Weekly Tax News – 17 December 2018

December 17, 2018

MEPs disappointed by the deadlock on taxation of the digital economy

On 13 December, in the course of the plenary in Strasbourg, MEPs approved by a large majority the two opinions drafted by Paul Tang (S&D, the Netherlands) and Dariusz Rosati (EPP, Poland) favoring the Commission’s proposals to introduce a Digital Services Tax (3% on the turnover of certain activities) and the concept of Significant Digital Presence, respectively. Although the European Parliament has only an advisory role on taxation matters, this vote is meant to maintain political pressure on the Council, which is struggling to reach unanimity on these files. Furthermore, MEP Eva Joly (Greens/EFA, France) has called for political courage to bypass unanimity by using article 116 of the Treaty on the Functioning of the European Union, since the issues concerning taxation have become a matter of distorted competition. Commissioner Günther Oettinger confirmed that the Commission would present a proposal for the transition to qualified majority voting for certain tax matters in early 2019.

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European Commission presents new details on VAT rules for e-commerce

On 11 December, the European Commission has proposed new implementing measures designed to facilitate electronic commerce and combat VAT fraud. The implementing rules proposed will ensure that a new VAT system is ready for businesses that sell goods online, once the agreed new framework comes into force in 2021. The electronic business portal for VAT ('One-Stop Shop') put in place by these measures will allow companies that sell goods online to their customers to deal with their VAT obligations in the EU through one easy-to-use online portal. Without the portal, VAT registration would be required in each EU Member State into which they want to sell. Furthermore, from 2021, large online marketplaces will become responsible for ensuring that VAT is collected on sales of goods by non-EU companies to EU consumers taking place on their platforms.

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VAT and Administrative Cooperation: the Commission proposes new measures

On 12 December, the European Commission proposed two new measures which would help to establish better cooperation between tax authorities and Payment Service Providers such as credit card and direct debit providers. The objective of the measures is to reduce e-commerce VAT fraud by providing tax authorities with efficient and effective instruments for detecting non-compliant businesses.

The proposed Directive and Regulation introduce new record-keeping obligations for payment service providers in a form of database of VAT related payment data to be accessible by Member States to fight e-commerce VAT fraud. Furthermore, the proposal sets up a new central electronic system of payment information (CESOP) and for the further processing of this information by anti-fraud officials in the Member States within the Eurofisc framework. Both texts need to be approved by the EU Council after consultation with the European Parliament.

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Green light from the European Parliament on the VAT reverse charge mechanism

On 11 December, the European Parliament meeting in plenary session has adopted the report for opinion by Gabriel MATO (EPP, Spain) on the proposal for a Council directive temporarily authorizing Member States to apply the reverse charge mechanism for VAT. The Parliament made few amendments to the Commission's proposal increasing the invoicing threshold (for supplies exceeding €25,000 instead of the €10,000 proposed by the Commission) and excluding the provision allowing a Member State having a common border with a Member State applying the mechanism, also to apply it under certain conditions.

Having found a general approach to the text on 2 October, the Council will probably adopt the Directive at its next meeting on 22 January 2019.

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