EU-voorstel betreffende technische maatregelen inz. het definitieve btw-stelsel voor de belastingheffing in het handelsverkeer tussen de lidstaten


Dear Madam, Sir,


The Confederation of Netherlands Industry and Employers VNO-NCW and the Royal Association MKB-Nederland (business association for SMEs) welcome the opportunity to comment on the EC-proposal for a directive which contains the technical details of the definitive VAT system for intra-Union trade (COM(2018) 329 final). This proposal follows the legislative proposal of October 2017 which introduced a number of fundamental principles ("cornerstones") for a definitive VAT system for cross-border trade of goods, as well as a series of quick fixes to the current VAT regime.


For us the publication of the technical arrangements of the proposed definitive system was a reason to reflect on the fundamental principles of the future system. We fully support the objectives of the reform, i.e. VAT fraud prevention and a reduction of administrative costs. The key question is whether these unquestionable objectives can be achieved by the model proposed by the European Commission. Our conclusion remains that the proposals lacks conviction that the desired result will be reached, both for business and for tax authorities. We have to be very careful to implement a new system intended for the long term without the certainty that the aimed goals will be achieved.


Below we would like to explain the core of our concerns and views.


The taxation model – administrative costs
Under the current EU VAT rules, a cross-border supply of goods is split into two transactions: a VAT-exempt intra-Union supply in the Member State of origin and a taxable intra-Union acquisition in the Member State of destination. In the proposed model these two transactions will be replaced by one single supply which will be taxable in the Member State of destination only. A major change is that suppliers would have to charge and collect VAT at the rate applicable in the Member State of arrival of the goods. The VAT would be declared and paid in de Member State where the supplier is established via a One-Stop-Shop mechanism.


As a consequence of the proposed taxation model suppliers will have to apply the VAT rates of 27 other Member States. With regard to every supply to every Member State of destination of the goods the supplier has to ascertain which VAT rate has to be applied (either a standard, a reduced or a zero rate) and has to be constantly informed about any change in the rates. The introduction of these new obligations would mean a huge increase in compliance costs for businesses. Broadening the One-Stop-Shop mechanism is in itself positive, but will not prevent suppliers from a costly new administrative burden. In addition suppliers will be confronted with a tangle of bad-debt relief rules which would make it impossible to recover the unpaid VAT. Besides this financial bad-debt risk, taxation of intra-Union supplies would have a potentially huge negative impact on the cash-flow and thus on the working capital of companies.

Compared to the rules governing exports to outside the EU the proposed intra-EU VAT rules will be more burdensome. An unwelcome development which could damage the functioning of the internal market and which is detrimental to the efforts of the EU to encourage SMEs to start intra-Union supplies.


The proposed model of the Certified Taxable Person (CTP)
Under the definitive system, where the supplier is not established in the Member State of taxation and the customer has been granted the CTP status, the CTP customer would have to pay the VAT due by way of the reverse charge mechanism in the Member State of arrival of the goods. In that case the reverse charge mechanism will replace the VAT due by the supplier via the One-Stop-Shop. Although we have a positive attitude towards the CTP-concept as such because it means a potential relief for companies, we are very concerned about the proposed model. Main objections are that:

  • The proposed model will create a double standard, which may lead to a competitive disadvantage for especially SMEs and start-ups.
  • Companies have to implement two parallel administrative systems (CTP and non-CTP) and two parallel systems for filing domestic VAT returns and multiple OSS VAT returns, which is costly and administratively complex. By introducing the CTP as a temporary measure, these negative consequences will be strengthened. It is important to notice that the taxation model is based on an impact assessment (2015) which does not relate to the proposed definitive system as presented by the European Commission. For example, the impact assessment does not take into account the proposed CTP-model.
  • Companies need to continuously monitor the CTP status of their customers and link that to sales proposals and invoicing. This will be quite a burdensome process or will require significant IT investments.

The taxation model – fraud tackling
The new model aims to treat domestic and cross-border transactions in an equal way (VAT-taxed) and to create one "domestic" market of 28 Member States. We are not convinced that in the new model missing trader fraud related to cross-border transactions will be reduced. In case of taxation of cross-border transactions missing trader fraud is still very possible. E.g. in case of a supplier in one Member State who did not pay the VAT charged to the tax authorities in that state, whereas the customer in another Member State deducted the VAT charged. Our conclusion is that missing trader fraud will most likely shift to new "domestic" situations.


In addition, new forms of VAT fraud will arise as a result of the additional VAT flow in the EU of EUR 600 billion. That increase in VAT flow gives fraudsters in itself more opportunities to commit fraud. Moreover, the additional VAT flow causes an extra financial risk for Member States. Two-thirds of the VAT gap is caused by loss of VAT as a result of bankruptcy, insolvency and mistakes. With considerable additional amounts of VAT in circulation, the possible losses due to these causes will increase.


Conclusion and way forward
We fully support the European Commission’s intention to make the EU VAT system more robust against fraud and to make it simpler for businesses trading cross-border within the EU. For businesses as well as tax authorities it should be beyond question that these aims will be reached. In our opinion that is not the case with the proposed definitive system.

Therefore we would advocate further exploring other models, e.g. the reverse charge model, and taxation according to the place of establishment of the customer on the basis of that customer's VAT-number.


In the meantime the combating of fraud should have the highest priority. Regarding fraud we are, of course, a strong supporter of a powerful approach. The huge damaging impact of fraud on legitimate businesses, tax authorities and society as a whole has to be combated. In our view it is of utmost importance that the approach is targeted (in other words will not affect legitimate business) and effective. An acceleration to detecting fraud will already be given by the introduction of the Transaction Network Analysis (TNA) in the spring of 2019. We are strongly in favour of this IT tool, because by using it international fraud networks can be identified faster and more complete.


Besides, in our view it would be recommendable to further examine whether the aims of the definitive VAT regime could be achieved through the use of new technologies, e.g. of the blockchain technology. We fully support the started exploration of this technology for VAT purposes.


The need for a robust and simple European VAT system is widely supported. We would be very pleased to pay a further contribution to achieve that important goal.


Yours faithfully,


Jeroen Lammers
Director Economic Affairs