(1)

In 1967, when the Council adopted the common system of value added tax (VAT) by means of Council Directives 67/227/EEC (1) and 67/228/EEC (2), the commitment was made to establish a definitive VAT system operating within the European Community in the same way as it would within a single Member State. Since the political and technical conditions were not ripe for such a system, when the fiscal frontiers between Member States were abolished by the end of 1992 transitional VAT arrangements were adopted. Council Directive 2006/112/EC (3), which is currently in force, provides that these transitional rules have to be replaced by definitive arrangements.

(1)

In 1967, when the Council adopted the common system of value added tax (VAT) by means of Council Directives 67/227/EEC (4) and 67/228/EEC (5), the commitment was made to establish a definitive VAT system operating within the European Community in the same way as it would within a single Member State. Since the political and technical conditions were not ripe for such a system, when the fiscal frontiers between Member States were abolished by the end of 1992 transitional VAT arrangements were adopted. Council Directive 2006/112/EC (6), which is currently in force, provides that these transitional rules have to be replaced by definitive arrangements. However, those rules have now been in place for several decades, resulting in a complex transitional VAT system susceptible to intra-Union cross-border VAT fraud. Those transitional rules suffer from numerous shortcomings, which result in the VAT system being neither fully efficient nor compatible with the requirements of a true single market.

(1a)

In its Communication of 28 October 2015 entitled Upgrading the Single Market: more opportunities for people and business, the Commission identified the complexity of the current VAT regulations as one of the major obstacles to the completion of the single market. At the same time, the VAT gap, defined as the difference between the amount of VAT revenue actually collected and the theoretical amount that is expected to be collected, has been increasing, reaching EUR 151,5 billion in 2015 in the EU-28. This illustrates the need for an urgent and comprehensive reform of the VAT system towards a definitive VAT regime, to facilitate and simplify cross-border intra-Union trade and make the system more fraud-proof.

(1b)

The creation of a single EU VAT area is crucial for decreasing compliance costs for businesses, reducing the risks of cross-border VAT fraud and for simplifying VAT-related procedures. The VAT definitive system will strengthen the Single Market and create better business conditions for cross-border trade. It should include the necessary changes due to technological developments and digitalisation, changes in business models and the globalisation of the economy.

(2)

In its VAT Action Plan (7), the Commission announced its intention to put forward a proposal setting out the principles for a definitive VAT system for cross-border business-to-business (B2B) trade between Member States that would be based on the taxation of cross-border supplies of goods in the Member State of destination.

(2)

The current EU VAT system which was introduced in 1993 is similar to the European customs system. However, equivalent checks are lacking, which makes it a target for cross-border fraud. The current VAT system should be fundamentally changed in the way that the supply of goods from one Member State to another is taxed as if they were supplied and acquired within one Member State. In its VAT Action Plan (8), the Commission announced its intention to put forward a proposal setting out the principles for a definitive VAT system for cross-border business-to-business (B2B) trade between Member States that would be based on the taxation of cross-border supplies of goods in the Member State of destination. That change should contribute to the reduction of VAT-related cross-border frauds by EUR 40 billion annually.

(3)

This would require replacing the current system consisting of an exempt supply in the Member State of departure of the goods and a taxed intra-Community acquisition of goods in the Member State of destination by a system of a single supply taxed in and in accordance with the VAT rates of the Member State of destination. As a rule, the VAT will be charged by the supplier who will be able to verify the applicable VAT rate of any Member State online by means of a web portal. However, where the person acquiring the goods is a certified taxable person (a reliable taxpayer recognised as such by Member States), the reverse charge mechanism would apply and the certified taxable person should be liable to VAT on the intra-Union supply. The VAT definitive system will also be based on the concept of a single registration scheme (One-Stop Shop (OSS)) for businesses allowing for the payment and deduction of the VAT due.

(3)

This would require replacing the current system consisting of an exempt supply in the Member State of departure of the goods and a taxed intra-Community acquisition of goods in the Member State of destination by a system of a single supply taxed in and in accordance with the VAT rates of the Member State of destination. As a rule, the VAT will be charged by the supplier who will be able to verify the applicable VAT rate of any Member State online by means of a web portal. The VAT definitive system will also be based on the concept of a single registration scheme (One-Stop Shop (OSS)) for businesses allowing for the payment and deduction of the VAT due. OSS is the core of the new destination-based system without which complexity of the VAT system and the administrative burden would increase significantly. Therefore, extension of the Mini One-Stop Shop (MOSS) to cover all B2B services and sales of goods should take place within proposed improvements of the current system.

(3a)

To ensure interoperability, ease of use and future fraud-proofing, OSS for businesses should operate with a harmonised cross-border IT system, based on common standards and allowing for automatic retrieval and input of data, for example, through the use of unified standard forms.

(4)

These principles should be established in the Directive and should replace the current concept according to which the definitive arrangements shall be based on the taxation in the Member State of origin.

(4)

These principles should be established in the Directive and should replace the current concept according to which the definitive arrangements shall be based on the taxation in the Member State of origin with a definitive VAT system . Those new principles would enable the Member States to better fight VAT fraud, especially Missing Trader Intra-Community (MTIC), estimated to amount to at least EUR 50 billion a year.

(5)

The Council, in its conclusions of 8 November 2016 (9), invited the Commission to make certain improvements to the Union VAT rules for cross-border transactions, regarding the role of the VAT identification number in the context of the exemption for intra-Community supplies, call-off stock arrangements, chain transactions and the proof of transport for the purposes of the exemption for intra-Community transactions.

(5)

The Council, in its conclusions of 8 November 2016 (10), invited the Commission to make certain improvements to the Union VAT rules for cross-border transactions, regarding four areas: the role of the VAT identification number in the context of the exemption for intra-Community supplies, call-off stock arrangements, chain transactions and the proof of transport for the purposes of the exemption for intra-Community transactions.

(6)

Given this demand and the fact that it will take several years for the definitive VAT system for intra-Union trade to be implemented, these specific measures, intended to harmonise and simplify certain arrangements for businesses, are appropriate.

(6)

Given this demand and the fact that the definitive VAT system for intra-Union trade is yet to be duly implemented, these specific measures, intended to harmonise and simplify certain arrangements for businesses, are appropriate only in a transitional manner .

(7)

The creation of the certified taxable person status is needed for the efficient application of the improvements to the Union VAT rules for cross-border transactions as well as for the gradual transition towards the definitive system for intra-Union trade.

(7)

The creation of the certified taxable person status is needed for the efficient application of the improvements to the Union VAT rules for cross-border transactions as well as for the gradual transition towards the definitive system for intra-Union trade. However, strict criteria, applied in a harmonised way by all Member States, need to be put in place to determine which enterprises can benefit from the status of the certified taxable person, and common rules and provisions resulting in fines and penalties for those who do not comply with them should be established.

(8)

In the current system no distinction is made between reliable and less reliable taxable persons as regards the VAT rules to be applied. The granting of the certified taxable person status on the basis of certain objective criteria should enable the identification of those reliable taxable persons. This status would allow them to benefit from the application of certain fraud-sensitive rules not applicable to other taxable persons.

(8)

In the current system no distinction is made between reliable and less reliable taxable persons as regards the VAT rules to be applied. The granting of the certified taxable person status on the basis of certain objective criteria, to be applied in a harmonised way by Member States , should enable the identification of those reliable taxable persons and those who do not fully comply with the criteria . This status would allow them to benefit from the application of certain simplified and user-friendly rules not applicable to other taxable persons.

(9)

Access to the certified taxable person status should be based on criteria harmonised at Union level and therefore certification provided by one Member State should be valid in the whole Union.

(9)

Access to the certified taxable person status should be based on clearly defined criteria and should be available to businesses including SMEs. Those criteria should be harmonised at Union level and therefore certification provided by one Member State should be valid in the whole Union. The Commission should therefore present implementing acts and comprehensive and easy to use guidelines, facilitating harmonisation and administrative cooperation between the authorities and ensuring interoperability among Member States whilst verifying the proper application by Member States of such harmonised criteria across the Union. Those guidelines should be closely aligned to the criteria of the Authorised Economic Operator under the Union Customs Code, in order to reduce the administrative burden and to ensure uniform implementation and compliance across Member States.

(9a)

With particular focus on the higher compliance costs for SMEs, the Commission should present simplified administrative procedures for SMEs to obtain the status of certified taxable persons.

(9b)

Information on whether an economic operator is a certified taxable person should be accessible via the VIES system.

(10)

Certain taxable persons covered by particular arrangements excluding them from the general VAT rules, or who only occasionally carry out economic activities , should not be granted the certified taxable person status as far as those particular arrangements or occasional activities are concerned. Otherwise the smooth application of the proposed changes could be disrupted.

(10)

Certain taxable persons covered by particular arrangements excluding them from the general VAT rules should not be granted the certified taxable person status as far as those particular arrangements or occasional activities are concerned. Otherwise the smooth application of the proposed changes could be disrupted. In addition, special attention should be paid to ensuring that SMEs are not put at a competitive disadvantage compared to large enterprises in respect of the obtainment of the status of certified taxable persons.

(13a)

The EU VAT cross-border ruling pilot project should be the basis for a fully developed Union tool which would prevent conflict of VAT rules on tax disputes and would resolve cases of intra-Union cross-border disputes in VAT cases. National mechanisms will continue to apply for internal VAT tax disputes between the taxpayer concerned and the national tax authority.

(13b)

This Directive provides for provisional arrangements prior to the adoption by Member States of a definitive system for the taxation of trade between Member States, and should be accompanied by corresponding implementing acts and guidelines. This Directive, implementing acts and guidelines should enter into force at the same time.

(13c)

A mechanism should be established to ensure a transparent and direct information system which automatically notifies tax payers of updates and changes in the VAT rates of Member States. Such a mechanism should be based on harmonised standards and reporting forms, ensuring uniform reporting and data retrieval across Member States. Member States should be obliged to ensure that all information regarding their national VAT rates are correct and up to date. Member States should furthermore ensure that any changes to national VAT rates are notified via such a system within a reasonable time of their adoption and in any case before the changes become applicable.

(15a)

In keeping with the public interest and the financial interests of the Union, whistleblowers should enjoy effective legal protection, in order to facilitate the detection and prevention of all forms of fraud.

(a)

the absence of any serious infringement or repeated infringements of taxation rules and customs legislation, as well as of any record of serious criminal offences relating to the economic activity of the applicant ;

(a)

the absence of any serious infringement or repeated infringements of taxation rules and customs legislation in the last three years of economic activity, the absence of any serious tax adjustment by tax administrations, or no record of serious criminal offences relating to his or her economic activity, regardless of whether the activity has taken place within the Union or elsewhere ;

(aa)

the absence of any record of serious criminal offences relating to the economic activity of the applicant, such as, but not limited to:

(b)

the demonstration by the applicant of a high level of control of his operations and of the flow of goods, either by means of a system managing commercial and, where appropriate, transport records, which allows appropriate tax controls, or by means of a reliable or certified internal audit trail;

(b)

the demonstration by the applicant of a high level of control of his operations and of the flow of goods, either by means of a system managing commercial and, where appropriate, transport records, which allows appropriate tax controls, or by means of a reliable or certified internal audit trail, in accordance with the implementing acts and guidelines to be adopted by the Commission ;

(c)

evidence of financial solvency of the applicant, which shall be deemed to be proven either where the applicant has good financial standing, which enables him to fulfil his commitments, with due regard to the characteristics of the type of business activity concerned, or through the production of guarantees provided by insurance or other financial institutions or by other economically reliable third parties.

(c)

evidence of financial solvency of the applicant during the last three years , which shall be deemed to be proven either where the applicant has good financial standing, which enables him to fulfil his commitments, with due regard to the characteristics of the type of business activity concerned, or through the production of guarantees provided by insurance or other financial institutions or by other economically reliable third parties. The applicant shall possess a bank account in a financial institution established in the Union.

(da)

taxable persons which do not have or cease to have a valid VAT registration number;

(a)

those of the Member State where the applicant has established his business;

(a)

those of the Member State where the applicant has established his business as defined in Council Directive (EU) …/… of … on a Common Corporate Tax Base (CCTB)  (*1) and in Council Directive (EU) …/… of … on a Common Consolidated Corporate Tax Base (CCCTB)  (*2), as well as in Council Directive (EU) …/… of … laying down rules relating to the corporate taxation of a significant digital presence  (*3) and in Council Directive (EU) …/… of … on the common system of a digital services tax on revenues resulting from the provision of certain digital services  (*4);

(c)

those of the Member State where the applicant has his permanent address or where he usually resides, where he has neither a place of business nor a fixed establishment.

(b)

the taxable person or non-taxable legal person for whom the supply is made is identified for VAT purposes in a Member State other than that in which dispatch or transport of the goods begins;

(b)

the taxable person or non-taxable legal person for whom the supply is made is identified for VAT purposes in a Member State other than that in which dispatch or transport of the goods begins and possesses a VAT identification number accessible via VIES ;

(b)

‘intermediary operator’ shall mean a supplier in the chain other than the first supplier, who dispatches or transports the goods, himself or by a third party on his behalf;

(b)

‘intermediary operator’ shall mean a supplier in the chain other than the first supplier or the last receiver/customer , who dispatches or transports the goods, himself or by a third party on his behalf;

(6a)

(6b)

(9)

Articles 403 and 404 are deleted.

(9)

Article 403 is deleted.

(9a)

(9b)