European Council VAT Action Plan on VAT Fraud

On 25th May 2016 the ‘Council for the European Union’ and the ‘Economic and Financial Affairs Council’ (also known as ECOFIN) agreed on an action plan to tackle VAT fraud and the ever increasing VAT gap in Europe, leading towards a single EU VAT area.

At a recent meeting in Brussels the ECOFIN reviewed the programe see the original publication here, to tackle fraud and simplify the process around VAT compliance. The plan proposes a range of measures including the extension of MOSS (Mini One Stop Shop) reporting to goods, the removal of zero rating intra-Community supplies and better co-operation between tax authorities.

The key points raised were;

• Welcomes the findings towards a single EU VAT area with the aim of tackling VAT fraud and closing the VAT gap.

• It agrees with the Action Plans call for new and radical anti-VAT fraud measures, but highlighted that more simplification is required with the aim of introducing these legislative principles in 2017.

• Calls for improving administrative cooperation and automated exchange of information between member states’ tax authorities but stressing the importance of keeping the EU’s business environment competitive.

• Acknowledgement that some member states, subject to heavy VAT fraud, may require a further extension of the scope of the domestic reverse charge where the customer is responsible for the VAT and not the supplier.

• Agrees for the enhanced development around VIES and Eurofisc and request further work to be carried out on the Transaction Network Analysis anti-fraud pilot.

So how does that affect your Oracle Indirect tax solution?

Most solutions that we see configured unfortunately still default tax codes from supplier or customer sites and then allow users to manually change these values. Moving more to a MOSS solution, your users are going to need to know the correct rates to charge in each country being sold to. It won’t be a simple case of charging an EU Zero Rate any more, because the rates could be intra EU or they could be the rate of the target country.

Digital or physical will also play a part as will, where you are registered. More and more items sold will use domestic reverse charge where the supplier charges a 0% rate and the customer will apply the reverse charge – much like they do for your intra-EU purchases. So the irony is that to combat VAT fraud, more measures will be put in place to ensure the correct rates are determined and submitted in the returns but the tax logic becomes more complex and those entering the transactions are likely to make more mistakes. So is it a case of robbing Peter to pay Paul?

Are You Ready?

Are you ready to handle these proposed changes, fast enough to adapt or even have a fully compliant indirect tax solution in place now? Contact us at eBiz Answers Ltd to find out how our existing customers won’t need to pay a penny more to cover these legislative changes in their Oracle instance.