VAT: New rules to tackle VAT fraud schemes
Two new directives, one on the quick reaction mechanism against VAT fraud and the other one on the optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud were adopted by the Council on 22 July 2013. Both directives amend Directive 2006/112/EC.
The quick reaction mechanism provides the legal basis to Member States to implement an emergency measure in case they are faced with a serious case of sudden and massive VAT fraud. The measure will allow Member States, through a faster procedure, to apply the reverse charge mechanism for a limited period of time and under specific conditions.
The second directive provides for an optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud. The list of sectors where this mechanism can be applied was extended and it comprises now also mobile phones, integrated circuit devices, supply of gas and electricity, telecom services, game consoles, tablet PCs and laptops, cereals and industrial crops and raw and semi-finished metals.
VAT implementation: EU Council adopts Regulation to clarify existing rules
The Regulation, which recasts Regulation (EC) No 1777/2005, clarifies certain aspects of the VAT Directive with the objective of ensuring a more uniform application of VAT rules within the EU. It is directly applicable from 1 July 2011 in all EU Member States.
This Regulation includes new measures linked to the VAT Package, giving guidance in particular in determining
- what is the status of the customer,
- whether he acquires services for business use and
- where he is located,
as this will in most cases determine the place of taxation and thus the rate of VAT to be applied. Its basis is in guidelines agreed by the VAT Committee after consultations with Member States undertaken by the Commission.
In all, it provides for:
- implementing measures for Directive 2008/8/EC as regards the place of supply of services;
- adaptation of the provisions of Regulation (EC) No 1777/2005 to the VAT Directive after its recast in 2006;
- implementing measures for other elements of the VAT Directive.