed from an end-to-end perspective. A coherent approach is required
which manages the debt collection process from the time the debt is
established until it is extinguished. Many Member States do not have a
central or local real-time system to report on the stock of VAT debts (5
Member States –DE, EL, PL, SK, UK- as regards a per-debtor reporting and 7
Member States –DE, EL, HU, PL, SE, SK, UK as a whole). Only 3 Member
States (ES, IT and PT) have a fully integrated recovery process which is
supported by an automatic identification of assets based on internal or
third party information. While 10 Member States (BE, BG, CZ, DK, FI, HU,
IE, LT, SE and SI) have partially integrated such a process.
Graph
17 – Automated identification of asset system supporting the recovery process
and based on third party information
There
is a clear trend towards non-sequential debt collection processes. About half of all Member
States use automatic debtors profiling tools in order to
differentiate the recovery process between low, medium and high
risk debts (AT, BE, BG, DE, ES, FR, HU, IE, LT, LU, LV, PT, SE and UK).
Moreover, in 19 Member States (AT, BG, CY, DE, DK, EE, EL, FI, HU, IE, LT,
LU, LV, MT, NL, PL, PT, SE and SI) there is systematic special procedure
for new debtors, involving in many cases outbound call centres. Graph
18 depicts the use of non-sequential debt collection processes.
Graph
18 – Distinction between low, medium and high risk debts
The
policy on instalments schemes is diverse. A small number of Member States do
not apply instalments schemes for VAT. 4 Member States most frequently
apply settlement arrangements for periods of less than 6 months (CY, LU,
SK and UK). 12 Member States apply settlement arrangements for 6 to 12
months (BE, CZ, DK, EE, ES, HU, LV, MT, NL, PT, SE and SI) and 5 Member
States for 12 to 24 months (AT, FI, FR, IE and LT). Within the
scope of this exercise, the correlation with the performances of the
Member States in terms of management of the VAT debt is difficult to
establish. Nevertheless, the Member States who perform well in this
respect have generally a 6 month deadline with a maximum of 12 months (HU,
NL and SI). Table 3 below depicts the four categories in which the
Member States can be ranked when considering the value of their instalment
arrangements compared to their outstanding VAT debts and can be correlated
with the Graph 19 describing the length of the instalment periods.
Table
3 - Value of instalment arrangements in
percentage of total outstanding VAT debts at year end – average performance of
Member States group over 2009-2011 1st Group || CY, CZ, DK, ES || 21% 2nd Group || NL, IE, HU, SI || 9% 3rd Group || AT, BE, EE, PL, LV, LT, MT || 4% 4th Group || BG, DE, UK || 0.21% Graph
19 – Possible instalment procedures[41]
Little
use is made of offsetting arrears against tax credits. Only 13 Member States
(AT, CY, CZ, ES, FI, HU, IE, LT, PL, PT, SE, SI and UK) offset only
automatically tax VAT refunds against outstanding VAT debts and 7 Member
States (AT, ES, FI, HU, IE, SE and SI) offset only automatically VAT
credit entitlements against outstanding other taxes.
The
percentage of enforced collection in relation to the total collection are
heterogeneous.
One explanation is that the legal definition of enforceable debt differs
amongst the Member States which has a significant impact on practices and
data. The average performance is 10,79 per cent nonetheless.
Graph
20 – Percentage of enforced collection in relation to total collection
There
is a trend to combine tax and social security contribution debts offering
significant economies of scale. Tax and social security claims are
recovered by the same authorities in the following Member States: BG, DK,
EE, FI, LV, NL, RO, SE, SI, and the UK.
Conclusions
There
is a growth in VAT arrears which can be, at least partly, explained by the
recession.
The increase in the stock of debts is in particular a concern in EL, ES,
SI and SK.
The
absence of write-off procedures in many countries makes it difficult to
compare the level of collectable debts. Debts proven uncollectible at a
reasonable cost should be subject to a flexible write-off procedure.
Efforts
have been made to increase the efficiency of the debt collection. There is a clear trend
towards non-sequential debt collection processes as well to combine tax
and social security contribution debts. Around half of the Member States
(BE, BG, CZ, DK, ES, FI, HU, IE, IT, LT, PT, SE and SI) have implemented
fully or partly integrated recovery processes supported by automatic
identification of assets based on internal or third party information.
CHAPTER 6: VAT Audit and Investigation Overall
Benchmarks
The
audit programme includes a range of audit approaches and a risk-based
enforcement plan that, together with taxpayer services, provides a
balanced approach to promoting voluntary compliance. A risk based
management system should be in place for the selection of taxpayers to be
audited. The existence of such risk management system allows allocating
audit resources according to the taxpayers' risk. The tax administration
has an appropriate number of staff with adequate training. The audit
managers and staff are well trained and display a high level of
professionalism and integrity in their dealings with taxpayers.
There is a separation of duties
throughout the audit process with checks and balances in place to minimize
opportunities for corrupt dealings. VAT audit results rely on sound evidence
that is not disputed in an administrative or judicial appeal phase. An annual operational plan is developed,
implemented, and monitored to achieve a suitable level of operational
performance (e.g., audit coverage of key taxpayer segments productivity of
audit staff and revenue outcomes). Auditors have access to guidance on tax
technical and procedural topics to ensure consistent and equitable decisions in
the field and are equipped with modern audit tools (laptops, analytical
software, etc.). Current
Situation
The
majority of Member States have mentioned a risk-based strategy decided
centrally as a way of selection of taxpayers to be audited.
Nevertheless, there are 5 Member States that do not have a risk-based
strategy decided centrally as a way of selection of the taxpayers to be
audited (EL, ES, LU, PT and RO) and the selection is partly made by the
central headquarters and partly locally. Altogether 7 out of the 27 Member
States (AT, DE, IE, IT, FI, PL and SI) have an express obligation to audit
some taxpayers for all years. Even assuming that this obligation is only
valid for large taxpayers, it prevents Member States from having the
flexibility to allocate audit resources to taxpayers that represent higher
risk.
There
are huge differences in EU Member States regarding the percentage of
taxpayers that are subject to field audits. The median is around 2 per cent,
but the average is around 6 per cent. The average is influenced by a group
of Member States that have field audits to more than 10 per cent of the
taxpayers (DE, HU, LT and MT).
Graph 21 – Percentage of
taxpayers subject to field audits (2011)
There
are also big differences in the percentage of VAT refunds that are subject
to field audits. While
13 Member States (BE, BG, DK, EE, ES, FR, LT, LV, NL, SE, SI, SK and UK)
have restricted field audits to less than 4 per cent of VAT refund
requests, with some having 0.2 per cent or less (EE, LT, NL, SE and SI),
there are 2 Member States (CY and HU) where more than 20 per cent of the
VAT refunds requests are subject to field audits and in France 7 per cent
of these requests are subject to in-depth audits.
The
differences in approach amongst Member States is also visible in the
dichotomy between full audit/targeted audit. Of the 22 Member States that
mentioned the percentage of full audits (AT, BE, BG, CY, DK, EE, ES, FI,
FR, HU, IE, IT, LT, LU, LV, MT, PT, RO, SE, SI, SK and UK), 6 (BE, BG, CY,
DK, FI and FR) have more than 80 per cent in all years, while the average
(including these Member States) is close to 50 per cent.
Graph 22 – Percentage of target
audits
The
median of additional VAT assessed as a result of controls is around 3,7
per cent,
but this value is significantly higher in some Member States. The results
confirm the limited impact of audit in addressing tax fraud and evasion
and the need for it to be seen as one of many tools to address this issue.
Graph 23 – Amount of
additional VAT assessed as a result of the controls as percentage of the total
VAT revenues
Five
Member States (CY, DK, FI, LU and MT) have mentioned that they do not have
performance indicators to assess the effectiveness of their audits. With a large number of
staff involved in audit tasks, tax administrations have to regularly
assess the effectiveness of their audit work, in order to allocate
resources accordingly.
A
large majority of Member States indicated that taxpayers must provide data
in computer-based systems during tax audits. With the large number of
transactions that even a medium-sized company makes and with electronic
invoicing gaining importance, it is impossible for tax auditors to carry
out their work efficiently with old-fashioned paper-based audits. It is
natural that tax auditors should have the means to analyse data that is
provided in computer-based systems. Nevertheless, most Member States do
not have the obligation for taxpayers to have a Standard Audit File, which
could represent additional gains in terms of efficiency and effectiveness
of audit work.
Most
Member States have access to a wide range of categories of third party
information, but not always in an automated manner. Effective audit work
should not rely solely on the data collected from the taxpayer, but
auditors should prepare in advance their audits by having access to
relevant third party information. The level of access to third party information
for audit work varies within the EU Member States, but there is a clear
trend to provide auditors with more information. For some categories of
information (e.g. real estate register and vehicle register) most Member
States have automatic access to such information, while for other
categories (e.g. social security and financial institutions) most tax
administrations need to make a request before access to the information is
allowed. The fact that important information is only available on request may
prevent it from being obtained in time to be used during the audit and may
as well discourage auditors from requesting it simply to avoid the
additional burden.
The
majority of Member States frequently request information from other Member
States.
In a globalised economy, in which many companies have transactions with
economic operators established in other countries, it is essential that
auditors can get information from other Member States to assess correctly
the tax situation of the companies being audited. However, though Member
States do use this possibility frequently, there are still significant
obstacles (legal, speed, quality of reply and language) that hamper the
effectiveness of this tool.
All
Member States have indicated that there is a review, either systematic or
occasional, of audit reports. This is important to ensure the level of
professionalism that is expected from audit work and to minimise the
occurrence of corruption, guaranteeing at the same time that audit reports
rely on sound evidence avoiding unnecessary disputes with taxpayers.
It
is important to ensure that the auditors have adequate training and have
the technical knowledge to produce high quality work. The median of training
days per auditor is 5, with RO mentioned 30 days, which would mean that an
auditor would spend on average close to 15 per cent of its working time on
training.
Graph 24 – Annual Training
Days per Auditor
The
large majority of Member States provide e-audit training, divided almost equally
between the group that provides this training to all auditors and those
who provide it only to e-audit units. Only two Member States (IT and MT)
do not provide any e-audit training. As all Member States mentioned the
obligation for taxpayers to provide data in computer-based systems, it is
important that tax auditors have the possibility of handling the data in
an effective way, which requires the use of e-audit tools.
Graph 25 – Specific e-auditing
training
The
majority of Member States have specialized VAT anti-fraud units. Eight Member States
still lack such units (AT, CZ, EE, EL, FI, HU, LV, RO and SI). The
investigation of potential fraud cases requires a set of skills completely
different from audit work. This task needs to be performed by trained
investigators integrated in teams that are able to analyse fraud trends
and identify early signs of fraudulent activity.
Graph 26 – Specialized VAT
anti-fraud units Conclusions
The
majority of Member States apply a risk-based strategy to the selection of
taxpayers to be audited. However, 7 Member States (AT, DE, FI, IE, IT, PL and
SI) still keep the obligation to audit some taxpayers for all years. This
obligation prevents an optimal allocation of audit resources according to
risk and prevents tax administrations from rewarding companies that
voluntary comply with their tax obligations with less frequent audits.
There
has been a trend for the increase of number of targeted audits. However, in some Member
States full audits are still the norm which prevents more focused and efficient
audits making full use of the third party information collected before the
audit procedure.
E-auditing
is well developed in many Member States. A large majority of Member States
have the obligation for taxpayers to provide data in computer-based systems
during tax audits and 24 Member States (AT, BE, BG, CY, CZ, DK, EE, EL,
ES, FI, FR, HU, IE, LT, LU, LV, NL, PL, PT, RO SE, SI, SK and UK) provide
e-audit training to their auditors. However, only a limited number of
Member States have already introduced the obligation for a Standard Audit
File in their legislation, which would result in efficiency gains in audit
work.
The
use of third-party information for audit purposes is widespread. The majority of Member
States make use of third party information to prepare their tax audits and
make regular use of administrative cooperation requests for information
from other Member States. Nevertheless, Member States identify significant
obstacles that limit the usefulness of administrative cooperation (legal,
speed, quality of reply and language).
The
majority of Member States have created VAT anti-fraud units with
specialised investigators. Only 8 member States (AT, CZ, EE, EL, FI, HU, LV, RO and SI) do not tackle VAT fraud in a distinct and autonomous way.
CHAPTER 7: Tax Dispute Resolution System Overall
Benchmarks
The
dispute resolution process helps build community confidence in the tax
system and reduces collection risks by ensuring the quick and equitable
resolution of disputes. In an ideal situation a taxpayer can appeal
against decisions by the tax administration in a codified, transparent,
fast and low-cost tax dispute resolution system. This system includes a
fast and efficient administrative appeal process, independent of the
original decision-maker (usually an auditor), before addressing the
dispute to the Courts. This administrative appeal process must ensure that
only cases of legislative substance are submitted to the judicial appeal
process. Payment of the disputed tax is required when a request for
judicial review is made and there is minimal backlog of unheard cases.
Therefore, there are specialized units and officers specially trained in
dealing with tax disputes in or outside the tax administration. The tax
administration is able to manage the tax dispute resolution system based
on management information data. These data allow the tax administration if
needed to adjust their practices.
Current
Situation
Most
Member States have a compulsory administrative dispute resolution process.
In the
case of disagreements with a final decision of the tax administration, the
majority of Member States (14 Member States) replied that the first stage
in the tax dispute resolution process is an obligatory administrative
appeal procedure within the tax administration. Other 5 Member States (DK,
EL, ES, MT and SI) have an obligatory administrative procedure outside the
tax administration (for instance, an appeal body at the Ministry of
Finance or an administrative committee). In 7 Member States (BE, BG, CY,
EE, EL, FI and IT) the dispute is directly dealt by the Court of First
Instance. 4 Member States (BG, EL, IT and UK) offer the taxpayer a choice
resulting in a dispute resolution system with multiple entries. Graph
27 depicts the first step of the dispute resolution process.
Graph
27 – First stage of the dispute resolution process
Only
a minority of Member States do not have deadlines for decisions in the
administrative appeal process. Most Member States (21 Member
states- AT, BG, CY, CZ, DE, DK, EE, EL, ES, FR, HU, IT, LT, LV, NL, PL,
PT, SE, SI, SK and UK) apply deadlines for decisions in the administrative
appeal process. These deadlines vary between 2 months (10 Member
States-DE, EE, HU, IT, LT, LV, NL PL, SE, SI and SK[42]),
and one year (10 Member States-AT, BG, CY, CZ, DK, EL, ES, FR, IT and PT).
In a minority of Member States no deadline is applied (6 Member States -
BE, FI, IE, LU, MT and RO).
Graph 28 – Applicable
deadlines in Administrative Appeals
In
the majority of the Member States the disputed amounts remain fully or
partly collectable during the appeal process. There are two main approaches
towards the consequences of VAT collection in case of a VAT dispute, i.e.,
no postponement of the payment of VAT to the State budget (14 Member
States-BG, DE, DK, EE, EL, ES[43],
FI, FR[44],
HU, LU, PL, RO, SI and UK[45])
or postponement only of the disputed amount of VAT (12 Member States –AT,
BE, CY, CZ, DE, IE, LT, LV, MT, NL, SE and SK). Only few Member
States (3 in both cases) postpone a part of the disputed amount of VAT
(DE, EL and IT) or all the assessed VAT (EL, PL[46]
and PT).
The
percentage of decisions fully or partly in favour of the taxpayer varies
significantly across Member States. The average percentage of decisions
in the first stage of the appeal process fully in favour of the taxpayer
ranges differs between 1 and 61 per cent. For most Member States, the
percentage is between 11 and 28 per cent over 2009-2011. Taking into
account the second stage[47]
of the appeal process the percentage increases by a few points. Graphs 29 to 32 depict the
number of decisions fully or partly in favour of the taxpayer,
respectively at first and second stages.
Graph 29 – Percentage of decisions
in favour of the tax payer after first stage compared to the number of total
appeals Graph 30 –Percentage of
decisions in favour of the tax payer after second stage compared to the number
of total appeals Graph 31 – Percentage of partially
favorable first stage of decisions compared to the number of total appeals Graph 32 - Percentage of partially
favorable second stage of decisions compared to the number of total appeals
In
general the dispute resolution process is not managed from an end-to-end
perspective. The
collection of management information (data) is not a common practice. Several
Member States do not have any information about their tax dispute
resolution process. Others have only fragmented data available.
There
are significant differences in the efficiency of the dispute resolution in
the Member States.
The number of administrative appeals varies significantly amongst Member
States. The number of administrative appeals varies between 7.039,00 and
10.997,00 on average, per Member State. This number, if compared to the
VAT taxpayer population, equals 1,76 per cent on average with a maximum of
10 per cent (AT) (see Graph 33 below). Also the number of pending
appeals varies significantly amongst Member States (see Graph 34
below), with, mostly, no direct correlation to the number of appeals. This
suggests large differences in the efficiency of the dispute resolution
process in Member states.
Graph 33 –Percentage of
Administrative Appeals in 2011 compared to VATable persons Graph
34 – Percentage of Pending Appeals compared to
VATable persons Conclusions:
The
organisation of the procedure differs, but most Member States have a
compulsory administrative dispute resolution process. Such an approach
focuses on the efficiency of the appeal procedure. It helps to clarify
fact-based disputes, where the judicial phase will rather focus on the
legal aspects and the quality of the appeal procedures. It contributes to
reducing the number and length of appeals. Some countries have a separate
tax tribunal as a first step in the judicial process as an appropriate
alternative to the administrative phase. This confirms a trend to
guarantee both the efficiency (number and duration) and the quality of the
appeal procedure.
Most
Member States have deadlines for the administrative appeal procedure. This speeds up the
dispute resolution and again confirms the focus on the efficiency of the
procedures.
The
number of appeal varies but is high in certain Member States as well as the number of appeals in favour of the tax payer. Where possible, potential
sources of tax disputes should be eliminated and tax administrations
should work to establish an environment that minimises unnecessary
disputes. This requires preventive measures such as, inter alia, clear and
well-drafted laws and regulations, effective taxpayers services, binding
rulings and high quality audits.
In
half of the Member States the disputed amounts remain full or partly
collectable during the appeal process. This is good practice that
safeguards revenue and avoids abuse of the appeal procedures.
Many
Member States do not collect sufficient information on their tax dispute
resolution process. The
collection of management information on disputes is not a common practice.
All aspects of the appeal process should be monitored, including through
the use of key performance indications. Increasing the number and the
speed of the dispute resolution process requires an end-to-end approach,
whereby the outcome of the appeals feeds into dispute preventive measures
and gives rise to adjustments to the tax payers' services, clarifications
of laws and regulations, etc.
CHAPTER 8: VAT Compliance Overall
Benchmarks
The
tax administrations follow a Compliance Risk Management Strategy,
intervening to promote compliance and preventing non-compliance based on
the knowledge of taxpayer behaviour. There is a risk based segmentation of
taxpayers, allowing tax administration to interact with taxpayers
according to their risk pattern. Tax administrations provide appropriate
taxpayer services, making it easier for taxpayers that want to comply to
fulfil their tax obligations and enhance voluntary compliance by
influencing behaviour of taxpayers.
Current
Situation
There
is a trend in most Member States to develop a Compliance Risk Management
Strategy approach. These strategies segment taxpayers according to
their risk profile and act accordingly to the specific risks of the
segment. A majority of Member States indicated that they have different
compliance strategies according to taxpayer segment, mainly based on
business size (24 Member States –AT, BE, BG, CY, CZ, DK, EE, EL, ES, FI,
FR, HU, IE, IT, LT, LU, LV, MT, NL, PT, SE, SI, SK and UK), economic
activity (17 Member States –BE, BG, CY, CZ, IE, EL, ES, FI, FR, HU, IT,
LU, LV, NL, PT, SI and UK) and compliance level (16 Member States). A
description of risks for different segments of taxpayers is also developed
in 18 Member States (AT, BE, BG, CZ, EE, EL, ES, FR, HU, IE, IT, LT, LV,
PL, SE, SI, SK and UK) and 16 Member States (BE, BG, CZ, DE, DK, EE, EL,
HU, IE, LT, LV, PT, SE, SI, SK and UK) indicate that they use the results
of audits to update their risk model. However, ultimately, only 4 Member
States (EL, FR, HU and IT) could effectively indicate the percentage of
taxpayers falling within the different layers of the compliance pyramid.
Graph
35 – Description of risks developed for
different segment of taxpayers Without a clear segmentation of taxpayers
into risk categories it is not clear how tax administrations can adjust their
interaction with taxpayers. Furthermore, the effectiveness of the Risk
Management Strategy in many Member States needs to be confirmed.
The
large majority of Member States do not have an estimate of the VAT gap and are unable to use
the evolution of this indicator as a measure of the effectiveness of their
tax administrations and their compliance risk management strategies. Only
5 Member States presented estimates of the VAT gap (EE, IT, PL, SK and UK).
Member
States apply different approaches to tackle this VAT gap, at different
levels. The
majority of Member States resort to information initiatives and the
development of an information strategy (see Graph 36 below). Other
Member States (18 –BE, BG, CZ, DE, DK, EE, EL, ES, FR, HU, IE, LT, LV, PT, SE, SI, SK and UK), use the systematic results of audit to update their risk
model. Most Member States also give taxpayers the opportunity to request a
binding ruling (18 Member States – BE, CY, CZ, DE, DK, ES, FI, FR, HU, IT,
LT, LV, MT, PL, PT, SE, SI and UK), whereas only a small majority of
Member States (15 - AT, BE, CY, DE, DK, FR, IE, IT, LV, MT, NL, PL, SI, SK
and UK) offer voluntary disclosure arrangements.
Graph
36 – Information initiatives undertaken by the
member states in the recent years
However,
the measurement of the impact on compliance of the various approaches to
tackle the VAT gap can be significantly improved. Despite the development
of new approaches to tackle the VAT gap in the recent years, the large
majority of the Member States do not measure the impact on voluntary
compliance of the various elements of tax policy. Significant efforts are,
therefore, required to improve the monitoring and assessment of the
performance.
Graph 37 – Measurement of impact on
voluntary compliance of the various elements of tax policy
Use
of third-party information is crucial to developing a complete view of the
risk of the taxpayers and to improve debt collection. There is a variety of
sources made available to the tax authorities (see Graph 38 below)
and, also, a trend in making increased use of data/information from third
party information sources. This can nevertheless be significantly improved
in particular for debt collection and tax payer segmentation.
Graph
38 – Use of third party information Conclusions
There
is a trend to develop and implement a compliance risk management strategy
in most Member States. However, in many Member States the risk management
strategy have to be further developed.
More
work could be done on the estimation of the VAT gap. Only five Member
States produce estimates of the VAT gaps. The objective of a tax administration
is to decrease the gap between the taxes due and the taxes collected.
Without the knowledge of the evolution of this indicator, it is not
possible to evaluate the effectiveness of the measures to tackle tax fraud
and evasion.
The
measurement of the impact of the different components of the compliance
strategy can be improved. Again only eight Member States (AT, BG, EE, EL, HU, LT,
LV and UK) assess the outcome of the different measures implemented to
promote of voluntary compliance, in order to identify best strategies to
influence behaviour of taxpayers to voluntarily comply with their tax
obligations.
There
is a trend in making increased use of data/information from third party
information sources. This
can nevertheless be significantly improved in particular for debt
collection and tax payer segmentation.
RECOMMENDATIONS
In
most fields a majority of tax administrations has implemented best
practices. The following main recommendations are addressed to a number of
Member States where improvements in the field of VAT collection and
control can be made.
VAT Identification,
Registration and Deregistration
The
compliance of voluntary registrations needs to further examined, in
particular for those Member States where the segment has a negative VAT
liability. (DK,
EE, EL, FR, HU, LT, SI, SK and UK)
Cross-check
registration data with internal data sources and systematically compare
with third-party information sources. (BG, CY, DE, DK, EL, IE, MT, PT, RO
and SK)
Issue
clear instructions, guidelines and manuals for risk assessment at
registration and on-site pre-registration visits. (BE, EL and LU)
Implement
post registration monitoring programmes for risky traders. (BG, CY, DE DK,
EL, IE, LT, PT, RO and SK)
Implement
a fast-track procedure to deregister missing traders from the VAT system.
(AT, CY, EL, HU, IE, PT and RO)
Keep
the information available in the VIES system up-to-date, complete and
accurate. (BE, EL ES and PT)
Customs Procedure 42
Ensure
that at least the validity of the VAT identification numbers listed in box
44 of the SAD are systematically checked at the time of importation.(BE,
BG, DE, EE, HU, IE, IT, LU, LV, NL, PL, PT, RO, SE, SK and UK)
Guarantee
automatic access to VIES to Customs Administration and, vice versa,
ensure that all information on importations using the Customs Procedure 42
is transmitted domestically to the Tax Administrations. (EL, IT, NL and
PL)
Identify
Customs Procedure 42 as an additional risk in domestic risk analysis
systems and reinforce the exchange of information on transactions misusing
the procedure, inter alia by active participation in Eurofisc working
field nr. 3. (DE, DK, NL, PL and RO)
Consider
using licences or guarantees to prevent the misuse of the Customs
Procedure 42, targeted at risky traders. (BE, BG, CY, CZ, DE, EL, FI, FR,
IE, LT, LV, PL, PT, SE, SI and UK)
Submitting VAT Returns (Filing) and
Payment
Introduce modern and automatic
end-to-end processes for filing and payment, including automated reminders
by SMS or e-mail.(AT, BE, BG, CY, CZ, DE, ES, FI, FR, IT, LU, LV, MT, NL,
PL, PT, RO, SE, SI and SK)
Investigate
the efficiency of interest and penalties schemes for late filing and
payment. ALL
Provide
for compulsory electronic filing. (CY, EE, FI, HU, LT, MT, PL, RO, SE and SK)
Consider immediate and automated
estimated assessments in case of non-filing (AT, BE, BG, CZ, DK, EE, EL,
ES, HU, IT, LT, LV, LU, PL, SI and SK)
Introduce
a standard effective period for VAT refund being between at least between
30-45 days.(AT, BE, CY, EL, ES, FI, IT, LU, MT and SE)
Pay
interest in case of late refunds.(AT, CY, LU, NL and UK)
VAT Collection and Recovery
Implement best practices as regards
write offs of debts proven uncollectible at a
reasonable cost.(BG, CY, EE, EL, FI, IE, MT and SK)
Reconsider policies in term of late
payment interest, instalment length in line with best practice.(AT, BG,
DE, FI, FR, IE, IT, LT, PL and RO)
Implement
non-sequential debt collection processes.(CY, CZ, DK, EE, EL, FI, IT, MT,
NL, PL, RO, SI and SK)
Combine
collection of tax and social security contribution debts. (AT, BE, CY, CZ,
DE EL, ES, FR, HU, IE, IT, LT, LU, MT, PL, PT and SK)
Implement
integrated recovery processes supported by automatic identification of
assets based on internal or third party information. (AT, CY, DE, EE, EL, LU, LV, MT, NL,
PL, RO, SK and UK)
VAT Audit and Investigation
Abolish
the obligation to audit some taxpayers for all years and apply risk-based
systems.(AT, DE, FI, IT, NL, PL and SI)
A
risk-based selection of taxpayers to be audited should also highlight
major risk areas and full audits should not be the norm.(BE, BG, CY, DK,
FI and FR)
Provide
basic e-audit skills to all auditors and promote the use of e-audit tools;
the number of transactions and the use of electronic invoicing preventing
the effectiveness of paper-based audits.(IT and MT)
Establish
specialized VAT anti-fraud units; the requirements for staff dealing with
potential fraudsters are totally different from those of regular tax
auditors who deal with taxpayers who try to comply with their obligations.(AT,
CZ, EE, EL, FI, HU, LV, RO and SI)
Tax Dispute Resolution
Consider
a compulsory independent administrative dispute resolution process and
avoid multiple entries for dispute resolution.(BE, BG, CY, EE, EL, FI and
IT)
Consider
deadlines for the administrative appeal procedure.(BE, FI, IE, LU, MT and
RO)
Eliminate
potential sources of tax disputes and work to establish an environment
that minimises unnecessary disputes.(AT, BG, CY, HU, IT, LU, LV, NL, RO and SK)
Ensure
that the disputed amounts remain fully or partly collectable during the
appeal process.(EL, PL and PT)
Collect
management information on disputes and monitor all aspects of the appeal
process, including with key performance indications.(BE, BG, CZ, DE, EL,
FI, IE, FI, IT, LU, MT, NL, PL, PT, SE and SK)
VAT Compliance
Implement
a compliance risk management strategy, segment taxpayers according to
their risk profile and act accordingly to the specific risks of the
segment using a mix of tools.(CY, DE, DK, FI, LU, MT and NL)
Produce
reliable estimates of the VAT gaps as a mean of evaluating the
effectiveness of the measures to tackle tax fraud and evasion.(AT, BE, BG,
CY, CZ, DE, DK, EL, ES, FI, FR, HU, IE, LT, LU, LV, MT, NL, PT, RO, SE and
SI)
Assess
the outcome of the different measures implemented to promote of voluntary
compliance, in order to identify the best strategies to influence the
behaviour of taxpayers to voluntarily comply with their obligations.(BE,
CY, CZ, DE, DK, FI, FR, IE, IT, LU, MT, NL, PL, PT, SE, SI and SK)
Further
develop the use of third party information for audit selection, taxpayer
segmentation and debt collection. ALL
************ [1] Source:
EUROSTAT [2] VAT
theoretical liability is estimated by identifying the categories of expenditure
that give rise to irrecoverable VAT and combining these with the appropriate
VAT rates. The VAT gap is not a measure of VAT fraud and includes e.g. VAT not
paid as a result of legitimate tax avoidance measures or VAT that is not
collected due to insolvencies. Since the VAT gap is estimated primarily on the
basis of national accounts data, it depends on the accuracy and the
completeness of such data. Moreover, it does not take account of taxable
activities that are outside the scope of national accounts. [3] Excluding
Cyprus. Source: Case Study commissioned by the EC. [4] Council
Regulation (EEC, EURATOM) 1553/89 of 29 May 1989 on the definitive uniform
arrangements for the collection of own resources accruing from value added tax. [5] See
footnote 2 : annex Commission staff working document/ Annex to the Sixth
report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT
collection and control procedures COM(2008) 719 final: Summary of State of
Implementation of Report Recommendations. [6] Croatia is not included in this working document as it was not yet an EU member when the
data was being collected. [7] Cf.
Tax administration in OECD and Selected Non-OECD Countries: Comparative
Information Series (2008); 29 January 2009. [8] In
the following Tables, "Y" stands for "YES"
and "N" stands for "NO" [9] Federally
structured tax administration. Given the particularity of the Federal Republic
of Germany, which is a federation of Lander, the situation will differ
according to the Lander. [10] Caption:
""T" stands for "Tax type" model, i.e.
tax administration organization model based mainly on "type of tax"
or "type of legislation" criterion, consisting in separate
multifunctional departments or pillars responsible respectively for each tax,
e.g. VAT and indirect taxes, Customs, Direct Taxes etc. "F"
stands for "Functional" model, i.e. under this model,
staff are organized according to processes by functional groupings (e.g.
registration, filing and payment, IT, audit, debt collection, etc.).
"TP" relates to "Tax Payers" and results from
the organization of the tax administration principally around segments of
taxpayers (e.g. large taxpayers, small/medium businesses, individuals, etc.).
ALL" stands for a mixture of tax, functional and taxpayers type
organisation. Lastly, the MATRIX model corresponds to an mixed form of
organization where vertical lines are process-based and horizontal focus on
taxpayers types. [11] In
Austria, there is an anti-fraud unit at central level and correspondent units
at local level. However, these units are not specialised in VAT only. [12] In
Cyprus, there is a large trader function. [13] In
Spain, there is a risk management function in each department (e.g. audit,
collection). [14] In Italy enforcement of the collection of public and private debt is carried out by a separate
Enforcement Agency. [15] In
Sweden, functions such as large taxpayer function and high wealth individuals
function are allocated to some regional tax offices. [16] In
Sweden enforcement of the collection of public and private debt is carried
out by a separate Enforcement Agency. [17] In
order to compute this average, we have considered all thresholds in place in
the 21 Member States who have set up such kinds of thresholds (i.e. 25
occurrences, since EL, FR and IE have several thresholds). [18] The
national thresholds are converted in Euro according to the exchange rate of the
ECB on the 30 December 2011. [19] The
net VAT liability is the VAT due minus the VAT deductible or refunded. [20] According
to the EU definition, micro enterprises have a turnover up to € 2 million. [21] The
option for registration is in Article 290 of the EU VAT Directive. [22] In
France, cross-checking of data is not possible due to legal constraints and
regulations governing the protection of IT personal data. [23] Rejected
registrations in percentage of 2011 number of taxpayers [24] This
facility will be available for the UK during 2013. [25] Article
22 of COUNCIL REGULATION (EU) No 904/2010 of 7 October 2010 on administrative
cooperation and combating fraud in the field of value added tax, published in
OJ 12.1.2010 L 268/1. [26] See
Article 23 a) and b) of the above mentioned Council Regulation 904/2010. [27] See
article 33 of Council Regulation No 904/2010. [28] In
France, a systematic and automatic control system is introduced with effect
from 1 June 2013. [29] The
NL has a general domestic reverse charge mechanism for VAT due upon
importation As there is no exemption of VAT upon importation, the
recommendations listed for this procedure in the report are not applicable to
these types of importations. This does not, however, exclude that there could
be importations where the Customs 42 procedure is used, and for which the
comments made are valid. [30] Poland is currently in the process of becoming an active participant of the Eurofisc. [31] Special Report No 13//2011 - Does the control
of the customs procedure 42prevent and detect VAT evasion? - from the
European Court of Auditors refers, in its Recommendation 4, that "the
Commission should encourage the automatic verification of the validity of VAT
identification numbers in VIES in the Member States customs electronic
clearance systems". [32] No
information was made available by DE and FI. [33] In
Spain, electronic filing of VAT returns is obligatory for certain groups of
taxpayers, e.g. large taxpayers. In the Czech Republic and France, electronic filing of VAT returns is obligatory as of 1 January 2014. [34] In
France, notifications are sent by written letters due to legal effects. [35] Taxpayers
that have stopped to comply with the VAT return filing obligation. [36] Fifteen
Member States did not provide data. [37]
The UK does not automatically pay interest in all cases of late
refunds, but the UK does pay repayment supplement where HMRC delay (excluding
reasonable enquiry time) resulted in late refunds in relation to VAT return
repayment claims. [38] DE
and UK showing significant decreases over the period 2009-2011. [39] Statements
to be filed by taxable persons making intra-Community transactions. [40] Growth
in the stock of VAT debt at the end of the year calculated as a percentage of
annual VAT revenue. For Romania, there were no figures available. [41] CZ
is excluded since the delay for the instalment procedure can be up to 6 years
as a maximum which corresponds with the general deadline for paying taxes in
CZ. Nevertheless, the CZ tax administration may determine a shorter period
usually based a case-by-case assessment. [42] In
the UK the deadline for seeking review or appeal is 30 days. [43] In
Spain, in case of a tax dispute, the debt collection is generally not
postponed. However, it can be postponed if the debtor guarantees the amount of
the debt by the endorsement of a credit institution or by a mortgage. [44] In
France, the debtor can request the postponement of the payment of de disputed
amount. [45] In
the UK, the taxpayer does not have to pay the VAT in dispute prior to the
appeal if either HMCR or the appeal tribunal on appeal are satisfied that
payment would result in hardship. [46] In
Poland, the postponement of the disputed amount is only for the period of the
administrative appeal process (approximately 2 months). [47] The
second stage can include all kind of courts, arbitration body or mediation
body. In Spain, the second stage is also an administrative court.