Proposed unified EU VAT return brings hopes of easier compliance for EU taxpayers
On 23 October 2013, the European Commission tabled a legislative proposal(1) for a standard value added tax (VAT) return. The Commission states that the aim of the standard VAT return is to reduce administrative burdens for business, ease tax compliance and make tax compliance across the European Union (EU) more efficient. The proposal envisages a simplified and uniform set of information that businesses will have to provide to tax authorities when filing their VAT returns, regardless of the Member State of submission. The standard VAT return, which will replace national VAT returns, will ensure that businesses are asked for the same basic information, within the same deadlines, across the EU.
Around 13% of VAT payers in the EU submit VAT returns in more than one Member State. Currently, although the objectives and logic behind a VAT return are the same in all Member States, the content and format of VAT returns vary significantly between them. This is a source of complexity and administrative burdens for businesses. It is estimated that, if adopted, the new return could cut costs for EU businesses by up to €15 billion a year. As such, it reflects the Commission’s stated commitment to smart regulation and reducing administrative burdens for businesses. Another possible benefit of the standard VAT return is that, in simplifying the process for taxpayers, it should also improve tax compliance and increase tax revenue collection.
Details of the proposed return
The proposed standard VAT return will have only five compulsory boxes for businesses to complete — chargeable VAT, deductible VAT, net VAT amount (payable or receivable), total value of input transactions and total value of output transactions. In addition, Member States will be entitled to ask for up to 21 boxes of additional standardized information, covering, for example, the split between tax rates or details of cross-border transactions. The Commission considers that this is a vast improvement on the current situation, whereby some Member States require up to 100 information boxes to be completed.
The standard VAT return will have to be submitted in the language of the Member State of submission. However, since the content of the information boxes will be the same in all Member States, and the description will be available in all EU languages, the Commission envisages that it will be easy to understand what is expected or to file a return in a foreign language.
Most businesses will file the standard VAT return on a monthly basis, while smaller businesses will only be required to file quarterly. The requirement to submit an additional annual VAT return, which some Member States currently demand, would be abolished. The proposal also encourages electronic filing, as the standard VAT return will be allowed to be submitted electronically throughout the EU.
The Commission’s proposal will have to be adopted by Member States in the European Council, after consultation with the European Parliament. On this basis, the Commission envisages that the proposed directive should enter into force on 1 January 2017.
How EY can help
We will continue to issue updates about developments in this area.
If you would like to discuss how the adoption of an EU standard VAT return may affect your business, or if you would like help in reviewing your processes and documentation, or in implementing new procedures in the light of these proposals, please contact your usual EY Indirect Tax advisor or one of the people under contacts.