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Rescue plan for VAT in the EU

Andrzej Puncewicz 05 May 2016

The European Commission presented a recovery plan for the VAT system. Taxand Poland explores the proposed plan.

The plan includes, among others, two important elements: clarifying the issue of reduced VAT rates and changing taxation rules including commodity transactions among Member States. However, for both issues, concrete proposals of changes to the current legislation of Directive 2006/112 can be expected no sooner than in 2017.

With regard to the reduced VAT rates, the Commission has proposed two possible scenarios:

• Extending the current, outdated list of goods and services covered by a reduced rate (contained in Appendix III to the Directive)
• Renouncement of Appendix III to the Directive and allowing Member States the freedom of choice in terms of reduced rates and the adoption of certain guidelines which each state should be guided in their introduction

When it comes to trade of goods, the Commission has finally decided to renounce the transitional arrangement introduced in 1993 and adopt a solution, which equals the rules for taxation of supplies of goods among Member States with the domestic rules in force in each Member State.

Of course, this change should be accompanied by significant simplifications concerning the settlement (paying) of VAT. This kind of change should enable fighting more effectively with VAT frauds which are destructive both for the public finances and competition in the market.

Discover more: Taxand Poland Flash – April 2016

Taxand's Take

Taxpayers in Poland should take note of these updates to ensure they remain compliant.

Article tags

Indirect Tax | Poland