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International exchange of VAT information within the EU

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International exchange of VAT information within the EU . DONATO RAPONI European Commission - DG Taxud Head of the Unit for administrative cooperation and fight against tax fraud. Why exchange information ?. VAT = consumption tax on the supply of goods and services

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International exchange of VAT information within the EU

DONATO RAPONIEuropean Commission - DG TaxudHead of the Unit for administrative cooperation and fight against tax fraud

why exchange information
Why exchange information ?
  • VAT = consumption tax on the supply of goods and services
  • European Union: free movement of goods and services → important international trade
  • Thus : need to control the correct application of the VAT rules = an international problem
history of vat information exchange
History of VAT information exchange
  • 1979: first EU rules on exchange of VAT information(simultaneously with the adoption of the 8th VAT directive, on VAT refunds to taxable persons in other Member States
  • 1993: Removal of tax borders between EU Member States

→ Reg. 218/92 to strengthen the exchange of information for intra-Community supplies and acquisitions of goods

→ main innovation: VIES (VAT Information Exchange System)

  • Vat Information Exchange System:
  • links together national VAT databases
  • electronic means of transmitting information between Member States relating to:
    • tax exempt intra-Community supplies;
    • VAT registration of companies registered in the EU;
  • in 2004: 80 million messages exchanged through VIES
  • Vat Information Exchange System:
  • Companies can verify the validity of VAT numbers of their contracting parties
  • in 2004 : 11 million such verifications
  • How : facility available on the internet at:

recent evolutions
Recent evolutions
  • Increase of the international VAT fraud
  • Reasons:
    • growth of international trade
    • expansion of the EU
    • VAT rules susceptible to fraud (missing trader fraud)
    • possible weaknesses in the control systems
recent evolutions7
Recent evolutions
  • The EU anti-fraud strategy:
    • adapt the control systems to the new fraud trends

(training seminars for tax inspectors; exchange of experiences and best practices)

    • improve administrative cooperation between the Member States → new legislation :
      • Council Regulation 1798/2003
      • implementing Commission Regulation 1925/2004
purposes of the new legislation
Purposes of the new legislation

More and better cooperation by clearer, better and more binding rules

  • 1. More direct contacts
  • 2. More efficient rules
  • 3. More information exchanges
1 more direct contacts are possible
1. More direct contacts are possible

using the available resources in the most effective way

  • functional decentralisation
  • territorial decentralisation
functional decentralisation
Functional decentralisation
  • Anti-fraud units
  • Specific anti-fraud teams
  • Intelligence units
2 more efficient rules
2. More efficient rules

a. Request for information

  • new possibility : request for a specific administrative enquiry
  • clear (and shorter) deadlines for replies
  • use of standard forms
  • electronic exchange of information
2 more efficient rules14
2. More efficient rules

b. Participation of foreign auditors in controls

  • now a specific legal base for such actions
  • note: the administrative enquiry itself is carried out exclusively by officials of the requested authority
2 more efficient rules15
2. More efficient rules

c. Simultaneous controls

  • … whenever such controls would appear to be more effective than controls carried out by only one Member State
  • new regulation provides for a clear legal structure
2 more efficient rules16
2. More efficient rules

d. Request for administrative notification

  • The authority of a Member State can be requested to notify all instruments and decisions of the applcant authority of another Member State, which concern the application of VAT legislation in the territory of the applicant Member State.
3 more information exchanges
3. More information exchanges

Exchange of information without prior request

- What kind of information ?

- info on non-established traders (allocation of VAT numbers; VAT refunds);

- info on intra-Community supplies of new means of transport;

- info concerning distance selling not subject to VAT in the Member State of origin;

3 more information exchanges18
3. More information exchanges

- info concerning intra-Community transactions presumed to be irregular;

- info on (potential) 'missing traders'

- How ?

- immediate or periodical exchange

- electronic exchange

- use of standard forms

e conclusions and future developments
E. Conclusions and Future developments

CONCLUSION: a strong "framework" for administrative cooperation

  • New legislation provides lots of possibilities.
  • The electronic exchange system and the use of standard forms allow a rapid exchange.
  • Practical assistance by SCAC (Standing Committee on Administrative Cooperation).
e conclusions and future developments20
E. Conclusions and Future developments

+ New developments

  • Exchange of information also covers new fraud trends.
  • Special attention is paid to risk management.
  • Further extension of the electronic exchange
    • for information on electronic services
    • in the future: for B2B intra-Community services
e conclusions and future developments21
E. Conclusions and Future developments

However …

  • Member States must dispose of the necessary resources to collect and to use the information they exchange…
  • The fight against fraud – as fraud itself - will continue…