As I mentioned in my previous post, tax leaders should be prepared to address a number of European Union (EU) value added tax (VAT) rules changes in 2019. Many, but not all, of these changes are part of the EU’s Digital VAT Package. The following changes take effect Jan. 1:
Simplified registration: Non-EU businesses that have an EU VAT number will soon benefit from the same simplified registration mechanism for supplies of digital services (the “One Stop Shop”) that non-EU businesses without an EU VAT number may currently use. This change means that these non-EU companies with an EU VAT number no longer need to register in every EU country in which they perform B2C supplies of digital services.
Invoicing changes: Currently, the EU Member State where the supply of the digital service takes place (i.e., the Member State of consumption) generally sets the invoicing rules. As of Jan. 1, however, suppliers of digital services using the One Stop Shop will be able to apply the invoicing rules of their Member State of identification rather than those of the Member State of consumption. While this makes life much easier for tax functions, tax administrations may have some trouble adjusting to the new rule. That’s because in the EU, the Member State of consumption (rather than the Member State of identification) conducts VAT audits when necessary. As a result, the Member State of consumption will perform VAT audits, when warranted, based on invoices drawn up in a different language and in accordance with other Member States' rules.
Vouchers: One more noteworthy VAT rules change for 2019 is unrelated to the Digital VAT Package. In 2016, the European Union adopted new rules to harmonize the VAT treatment of vouchers across all Member States. The rules seek to define a voucher, including the difference between a single-purpose voucher (SPV) and a multi-purpose voucher (MPV), and to determine at which points (issue, transfer or redemption) taxation will take place.
As always, we’ll keep you posted as these changes come into effect.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
Aleksandra Bal is senior product manager, responsible for leading the further development of Vertex VAT reporting and compliance solutions. Aleksandra has extensive experience in international taxation and VAT, including managing and developing digital solutions and digital transformation initiatives. A published author and speaker, Aleksandra holds a Ph.D. in virtual currency and blockchain, as well as several other advanced degrees and designations of distinction.