EUROPEAN COMMISSION DIRECTORATE-GENERAL TAXATION AND CUSTOMS UNION Indirect Taxation and Tax administration Value added tax GFV N O 064 MINUTES

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1 Ref. Ares(2018) /01/2018 EUROPEAN COMMISSION DIRECTORATE-GENERAL TAXATION AND CUSTOMS UNION Indirect Taxation and Tax administration Value added tax Group on the Future of VAT 19 th meeting 22 January 2018 taxud.c.1(2018) Brussels, 25 January 2018 GROUP ON THE FUTURE OF VAT GFV N O 064 MINUTES 19 TH MEETING 22 JANUARY 2018 Commission européenne, 1049 Bruxelles / Europese Commissie, 1049 Brussel Belgium Tel.:

2 1. NATURE OF THE MEETING The meeting was not open to the public. 2. RESULTS Member States expressed satisfaction with the Commission's approach and structuring of work for assessing the need for implementing provisions and IT developments required regarding the VAT e-commerce Directive. 3. LIST OF POINTS DISCUSSED Some formal adjustments have to be made in the Council Implementing Regulation 282/2011 (VAT IR) and the Commission Implementing Regulation 815/2012 (COM IR) in line with the extension of the OSS to services other than TBE services and distance sales of goods. The Member States did not raise any substantial observations to the envisaged formal adjustments which were considered comprehensively covered in the Commission's documents. Certain points however raised questions for clarifications and some of the newly introduced concepts will require detailed analysis and further discussions. These points are listed below Threshold of euros Some Member States asked for clarifications concerning the introduction of the EUR threshold: The Commission clarified that Member States should not automatically deregister taxable persons whose relevant turnover did not exceed the EUR threshold in The Member States also agreed that the text of the Directive allows for deregistration as of 1 January 2019 and no specific implementing rules are required in this respect. If a taxable person decides to deregister, he will be excluded from the OSS scheme for two calendar quarters (code 5 in the COM IR). Some Member States felt that a derogatory measure would be needed to waive the two calendar quarters waiting time for the SMEs deregistering due to the threshold. The Commission emphasised that this should not be an issue since generally a business will assess the evolution of his relevant turnover before taking the decision to deregister. There is no need to adapt Article 57d of the VAT IR to allow an SME exceeding the threshold to use the MOSS as of that moment, since this is already covered by the second paragraph of this Article. 2/5

3 3.2. Electronic interfaces, Article 14a The Commission made a presentation on electronic interfaces and the new Article 14a of the VAT Directive that deems the marketplace to be the supplier and thus splitting the original B2C supply into two supplies of goods, one from the seller to the marketplace (B2B) and one form the marketplace to the customer (B2C). All Member States that intervened agreed that the transport should be linked to the second supply of goods (from the marketplace to the customer). The meaning of "facilitate" should be clarified. The Commission asked MS how far they wanted to go concerning the scope of the provision and in particular whether the concept of "takes part in the supply" already existing for TBE services should be the starting point. One Member State emphasised that "takes part in the supply" has been discarded on purpose. A large number of Member States that intervened is in favour of a broader understanding and not too descriptive so that it is future proofed by technological or economic developments. It should be ensured that VAT is collected effectively and that the provisions cannot be circumvented easily. The question had been raised if "facilitate" should be given the same meaning in Article 14a and Article 242a. The Commission stated that Article 242a has a broader meaning than Article 14a, but has doubts about having different definitions for the same word. The aim of these two provisions is different. Article 242a comprises all the marketplaces that facilitate B2C supplies in the EU including those that are not deemed suppliers. Several Member States thought that the principle of proportionality should be kept in mind and Article 242a should not be too burdensome, whereas another Member State does not want to limit Article 14a too much. Two Member States emphasised that MS should concentrate on what information they need from marketplaces. A question concerning input VAT has been raised: If goods are imported directly from a third country into the MSC and the platform does not use the OSS, the place of supply is not within the EU. In this case VAT on import is paid but it should be ensured that no input VAT deduction can be claimed, because otherwise no VAT is actually paid. The same goes for a platform that facilitates an intra-eu distance sale of goods and which can deduct input VAT. The Member State suggests denying the right of input VAT to the platform and introducing reverse charge for the B2B supply to the platform. Article 194 of VAT Directive might be the legal basis for introducing this change. Doubts regarding reverse charge were expressed by the Commission (whether this could indeed be covered by Art 194) as well as by two other Member States (the platform might not be established in the MS of the supplier; possibility of MTIC similar type of fraud). One Member State asked the Commission to check the translation of certain terms in order to avoid misunderstandings ("intrinsic value", "consignments"). It has also been suggested that these concepts being new to the VAT area, should be explained in the VAT IR. Account should be taken of the jurisprudence of the ECJ (Case C-7/08 of 2 July 2009) for determining the possibility to provide for global import declarations for consignments, which go counter to the rationale of the Import One-Stop Shop (IOSS) as provided for in the VAT legislation. 3/5

4 A great number of MS recommended taking into account ongoing work on electronic interfaces within the OECD and looking at how other jurisdictions (AUS) treat electronic interfaces/marketplaces. The Commission indicated its intention to also invite OECD for the workshop planned in March Definition of distance sales of goods supplier intervenes "indirectly" Several Member States suggested including the wording of the guidelines from the 104 th meeting of 4/5 June 2015 concerning "intervening indirectly" into the VAT IR. One Member State wanted to discuss this more thoroughly and even go further with the definition of the term. Another Member State stated that e.g. mentioning the contact details of a transporter for promotional reasons does not qualify as "indirectly" supplied Deadline for submitting returns and making payments The deadline for submitting returns and paying VAT will be extended from 20 days to the end of the month following the tax period. One Member State wanted to know if this deadline was changed in case the last day of a month is a public holiday or weekend. Having discussed pros and cons, the Commission concluded not to change the current situation, i.e. a holiday or weekend does not alter the deadline Registration information One Member State suggested including a possible VAT number of a taxable person not established in the Community at the time of registration for the non-union scheme. This could be an interesting item for risk analysis. As regards registration for the Union scheme for making intra-eu distance sales of goods, an additional change to Article 57b would be required (not yet mentioned in row 2 of the table in working document GFV 063) to determine in which Member State a taxable person not established in the EU wanting to use that scheme should register Corrections The Commission asked MS if they wanted to keep the former system for corrections until 2023 for returns submitted until the end of 2020 (correction of the original return) and introduce the new system for returns as of 2021 (correction in current return) or if one system would be sufficient as of One MS was in favour of two systems. Other MS will check with their IT colleagues. Another MS suggested discussing this within the SCIT first to see what is best for IT Returns The Commission pointed out that it is of high importance to update the rates module of the TIC (Tax Information Communication database) including rates of goods and services other than TBE services. One MS put making a distinction between goods and services in the return up for discussion arguing that this would be useful to carry out risk analysis for audit purposes. 4/5

5 Another MS raised a problem linked to the VAT refund and will submit it in writing. An unintended gap has been created that should be amended IT work Several MS asked what is planned on the IT side from the Commission. The Commission replied that work is ongoing in defining the business case. The Commission replied that the IT impact of the package will be discussed at the next SCIT meeting (April or May) and that specific IT workshops with Member States will be organised as from Q Deloitte - split payment study Deloitte presented its study on split payment and answered questions from Member States: No thresholds were introduced because thresholds create a lot of complications (two systems being in place) and cost double the price. The consequences of split payment and reverse charge might be similar but reverse charge cannot replace split payment. Reverse charge is limited to B2B supplies. The Commission pointed out that a study on reverse charge had been conducted recently by Price Waterhouse Cooper. 4. CONCLUSION The Commission thanked Member States for the fruitful discussions and asked them to send further comments in writing, as soon as possible but no later than the end of February. It also emphasised that such comments would be very useful when drafting working documents for the Fiscalis workshop in Malta (March 2018). The Commission will be sharing on CIRCA the presentations made during the GFV meeting including the planning of the work on this file. 5. LIST OF PARTICIPANTS Commission officials from DG TAXUD Unit C1 and the members of the Group on the Future of VAT as published in the Register of Commission Expert Groups and other similar entities 1. Deloitte for point 9 of the agenda. *** &NewSearch=1&NewSearch=1 5/5