EU Council Approves Overhaul of VAT System

December 12, 2017 Charles Riordan

The Council of the European Union has adopted a legislative package that will substantially modify Europe's VAT law from 2019. This package - consisting of a Directive and two Regulations - represents the first step towards enacting the European Commission's 2016 Action Plan on VAT, which was written to reform and modernize the "transitional" VAT system. The legislative package has four main components:

  • simplification measures for intra-Community sales of electronic services, effective from January 1, 2019;
  • extension of the "one-stop shop" scheme, currently in place for e-services, to cross-border sales of goods (both within the EU and from third countries) starting in 2021;
  • elimination of the VAT exemption for imports of goods in small consignments of negligible value, as of January 1, 2021;
  • rules for enhanced administration cooperation between Member States to facilitate the implementation of the "one-stop shop" extension, effective January 1, 2021.

Although the Council has approved the overall goal and timeline of the package, it awaits a separate and more detailed proposal from the Commission on the implementation of the 2021 provisions. 

About the Author

Charles Riordan is a member of the Tax Research team at Sovos Compliance specializing in international taxation, with a focus on Value Added Tax systems in the European Union. Charles received his J.D. from Boston College Law School in 2013 and is an active member of the Massachusetts Bar.

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