Overall, over EUR150 billion of VAT is lost every year, of which around EUR50 billion – or EUR100 per EU citizen each year – is estimated to be due to cross-border VAT fraud, the Commission said in a statement. It is estimated that this sum would be reduced by 80% thanks to the proposed reform.
The Commission proposes to fundamentally change the current VAT system by taxing sales of goods from one EU country to another in the same way as goods are sold within individual Member States. This will create a new and definitive VAT system for the EU.
The EC proposed four fundamental principles of a new definitive single EU VAT area:
– Tackling fraud: VAT will now be charged on cross-border trade between businesses.
– One Stop Shop: Traders will be able to make declarations and payments using a single online portal in their own language and according to the same rules and administrative templates as in their home country.
– Greater consistency: A move to the principle of ‘destination’ whereby the final amount of VAT is always paid to the Member State of the final consumer and charged at the rate of that Member State.
– Less red tape: Simplification of invoicing rules, allowing sellers to prepare invoices according to the rules of their own country even when trading across borders.