September VAT roundup: latest EU rulings and middle east developments
Article 4 minute read

September VAT roundup: latest EU rulings and middle east developments

12 October 2018

Missed the VAT news? Here’s a summary of key developments in Europe and the Middle East over the past month.

We’re pleased to bring you the following rundown of key VAT news and wider tax bulletins from the past month. If you need help applying the latest developments in your business, make an enquiry with our VAT team.

ECOFIN meeting

The EU Economic and Financial Affairs Council (ECOFIN) has reached political agreement on three VAT-related proposals, which will be adopted once certain procedural steps are completed.

  • The e-publication regulation will allow member states to apply non-standard VAT rates to electronic publications and potentially align VAT rules between physical and electronic forms for publications.
  • The generalised reverse charge mechanism will allow member states that are most severely affected by VAT fraud to temporarily apply a generalised reversal of VAT liability. This provides a solution for member states that face endemic carousel fraud. Member states will only be able to use the generalised reverse charge mechanism for domestic supplies of goods and services above a threshold of €17,500 per transaction, and only up to 30 June 2022 under very strict technical conditions.
  • The VAT quick-fixes introduce adjustments to the EU's VAT rules in order to fix specific issues (call-off stock, VAT identification number, chain transactions, proof of intra-EU supply) pending the introduction of a new VAT system.

You can read the full details of the now-agreed proposals here.

Latest VAT Gap report

EU countries lost almost €150 billion in VAT revenues in 2016, according to a new study published on 21 September 2018 by the European Commission.

The so-called 'VAT Gap' which we’ve written about before shows the difference between expected VAT revenue and the amount actually collected. While member states have carried out a lot of work to improve VAT collection, today's figures show that reform of the current EU VAT system combined with better cooperation at EU level are needed so that member states can make full use of VAT revenues in their budgets.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: "Member states have been improving VAT collection throughout the EU. This must be recognised and commended. But a loss of €150 billion per year for national budgets remains unacceptable”.

In nominal terms, the VAT Gap decreased by €10.5 billion to €147.1 billion in 2016, a drop to 12.3% of total VAT revenues compared to 13.2% the year before. The individual performance of the member states still varies significantly. The VAT Gap decreased in 22 member states with Bulgaria, Latvia, Cyprus, and the Netherlands displaying strong performances, with a decrease in each case of more than 5% in VAT losses. However, the VAT Gap did increase in six member states - Estonia, Finland, France, Ireland, Romania and the UK.

The full report and a fact sheet can be read here.

EU cross-border VAT rulings project

The EU cross-border VAT rulings project has been extended from 30 September 2018 until 30 September 2022. The project began in 2013 and permits taxable persons planning cross-border transactions to one or more of the participating member states to ask for a ruling with regard to the transactions they envisage. If they wish to, they are invited to introduce their request for a cross-border ruling in the participating member state where they are registered for VAT purposes.

Greece - proposed VAT rate cut

Following Greece’s exit from the Third Economic Adjustment Programme with the IMF, the European Central Bank and the EU, Prime Minister Alexis Tsipras announced a number of tax legislation amendments. These include a commitment to reduce the standard VAT rate from 24% to 22%, and the reduced VAT rate from 13% to 12%, from 1 January 2021.

Bahrain VAT implementation

Bahrain’s House of Representatives has approved the implementation of a VAT regime with a standard rate of 5%, effective 1 January 2019. The bill must also be approved by the parliament’s Upper House, which is expected to meet soon.

As per an agreement among the Gulf Cooperation Council (GCC) member states, Bahrain has been committed to introducing a VAT regime for some time. GCC member states were to implement VAT regimes from January 2018, however so far only Saudi Arabia and the United Arab Emirates have done so.

UAE - VAT invoice clarification

A significant number of UAE businesses have been seeking clarity about the exact requirements of a valid VAT invoice and the circumstances in which one must be issued. Consequently, the UAE Federal Tax Authority (FTA) issued a public clarification with detailed VAT invoice guidance.

The main specifications are:

  • in all cases where a taxable supply is made, a tax invoice must be issued and delivered to the recipient
  • where full tax invoices are issued, line items have to show the tax value and net value, but it is not mandatory to show the gross value
  • where simplified tax invoices are issued, there is no requirement to show the net value for each item purchased
  • tax invoices issued in a foreign currency must show the tax amount converted to AED and the exchange rate used for the conversion.

Key takeaways

Businesses in Bahrain now have less than four months to prepare for the introduction of VAT and will need to assess the preparations they need to make. Meanwhile, the proposed increase in the VAT rate means businesses in Greece will need to plan ahead for adjustments to their ERP systems whilst implementing other changes in order to remain VAT compliant. And if you are a business in the UAE, are you conforming to the VAT invoice specifications issued by the FTA?

Our VAT services team can provide you with support in understanding the changing rules, and what they mean for your enterprise.

Talk to us today to find out how we can help.

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