Input into the public consultation of the European Commission on ViDA: Business Europe

Against this background and in order for ViDA to achieve a fair and efficient VAT system, BusinessEurope recommends that:

(i) A more realistic timeframe is considered. Some of the proposed rules are designed to take effect eight months after the finalisation of this public consultation (from 1 January 2024). Given the unanimous approval required from all Member States, we recommend a minimum of twenty-four months from the date ViDA is approved before the first measures start being implemented. Additional lead time will be needed for small and medium-sized businesses and for the introduction of the more complex proposals, such as the introduction of mandatory electronic invoicing, that requires fundamental changes to ERP systems and underlying business processes, or rules on the platform economy.
(ii) The reform of the existing VAT rules is guided by the principles of proportionality, effectiveness, and simplicity. Digitalisation has the potential of simplifying many complexities that exist in the VAT system. However, digital reporting should only be introduced in a harmonised manner to avoid further fragmentation. In addition, a thorough analysis of the effectiveness of the proposed reforms should be carried out to ensure that no unnecessary complexities are introduced for those companies that run their business in an honest and fair manner. In this context, the proposed two-day timelines to issue and report invoices, the additional data points required on invoices as well as the elimination of summary invoices need to be reconsidered and reassessed against the overall aim of the ViDA proposal before they are adopted.
(iii) Given the significant investment required by businesses to adjust their existing processes to new capability requirements, measures and incentives such as faster VAT refunds, faster audits and reduced enquiries from tax authorities, improvement of relief for bad debts, VAT deduction on the cost of implementing these proposals for VAT exempted businesses, combining the use of data for more efficient reporting (for example for Intrastat and EC sales), a relaxation of the Kittel ‘knew or should have known’ test in cases of correctly and timely reported transactions, and other investment incentives from a direct tax perspective should be considered in order to incentivise the optimal implementation of ViDA for businesses. It will be key that the rules result in less onerous obligations on businesses, simplified reporting obligations and more targeted and qualitative checks in order for honest taxpayers to benefit from more tax certainty.
(iv) Whilst we wholeheartedly support the Commission’s initiative to fight any form of VAT fraud (including any form of carousel fraud such as Missing Trader IntraCommunity fraud), careful consideration should be given to the appropriateness of introducing more administrative obligations designed to tackle the flaws in the current VAT system, as these may still not result in a reduction of the VAT gap but will nonetheless have adverse implications on the majority of businesses operating in the Single Market. In this respect, the fight against fraud should not come at the expense of the large majority of companies that are trying their best to comply with the current complexities and fragmentations of the EU VAT legislative framework.
(v) The exchange of data between Member States’ tax authorities through electronic invoicing and reporting, directly or indirectly via platforms, will need to be protected. We expect that a large amount of strategic, commercially sensitive and personal data will be shared thereby allowing a mapping of the commercial flows within the EU. Any leakage, misuse or destruction of this data would be highly detrimental to 3 European businesses. As such, ViDA should be accompanied by a robust process aimed at detecting and preventing misuse of information and/or cyber- attacks in order to safeguard the proper functioning of the proposed digital reporting rules.
(vi) Whilst we support the Commission’s first steps taken in the ViDA proposal to align the VAT treatment of goods and services by introducing the B-to-B domestic reverse charge mechanism for goods and services alike when supplied by a nonestablished business, the Commission should have taken this opportunity to standardise the VAT treatment of goods and services as the distinction has become increasingly blurred with the use of digital tools. Different interpretations by the Member States lead to natural mismatches that, in turn, lead to difficulties when analysing and matching invoice data. The same VAT treatment of goods and services would therefore not only make the VAT system less complicated and more modern, but also more robust against VAT fraud.
(vii) The ViDA proposal should work in practice for businesses and tax authorities alike. Therefore, the ‘central VIES’ system that will be created must be able to handle bulk validations as well as subscriptions for businesses to status updates of trading partners in order to streamline the process. Furthermore, real-time upgrades should be reliable in terms of data quality and stability of the system.
(viii) Rules on deemed supply should ensure that the principle of VAT neutrality is respected and a level playing field is maintained and should not disregard existing rules in Member States that confer specific exemptions. A uniform definition of an ‘intermediary’ in the context of the Platform Economy is required together with common presumptions for when platforms are acting in their own name in order to provide legal and tax certainty.
(ix) The Commission should continue working with the Member States to examine how ViDA can be implemented optimally for small and medium sized businesses, and to improve current cooperation between the different national tax administrations to establish greater levels of trust and efficiency. In particular, the One Stop Shop system can be improved by permitting input VAT deductions and VAT refunds as well as harmonised sanctions and interest payments.
(x) More flexibility should be provided for businesses to elect for a Member State of Identification for OSS purposes.

Source Business Europe

Input by other organizations into the public consultation