New EU VAT return is coming

The UK VAT return is one of the simplest in the EU, containing just nine boxes.  The same is not necessarily true in other EU member states, where returns can run to several pages (Hungary’s return has 99 boxes, for example!).

One of the difficulties when a business needs to register for VAT in an overseas member state is that it is not obvious how the local returns should be completed – because they are simply so different.

On 23 October 2013, the European Commission issued a Press Release (IP/13/988) announcing a standardised VAT return across the EU from 2017.  This will make it easier for cross-border businesses (and presumably also for the VAT authorities) to compare information on VAT returns in different EU member states.

There will be five ‘compulsory’ boxes on VAT returns which must be completed in all EU member states.

  • Chargeable VAT
  • Deductible VAT
  • Net VAT amount (payable or receivable)
  • Total value of input transactions
  • Total value of output transactions

There will also be 21 ‘optional’ boxes which member states can choose to include in their returns where required.  The European Commission states in its “FAQ” document that these will also be subject to a standardisation.

…Member States will be entitled to ask for up to 21 boxes of additional information, covering, for example, the split between tax rates or details of cross-border transactions.  These optional boxes are to cater for the specific needs of different tax administrations. For example, Denmark uses only one rate, so the split between tax rates would be superfluous.

The content of the 5 + 21 information boxes will be exactly the same in all Member States.  In practice, it means that a taxpayer filling a VAT return in its own Member State will be able to understand and fill a VAT return in any other Member State.

The frequency of VAT returns will also, to a large extent, be standardised.  Under the new proposals, many medium-sized UK businesses could be required to switch to monthly VAT returns.

The Commission also proposes to harmonise the periodicity of the returns, the submission deadlines, the procedures to submit corrections and the format of electronic submission of returns.

The proposed declaration period is one month with an optional quarterly period for micro businesses (under €2 million annual turnover).  Member States may allow longer periods not exceeding one year.

The attempt to standardise returns across the EU is a sensible one and will help to simplify administration procedures for those involved in cross-border trade.  The proposals are not yet law and will not come into effect until 1 January 2017; however, they will represent a significant change for UK businesses and practitioners and Gabelle will keep you updated as these proposals develop.

For further information on VAT returns new or old, please contact the TaxDesk on 0845 4900 509 and ask for Kevin Hall.