The European Commission on October 23, 2013, announced the launch of a new project to develop a standard VAT return for adoption by all member states to cut the cost of compliance by approximately EUR15bn (USD20.6bn) annually.
According to the Commission, the benefits of standardizing financial reporting rules are two-fold; EU businesses will benefit from a reduction in red tape and tax administration will be made more efficient.
The standard return would replace national VAT returns, requiring businesses to provide the same basic information with the same deadlines regardless of their location within the European Union. The standard VAT return would have only five compulsory boxes for taxpayers to fill in. Member states would be allowed to request a number of additional standardized elements, up to a maximum of 26 information boxes. This is a vast improvement on the current situation, whereby some member states require up to 100 information boxes to be completed.
Announcing the launch of the project, Algirdas Semeta, Commissioner for Taxation, said: “The standard VAT return presents a win-win situation. Businesses will enjoy simpler procedures, reduced costs and less red tape. Governments will have a new tool to facilitate VAT compliance, which should increase the revenues they collect. Today’s proposal therefore supports both our commitment to a business-friendly Single Market and our drive to improve tax compliance in the EU.”
Every year, 150 million VAT returns are submitted by EU taxpayers to national tax administrations. Currently, the information requested, the format of national forms and the reporting deadlines vary considerably from one member state to the next. This makes VAT returns for cross-border businesses a complex, costly and cumbersome procedure. Businesses operating in more than one member state have also complained that it is difficult to remain VAT compliant, due to the intricacy of the process.
Businesses will file the standard VAT return on a monthly basis, while micro-enterprises will only be obliged to file quarterly. The obligation to submit a recapitulative yearly VAT return, which some member states currently demand, would be abolished. The proposal also encourages electronic filing, as the standard VAT return will be allowed to be submitted electronically throughout the European Union.
The proposal for a standard VAT return across the European Union is as part of the European Commission’s work to create a more efficient and fraud-proof VAT system, as set out in its December 2011 Communication on the future of VAT.