January 2009. European actions to combat VAT fraud

In December 2008, the Council of the European Union adopted:
 - directive 2008/117/EC and regulation 37/2009  intended to combat tax evasion by making it easier to exchange information on cross-border transactions (Dated December 16, 2008 and published in the Official Journal of the European Union L 14/1 of January 20, 2009);
 - a proposal for a directive aimed at improving the detection of VAT fraud and the recovery of VAT  (COM (2008) 805 Final of December 1, 2008).

1. Mesures intented to make it easier to exchange information on cross-border transactions
From January 1, 2010, major changes are to take place
• A reduction of the time limits imposed on operators to submit the recapitulative statements required for VAT purposes:
Intra-community transactions with regard to goods will be declared for VAT purposes on a monthly basis. For supplies of goods amounting to less than EUR 50,000 excluding VAT per quarter (EUR 100,000 until December 31, 2011), Member States may nevertheless allow operators to continue to submit their recapitulative statements on a quarterly basis.
This measure will not however have any impact in France inasmuch as Intrastrat returns for goods (declarations d’échanges de biens) are filed on a monthly basis. The novelty could nevertheless lie in the option by France for the possibility of submission of a declaration on a quarterly basis, within the limit of the thresholds set above.
• An extension of the obligation to submit recapitulative statements to include intra-Community services:
 Service providers shall submit recapitulative statements every quarter.
 According to the Council, this does not involve extending Intrastat returns (with regard to introduction and dispatching of goods) to intra-Community services, but periodically tracing flows of services outside France. This therefore means grouping together all transactions under the VAT identification number of the beneficiary of the services.
 The scope of application of this measure should be limited to services for which the VAT is due by the beneficiary in accordance with the provisions of Article 196 of VAT Directive 2006/112, to the exclusion, in particular, of VAT-exempt services.
 On the basis of the discussions currently in progress, the recapitulative statements will be submitted through an electronic portal at each tax authority in the Member States.
A debate exists however with regard to the relevant authorities that will be responsible for managing this portal: will it be the customs authorities, like for Intrastat returns, or the tax authorities?
• Harmonization of the rules for the payment of VAT on services in order to ensure that transactions are declared in the same period by the service provider and the beneficiary (cross-checking of the information submitted):
 The date of payment for services for which the VAT is payable by the beneficiary is set at the time when the services are provided, without any possibility of derogation (i.e. collection of the price, option for payment based on sales made).
 Services for which the VAT is payable by the beneficiary which take place continuously over a period exceeding one year and which do not give rise to any balance due or payment during that period are considered as made at the end of each calendar year, until the service is discontinued, subject to any derogatory provisions.

2. Proposal of measures aimed at improving the detection of VAT fraud and the recovery of VAT
A proposal for a Council directive aims at amending VAT Directive 2006/112 in two specific areas. If this proposal is adopted as it stands, it would lead to:
• Introducing joint and several liability for the supplier within the framework of intra-Community transactions:
A supplier of goods making an intra-Community supply will be held jointly and severally liable for the payment of VAT due in respect of an intra-Community acquisition of such goods where it has not complied with the obligation to submit a recapitulative statement or where the recapitulative statement does not set out information with regard to such supply.
However, this presumption of liability can be refuted in two cases:
- the customer has filed its VAT return for the period during which the VAT became payable in respect of the transaction concerned;
- the supplier of the goods can duly justify its shortcoming to the competent tax authorities.

As currently worded, this presumption would apparently not be refuted in the event where the customer files its VAT return late, after the period during which the VAT became payable, even though a loss of VAT revenue is recorded in the Member State in which the intra-Community acquisition has taken place.


For example, joint and several liability for payment should apply in the following two cases:
- The supplier has not filed an Intrastat return upon dispatching the goods or has filed an incomplete Intrastat return and the customer has not filed its VAT return.
- The supplier has not filed an Intrastat return upon dispatching the goods or has filed an incomplete Intrastat return and the customer has failed to file its VAT return in a timely manner.

• Defining the conditions for exemption from VAT upon importation:
An exemption from VAT upon importation will only apply if, at the time of importation, the importer provides the competent authorities in the Member State of importation with the following information:
- Its VAT identification number or the VAT identification number of its fiscal representative in the Member State of importation;
- the VAT identification number of its customer;
- proof that the imported goods will be transported or dispatched from the Member State of importation to another Member State.

Alain Recoules

For further information, please contact:
[vatpackage2009@arsene-taxand.com]mail:vatpackage2009@arsene-taxand.com