On May 29, 2018 the Dutch Ministry of Finance sent a summary of discussions of the EUROGROUP meeting of May 24, 2018 and the Economic and Financial Affairs (ECOFIN) Council of May 25, 2018 to the Dutch House of Representatives. These summary of discussions give an interesting insight in the discussions that were held. In this article we will focus on the summary of discussions of the VAT topics that were discussed during the ECOFIN Council of May 25, 2018.
Administrative cooperation in the area of VAT
During the ECOFIN Council discussed the proposal to amend Council Regulation (EU) No 904/2010 of October 7, 2010 on administrative cooperation and combating fraud in the field of value added tax. According to the Dutch Minister of Finance, the Member States in general welcome the basic principles of this proposal to improve the administrative cooperation between the tax authorities and to strengthen the role of Eurofisc. At the request of one single Member State, the proposal was moved to the next ECOFIN Council because this Member State is not satisfied with the compromise that is supported by virtually all Member States, including the Netherlands. In the view of this Member State, the compromise regarding (compulsory) joint tax audits is not ambitious enough.
A general reverse charge mechanism for VAT purposes
The Council exchanged views on a proposal for a Council Directive amending Directive 2006/112/EC concerning the common system of value added tax regarding a temporary application of a general reverse charge mechanism to apply to the supply of goods and services above a certain threshold. According to the Dutch Minister of Finance, the Netherlands supports the proposal to allow Member States to temporarily apply a general reverse charge mechanism. According to the Dutch Minister, the proposal is expected to provide Member States that experience very serious VAT carrousel fraud and that have no other possibility of restraining this problem properly with an effective measure to do so.
This file has been stalled since a blockade in ECOFIN Council of June 2017. The Bulgarian Presidency wanted to open the discussion again. However, the ECOFIN Council did not lift the blockade (in conjunction with the negotiations on the e-publications proposal). According to the Dutch Minister some Member States could not agree with the pilot on a temporary general reverse charge mechanism. These Member States fear a shift from VAT fraud to Member States that do not apply a reverse charge mechanism. Furthermore, this pilot could be an obstacle to introducing more far-reaching VAT proposals such as the so-called definitive system.
VAT rates for electronic publications
The proposal for a Council Directive e-publications was discussed at the ECOFIN Council. The Netherlands supports the equal treatment of digital and physical publications and supports the proposal. Under the VAT Directive, it is currently not possible to tax electronic services at the reduced VAT rate. With this proposal an exception is made for certain electronic services, being: the delivery, including the lending by libraries, of books, newspapers and magazines, insofar as not exclusively or mainly being advertising material and insofar as not exclusively or mainly consisting of music or video. This will enable an equal VAT treatment of electronic and physical publications at the reduced VAT rate.
During its meeting of June 2017 the ECOFIN Council could not come to an agreement on the proposal. At the time, no agreement could be reached because the file was politically linked to the file concerning the general reverse charge. According to the Dutch Minister of Finance this time no agreement was reached in the ECOFIN Council because not all Member States could support the proposal.
Click here download the summary of discussions of the EUROGROUP meeting of May 24, 2018 and the Economic and Financial Affairs (ECOFIN) Council of May 25, 2018 as available on the website of the Dutch Ministry of Finance.
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