The Value Added Tax (VAT) system requires businesses to complete periodic VAT returns as per EU Directive 2006/112/EC On The Common System Of VAT.

In submitting VAT returns, there is a series of complexities to deal with, among which:

  • providing different information because there is not harmonized definitions;
  • the lack of good common guidance;
  • different rules and procedures for submissions and corrections; and
  • the need to use the national language of the Member State involved.

In addressing these problems, the Commission sought stakeholder views on a standard VAT declaration through the consultation on the Green Paper on the Future of VAT. Positive replies from stakeholders. Positive replies from stakeholders led the European Commission to include a commitment to come forward with a proposal for a standard VAT declaration before the end of 2013, which is currently being discussed at Member State level. The VAT declaration, in particular, is identified as an area where divergences constitute an obstacle to EU trade and a standardised VAT declaration procedure aims to reduce burdens on all business (particularly SMEs).

The reduction of fraud requires the timely exchange of information between Member States, and the European Commission thinks that a standard VAT declaration can help in this regard.

Special difficulties may be encountered in e-commerce and supply of goods in the internal market, where the customer is a private individual and the supplier must register, declare and pay VAT in the Member State of the recipient. These obligations may create obstacles to cross-border trade.

The goal of the Commission is reduce the administrative burden of doing business in the EU. This will be supported up by a high-level working group that will be in place by October 2014. It will focus on Small and Medium-sized Enterprises (SMEs) – particularly micro-enterprises – as well as on how to make Member State public administrations more efficient and responsive to the needs of stakeholders when implementing EU legislation.

These complexities lead to an increase in burdens on business, in a reduction of accuracy and timeliness of VAT declarations, and to restrictions in cross-border trade.

As VAT represents around 21% of national tax revenues, and with 12% of VAT receipts uncollected, a more efficient and fraud-proof VAT system is needed.

The reduction of fraud requires the timely exchange of information between Member States, and the European Commission thinks that a standard VAT declaration can help in this regard.

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