VAT, PMI and customs reform: what's new from VEG

What is the VEG?

VEG is an acronym for VAT Expert Group: a group of experts on value added tax to advise the Commission on the preparation of legislative acts and other policy initiatives in the field of VAT and to provide insight concerning the practical implementation of legislative acts and other EU policy initiatives in that field.

VAT in the Digital Age (ViDA) package: state of play of negotiations in Council

The Commission services provided a brief update on the state of play of the negotiations in Council of the ViDA legislative package. Under the ES Presidency, several meetings have been held on the three work streams of the proposal (19 and 20 July, respectively on the Platform and Single VAT Registration (SVR) parts, 11 and 12 September on the Digital Reporting Requirements (DRR) part and related administrative cooperation aspects, and on 9 October and 10 October respectively on Platforms and SVR). At the ECOFIN meeting held in June, most Member States expressed broad support on the package and the need to continue the discussion on more technical aspects. In addition, a dedicated Group on the Future of VAT meeting on DRR took place on 8 September 2023, at which with five Member States presented their national DRR systems.

Discussions on DRR will most probably be carried over to the Belgian Presidency, as this part of the proposal still needs further technical discussions. The main aim of this part of the initiative is to put in place a harmonised DRR system reducing fragmentation for businesses while providing Member States the information needed for control purposes.

One member enquired about the meaning of ‘validation' in the context of e-invoicing, to which the Commission services clarified that this term does not refer to the validation of the content but rather to a technical validation of the format of the e-invoice.

One member also asked whether there had been any discussions on the possible implementation of a harmonised sanction regime to be applied in cases of noncompliance. In this regard, the Commission services replied that this particular issue goes beyond the remit of the proposal and it will be left for individual Member States to legislate on this.

Finally, the Commission services confirmed that the formal adoption of the ViDA legislative initiative will only take place once an agreement has been reached on the three parts of the package.

Special Scheme For Small Enterprises

The Commission services presented the first draft of the Explanatory Notes on the special scheme for small enterprises, ‘SME scheme'. The objective of the Explanatory Notes is to provide practical information on the functioning of the SME scheme that is easy for small enterprises who are not experts in the field of VAT to understand. In this sense, the language used will be further adapted and the draft will be enriched with additional real- life examples and figures to provide concrete guidance to small enterprises.

VEG members made various suggestions of editorial nature and on topics they consider relevant to be included in the Explanatory Notes. Work will be undertaken to analyse the suggested additional topics with a view to include them in a more advanced version of the Explanatory Notes.

Some members offered to jointly further elaborate some of the topics suggested for the Explanatory Notes for the SME Directive. The deadline for delivering their input is 15 January 2024. The Commission services thanked the members for their initiative.

Customs reform: including the VAT proposal (COM(2023)262 final)

The Commission services presented the main elements of the customs reform package adopted on 17 May 2023, explaining that the reform aims at the simplification of customs processes for business, especially for the most trustworthy traders.

The reform is based on three pillars:

• an EU Customs Data Hub to digitalise the procedures, which will open for e- commerce consignments in 2028, followed (on a voluntary basis) by other importers in 2032, leading to immediate benefits and simplifications;
• a new EU Customs Authority that will help Member States to prioritise the right risks and coordinate their checks and inspections;
• a coordinated approach between customs and VAT rules regarding the importations of goods in the context of e-commerce.

One member asked about the interplay between the ViDA proposal, in particular the Single VAT registration part, and the customs reform.

The Commission services explained that the proposal (COM(2023) 262 final) lays down VAT rules relating to taxable persons who facilitate distance sales of imported goods, making online platforms, marketplaces or electronic interfaces the key actors in ensuring that goods sold online into the EU comply with all customs obligations as well. This proposal builds on the key elements of the ViDA proposal with regard to the single VAT registration pillar.

The e-commerce pillar of the customs reform entails:

• the alignment of the new customs proposal with the VAT framework (e.g. introduction of the concept of deemed importer enabled to use IOSS as the deemed supplier);
• the removal of the EUR 150 customs de minimis threshold which currently limits the application of the IOSS to distance sales of imported goods not exceeding EUR 150. The removal of the EUR 150 IOSS threshold will help to support the objective of a single VAT registration in the Union, in line with the ViDA proposal goals, by allowing IOSS registered traders to declare and remit the VAT due on all their eligible supplies of IOSS goods, irrespective of their value in one single Member State. The application of the same rules on all goods irrespective of their value will help tackle VAT fraud and undervaluation;
• according to the rules proposed, electronic interfaces will be responsible for ensuring that customs duties and VAT are paid at purchase, so the consumers will no longer be hit with hidden charges or unexpected paperwork when the parcel arrives at destination.

The negotiations in Council on this package and on the IOSS related changes of the ViDA proposal will take place under the Belgian Presidency.