European Union value added tax
[2] Following creation of the European Economic Community in 1957, the Fiscal and Financial Committee set up by the European Commission in 1960 under the chairmanship of Professor Fritz Neumark made its priority objective the elimination of distortions to competition caused by disparities in national indirect tax systems.
[3][4] The Neumark Report published in 1962 concluded that France's VAT model would be the simplest and most effective indirect tax system.
The co-ordinated administration of value-added tax within the EU VAT area is an important part of the single market.
[5]: 97,99 It has several basic purposes:[citation needed] The VAT directive is published in all EU official languages.
[13] In addition, the Recast Directive codified certain other instruments including a Commission decision of 2000 relating to funding of the EU budget from with a percentage of the VAT amounts collected by each member state.
[14] Abuse criteria are identified by the jurisprudence of the European Court of Justice (ECJ) developed from 2006 onwards: VAT cases of Halifax and University of Huddersfield, and subsequently Part Service, Ampliscientifica and Amplifin, Tanoarch, Weald Leasing and RBS Deutschland.
[15] The accrual of an undue tax advantage may be even found under a formal application of the Sixth Directive and shall be based on a variety of objective factors highlighting that the "organization structure and the form transactions" freely chosen by the taxpayer are essentially aimed to carry out a tax advantage which is contrary to the purposes of the EU Sixth Directive.
[15] Such a jurisprudence implies an implicit judicial evaluation of the organizational structure chosen by the entrepreneurs and investors operating across multiple EU member states, in order to establish if the organization was appropriately ordered and necessary to their economic activities or "had the purpose of limiting their tax burdens".
[19] Distance sales treatment allowed the vendor to apply domestic place of supply rules for determining which member state collects the VAT.
If a supplier provides a distant sales service to several EU member states, a separate accounting of sold goods in regards to VAT calculation was required.
The supplier must then seek a VAT registration (and charge applicable rate) in each country where the volume of sales in any 12 consecutive months exceeds the local threshold.
[22] VAT is charged at the rate applicable in and collected by the member state where the place of supply of the services is located.
But if the recipient of the services is not a taxable person (i.e. a final consumer), the supplier must generally charge VAT at the rate applicable in its own member state.
Following changes introduced on 1 July 2003, non-EU businesses providing digital electronic commerce and entertainment products and services to EU countries are required to register with the tax authorities in the relevant EU member state, and to collect VAT on their sales at the appropriate rate according to the location of the purchaser.
[25] Alternatively, under a special scheme, non-EU and non-digital-goods[26] businesses may register and account for VAT on only one EU member state.
Article 11 of the Directive permits member states to decide whether to allow groups of closely linked companies or organisations to be treated as a single "taxable person", and if so, also to implement its own measures decided to combat any associated tax avoidance or evasion arising from misuse of the provision.
The group members must be 'closely related' e.g. a principal company and its subsidiaries, and should register jointly for VAT purposes.
[34] Article 11 reads: After consulting the advisory committee on value added tax (hereafter, the ‘VAT Committee’), each Member State may regard as a single taxable person any persons established in the territory of that Member State who, while legally independent, are closely bound to one another by financial, economic and organisational links.
A Member State exercising the option provided for in the first paragraph, may adopt any measures needed to prevent tax evasion or avoidance through the use of this provision.
[36] To comply with the rules introduced since 2006, from 1 October 2014, businesses needed to decide if they want to register to use the EU VAT Mini One Stop Shop (MOSS) simplification scheme.
[37] If suppliers decided against the MOSS, registration was required in each Member State where business-to-consumer (B2C) supplies of e-services are made.
These member states have been granted a derogation to continue existing zero-rating but are not permitted to add new goods or services.
