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New plans in the design of European Community VAT: the extension of the “one stop shop” for intra-community transactions
In January 2012 the European Commission stated its intention to introduce important changes in the existing VAT system in the EU. The reason behind this is that the system, as it is currently designed, is too complicated and costly for the companies, as well as making fraud control very difficult (the so-called VAT Gap). As was recently stated by the Commissioner in charge of taxation,
“VAT is paid for by citizens, collected by businesses and accounts for over 20% of national revenues. However, it is now 40 years since the EU VAT system was first set up, and the regimen no longer fits with our service-driven, technology-based economy. The time has come for an ambitious VAT reform”.
For this reason, the Commission has announced that it wishes to broaden the application of the so-called “one stop shop” (OSS), which is currently applied to all companies outside of the EU which carry out certain activities, to all companies within the EU carrying out intra-community trades. The aim is to simplify obligatory formalities and reduce the cost of intra-community transactions. The idea is to prevent any company wanting to operate in any country from having to carry out tax related procedures in each country. It is not uncommon to find companies operating within the EU having 20 different national tax numbers, one for each country, who are obliged to present regular VAT returns in each country.
The suggestion is that as of 2015, the “one stop shop” is applied to all electronically provided services so that it is gradually extended to many other instances.
A working document of the Commission (COM (2011) 851 final) establishes the bases of what the next reforms should be (including, for instance, a standardised VAT return form for all countries) and states, and this is extraordinarily important, that the Commission waives the application of the source country VAT principle in intra-community transactions, thus accepting that the current system (hitherto provisional) based on the principle of destination country, should become definitive.