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Standard VAT Return
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A new standard VAT return, which can cut costs for EU businesses by up to €15 billion a year, has been proposed by the Commission today. The aim of this initiative is to slash red-tape for businesses, ease tax compliance and make tax administrations across the Union more efficient. As such, it fully reflects the Commission's commitment to smart regulation and is one of the initiatives set out in the recent REFIT to simplify rules and reduce administrative burdens for businesses (IP/13/891). Today's proposal foresees a uniform set of requirements for businesses when filing their VAT returns, regardless of the Member State in which they do it. 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. Given that simpler procedures are easier to comply with and easier to enforce, today's proposal should also help to improve VAT compliance and increase public revenues.
Algirdas Šemeta, Commissioner for Taxation, said: "The standard VAT return presents a win-win situation. Businesses will enjoy simpler procedures, reduced costs and less red tape. Governments will have a new tool to facilitate VAT compliance, which should increase the revenues they collect. Today's proposal therefore supports both our commitment to a business-friendly Single Market and our drive to improve tax compliance in the EU."
Every year, 150 million VAT returns are submitted by EU taxpayers to national tax administrations. Currently, the information requested, the format of national forms and the reporting deadlines vary considerably from one Member State to the next. This makes VAT returns for cross-border businesses a complex, costly and cumbersome procedure. Businesses operating in more than one Member State have also complained that it is difficult to remain VAT compliant, due to the intricacy of the process.
The standard VAT return proposed today simplifies the information that businesses will have to provide to tax authorities. The declaration will have only 5 compulsory boxes for taxpayers to fill in. Member States are given leeway to request a number of additional standardised elements, up to a maximum of 26 information boxes. This is a vast improvement on the current situation, whereby some Member States require up to 100 information boxes to be completed.
Businesses will file the standard VAT return on a monthly basis, while micro-enterprises will only be obliged to do it on a quarterly basis. The obligation to submit a recapitulative yearly 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 Union. This major simplification of the process for VAT returns supports the Commission's wider commitments to reducing administrative burdens and obstacles to trade within the Single Market.
Today's proposal is also an important contribution to creating a more efficient and more fraud-proof VAT system, as set out in the Commission's Strategy for VAT reform (see IP/11/1508). VAT accounts for around 21% of Member States revenues, and yet around €193 billion went uncollected in 2011 (see IP/13/844). By creating an easier system for both taxpayers and administrations to work with, the standard VAT return can improve tax compliance and reduce the VAT Gap. As such, today's proposal could make an important contribution to fiscal consolidation across the EU by increasing income to the public purse.
Source: Standard VAT Return
Importance of a standard VAT return
The profusion of procedures involved in completing VAT returns in EU Member States puts great administrative burdens on businesses. What's more, it restricts cross-border trade within the EU and hamstrings the Member States' tax authorities in their exchange of information. A standard EU VAT return should alleviate these administrative burdens and reduce these restrictions. The contents of the VAT return, the procedures involved in filing it, and the payment of the VAT due - this will all be harmonized. According to the proposal the standard VAT return must be written into national regulations on 31 December 2016 at the latest.
Submitting and paying the VAT return
The VAT return period for the standard VAT return will be one month. This period will be a quarter for small businesses whose annual turnover is no higher than EUR 2,000,000. Member States can extend the VAT return period up to maximum of one year. What has now been prohibited, though, is to require taxpayers to submit an annual summarising VAT return in which corrections must be made. Germany is among the countries using such an annual return. Corrections from prior periods will have to be included in the standard tax return.
The tax return must be submitted within one month after the end of each VAT return period. Member States can extend this to two months. The VAT must be paid when submitting the VAT return.
Member States must offer taxpayers the option to submit the VAT return electronically and may even require taxpayers to do so. In the Netherlands Dutch tax resident taxpayers are already required to submit VAT returns electronically.
The information to be included in the VAT return
The VAT return will include five standard headings with the following amounts to be completed by the entrepreneur: VAT due, VAT eligible for deduction, balance of VAT payable/ receivable, amount of the turnover over which VAT is paid, and the costs for which VAT is deducted. Through 31 December 2019, the tax return will include two additional headings where entrepreneurs should record their intra Community supplies and intra-Community acquisitions. This information is no longer required in the standard VAT return as from 1 January 2020. Member States do have the option to include headings in the VAT return for this and other information referred to in the proposal.
Source: Proposal of 23 October 2013, COM (2013) 721
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Commissioner Šemeta welcomes European Parliament's support for the Standard VAT Return
Algirdas Šemeta, EU Commissioner for Taxation, welcomed the European Parliament's strong support today for a Standard VAT Return (see IP/13/988 ). The Standard VAT Return is one of the Commission's key proposals to cut red-tape for business and improve tax compliance in the EU.
Commissioner Šemeta said:
This proposal is about making life simpler and cheaper for businesses. With the Standard VAT Return, it will be as easy to declare VAT abroad as it is at home. As such, it will remove a major tax obstacle in our Single Market and cut compliance costs by up to €15bn a year. Moreover, simpler rules are easier to follow and enforce. So the Standard VAT Return should also boost tax compliance throughout the EU, bringing new revenues to the Member States. I am very pleased – but not surprised – that the European Parliament has shown such backing for this growth-friendly, business-friendly proposal.
I would like to thank the rapporteur, Ivo Strejček, for his great work on this file."
via Press release - Cutting Red Tape and Boosting Tax Revenues: Commissioner Šemeta welcomes European Parliament's support for the Standard VAT Return .