Commissioner Šemeta gives his views on VAT for voluntary organizations
Following a number of inquiries of the Swedish voluntary organizations on the VAT, Taxation Commissioner Algirdas Šemeta explained the Commissions position on the subject.
" I believe the non-profit sector provides a very valuable input to the whole EU economy, in particular in certain Northern countries such as Sweden.
The Commission did not ask Sweden to apply VAT on all activities of non profit organisations. We have asked Sweden to adapt its VAT legislation in order to comply with the rules agreed between all Member States at EU level.
The VAT Directive indeed applies to all Member States without distinction. This ensures the proper functioning of the Single Market and avoids distortions of competition.
I recently personally visited Minister Borg and representatives of the Swedish Parliament to discuss this issue. We are now in close contact with the Swedish authorities to find a solution that would recognize the specificity of small non profit organisations in Sweden. The Commission has notably indicated to Sweden several possible avenues which would make it possible to find a solution in line with EU Law.
- First Sweden can exempt under the present rules many activities in the public interest (such as most of the activities of sport clubs or certain fund raising events).
- Second Sweden could make use of the option it has already today in the Directive to exempt all small operators with a turnover of less than 10 000 €, so as to avoid taxing economic activities of a very small scale (such as the sale of drinks in small quantities). Undoubtedly, this would also be to the benefit all micro-businesses.
The Commission would also be willing to examine with an open mind an increase of this exemption threshold. We therefore did not reject the Swedish request for a derogation granting this possibility. We however informed Sweden that in order to be compatible with European VAT legislation and acceptable to all Member States (who would need to unanimously agree on it in Council), the request needed to be reformulated. In particular, it had to better take into account the equal treatment of all economic operators. In practice, all small operators have to be covered by such a scheme.
Lastly, for those non-profit organisations whose activities would reach a much wider scale and would therefore be covered by none of these exemptions, options exist allowing Sweden to simplify their VAT obligations (by putting in place flat rate schemes where the only obligation could be a very simple annual VAT return).
In addition, the Commission has recently launched a very large public consultation on the future of VAT as the current VAT system suffers from several shortcomings and would need a complete overhaul. This public consultation has just finished. It is far too early to assess the overall content of the numerous contributions we got from stakeholders, but I can assure you that we will examine them carefully. The treatment of all activities in the public interest is part of this general review."
Commissioner Algirdas Šemeta