VAT Regime 2.0 - Will The Empire Strike Back?

The European Commission proposed fundamental changes to the current Value Added Tax (VAT) regime, aimed at delivering a definite pan-European VAT system in order to tackle tax fraud as well as to unify and simplify VAT requirements for companies while lessening red tape.

Why is a reform of the current EU VAT system needed?

VAT is a growing source of revenue in the EU and accounts for about 7 % of GDP in the EU. The current VAT regime, dating back to 1993, is not just outdated but also leaves the door open to fraud. According to EU estimates, over EUR 150 billion of VAT is lost every year; of this around EUR 50 billion due to cross-border VAT fraud.

With its recent proposal for the biggest reform of EU VAT rules in a quarter century, the European Commission, by amending the principal VAT directive (2006/112/EC), intends to introduce a definitive VAT regime. The main goals are to: