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A standard EU VAT Return should lead to an expansion of cross-border trade

standard EU VAT ReturnsOn 23rd October, 2013 the European Commission proposed that all of the 28 countries in the European Union introduce a standard EU VAT Return from 1st January, 2017.

The overwhelming case for a standard EU VAT Return is that it should simplify the administration of VAT for businesses operating in more than one EU country.  The existing situation where each country has designed its own VAT Return in its local language makes it extremely difficult for a business to perform the necessary VAT administration in each of the countries in which it operates.

The significance of this administrative burden is that it clearly acts as a barrier to trade.  It does not surprise me that only 13% of all VAT taxpayers in the EU submit VAT returns in more than one member state. If we have a truly standard VAT return throughout the EU then a UK company could refer to a version in English and use it as the model when considering completing the same VAT return in the language of another EU country in which it is registered or should be registered.

I asked Professor Rita de la Feria, who is the Chair in Tax Law at Durham Law School and Programme Director at the Oxford University Centre for Business Taxation, about the likelihood of the Commission’s proposals being accepted by the member states and she commented:

"I believe that it is most likely that the Commission's proposals will succeed.  If they do not gather unanimous support, they might be approved under the "enhanced cooperation" procedure.  I don't believe opposition will come from member states with high compliance levels, like Germany and the UK, but from countries that at present have been adopting a stronger stance on compliance.  In any event, even if approved only under enhanced cooperation and not applied to all member states, in my opinion this is a very significant and positive step towards facilitating and enhancing intra-EU trade, particularly for SMEs."

I hope that this simplification will actively encourage businesses in all EU countries to register for VAT in many EU countries leading to a much needed expansion of cross-border trade within the single market.  As a provider of VAT training we have seminars that we could present throughout the EU.  The need to complete non-standard VAT returns in each country’s local language ironically presents us with a problem that restricts us from delivering seminars in other EU countries. 

I eagerly await the introduction of a standard EU VAT return.

Stephen Smith
Managing Director
UK Training (Worldwide) Limited

What is proposed?

The Commission proposes to have a common format for the VAT returns for all member states which will contain 5 mandatory information boxes. They will state the essential information regarding the amount of tax payable or receivable, distinguishing between the amount of output tax payable and the amount of input tax deductible along with the total value of output transactions and the total value of input transactions.

In addition member states will be entitled to ask for up to 21 boxes of additional information, covering, for example, the split between tax rates or details of cross-border transactions. These optional boxes are to cater for the specific needs of different tax administrations.

It is intended that the content of all 26 information boxes will be exactly the same in all member states. It is recognised that some countries will not require some of the boxes but, to be consistent, the intention is that the boxes will remain on each country's return.

The Commission also proposes to harmonise the frequency of the returns, the submission deadlines, the procedures to submit corrections and the format of electronic submission of returns.

The proposed declaration period is one month with an optional quarterly period for businesses with an annual turnover under €2 million. Member states may allow longer periods not exceeding one year.

After a period of consultation the European Commission reports that it has received positive comments from both businesses and the member states which strongly support the introduction of a standardised EU VAT return available in all of the EU languages. You should note that it is still intended that the return is submitted in the language of the country of submission. However, since the content of the information boxes will be the same in all EU countries, and the description will be available in all EU languages, it will be much easier to understand what is expected when completing a return in a foreign language.


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