EU votes for change to cross-border VAT rules

MEPs have voted to make it mandatory for payment service providers to collect cross-border e-commerce payment to crack down on VAT fraud

They will also create an online database so anti-fraud authorities across the EU can strengthen administrative cooperation among the member states’ tax authorities, and payment service providers, and also make information-sharing and prosecution more effective.

The new rules should raise €7bn (£5.9bn) in additional VAT revenue, at the moment e-commerce VAT evasion is estimated at €137bn.

MEPs proposed various improvements to make information sharing and prosecution more effective. Another proposal was creating a mandate for the European Public Prosecutor's Office, in collaboration with national judicial authorities, to ensure that fraudsters are effectively prosecuted in national courts.

It will also require payment service providers to retain records of payment transactions for a three-year period and recommends that member states investing in digital tax collection, such as Making Tax Digital in the UK, automatically link corporate cash registers and sales systems to VAT returns.

To address carrousel fraud, the EU will also set up a common system for collecting comparable statistics on intra-Community VAT fraud and require national estimates of VAT fraud losses to be published.

The rules on requirements for payment service providers are awaiting first reading in the European parliament and will amend the EU VAT Directive 2006/112/EC 2004/0079(CNS).

According to Commission estimates, online sales in the EU are worth €550bn a year – €96bn of which is cross-border. 

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