Council Directive (EU) 2018/2057 of 20 December 2018

What it is

to amend Directive 2006/112/EC on the common system of value added tax as regards the temporary application of a generalised reverse charge mechanism in relation to supplies of goods and services above a certain threshold. ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting the European Parliament but without being obliged to follow its opinion. BACKGROUND: the creation of a robust single European VAT area is one of the key actions announced by the Commission in its VAT action plan . It will require the setting up of the definitive VAT system for intra-EU business-to-business (B2B) cross-border trade in order to replace the current system which was intended to be transitional. The European Parliament and the Council agreed that this definitive VAT system will be based on the principle of taxation in the country of destination of the goods (the so-called “destination principle”) whereas the current system is based on exemption of supplies of goods in the Member State of departure. The Committee on Economic and Monetary Affairs adopted, under the consultation procedure, the report by Gabriel MATO (EPP, ES) on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax as regards the temporary application of a generalised reverse charge mechanism in relation to supplies of goods and services above a certain threshold. The committee responsible recommended that the European Parliament approve the Commission's proposal subject to the following amendments: Application of the generalised reverse charge mechanism (GRCM) : Member States shall be allowed to derogate from the common value added tax system in order to apply a generalised reverse charge mechanism (GRCM) to supplies exceeding an invoicing threshold of EUR 25 000 (instead of a threshold of EUR 10 000 in the Commission's proposal). in 2014, in accordance with the method and figures set out in the 2016 final report dated 23 August 2016 on the VAT gap published by the Commission, a VAT gap, expressed as a percentage of the VAT Total Tax Liability, of at least 15 percentage points above the Community median VAT gap; register a carousel fraud level within its total VAT gap of more than 25 %; establish that other control measures are not sufficient to combat carousel fraud on its territory, in particular by specifying the control measures applied and the particular reasons for their lack of effectiveness, as well as the reasons why VAT administrative cooperation has proven insufficient; establish that the estimated gains in tax compliance and collection expected as a result of the introduction of the GRCM outweigh the expected overall additional burdens on businesses and tax administrations by at least 25 %; establish that businesses and tax administrations will not incur, as a result of the introduction of the GRCM, costs that are higher than those incurred as a result of the application of other control measures. Members opposed allowing a Member State that shares a border with a Member State that applies the GRCM to also be authorised to apply the GRCM, under certain conditions. Presentation of information : in…

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