EU Commission presents options for simpler and more robust future VAT regime

The European Union Commission has presented a number of options on how to ensure a simpler, more effective and more fraud-proof VAT system tailored to the Single Market in the EU. These have been presented in a paper published by the Commission. The aim is to create a “definitive VAT regime”, to replace the temporary and out-dated VAT system, which has been in place in the EU for over 2 decades.

The future VAT regime should better meet the needs of businesses in the Single Market and be less susceptible to fraud than today’s system is. The Commission services document, which follows extensive consultations with Member States and stakeholders, sets out five options for shaping the future VAT regime.

These are:

1. The supplier would be responsible for charging and paying the VAT, and supplies would be taxed according to where the goods are delivered;
2. The supplier would be responsible for charging and paying the VAT, and supplies would be taxed according to where the customer is established;
3. The customer – rather than the supplier – would be liable for the VAT, and taxation would take place where that customer is based (Reverse Charge);
4. The customer – rather than the supplier – would be liable for the VAT, and taxation would take place where the goods are delivered;
5. The status quo would be maintained, with some modifications.