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New VAT Package
The European Union Economic and Financial Affairs Council adopted the VAT Package on February 12, 2008. The VAT Package will affect businesses with intra-community supplies to and from VAT registered customers and vendors. The changes will take effect on January 1, 2010.
New Rules for Services
Place of Supply – For services provided to businesses the new general rule is that the services are deemed to be supplied where the recipient of the services is established.
Time of Supply – Where the service recipient is required to account for VAT under the reverse charge mechanism, the tax point will be the moment the service is provided or cash received, whichever is the earliest.
Intra-European Union Reporting for Services – The VAT package introduces intra-European Union reporting requirements for supplies of services to which the reverse charge apply.
8th Directive Refund Mechanism
The VAT package also includes a revised 8th Directive or refund of VAT. The revised Directive contains a simplified electronic procedure for the submission and processing of refund applications, and a detailed timetable for processing and paying refund applications.
Any firm with presence in one of the 27 European Union Member States will potentially be affected. Firms need to establish whether they will be affected by the VAT Package presently or in the future and take appropriate steps. Elite is currently monitoring the publication and evolving the VAT Package legislation in the individual European Union Member States. At the moment, the only comprehensive legislation including report and electronic file templates has been published by the UK only.
From the outlook, the individual European Union Member States will adopt the general principles of the VAT Package and also adopt the existing ESL for goods template, possibly adding a service indicator. We will be creating a general report both in 3E and Enterprise for current supported releases that can also be used as an electronic file. This new report would encompass the common information required by the individual Member States on the ESL report for both sales and acquisitions.
We will be following up with updates in the future. If you need more information please contact Nadia Strobbia by email at nadia.strobbia@thomsonreuters.com.