Author: Mattia Rossi
Committee: National Institutions Committee
Date: 06/04/2025
On 5 november 2024, it was approved by Ecofin, with meaningful amendments, the VAT in the Digital Age package (COM (2022) 701-702-703-704) with the goal to make VAT in compliance with the new technologies and the digital economy.
The VAT functioning, after VIDA’s transposition, that will happen, however, step by step, will make the procedure more easily for the small and medium-sized companies, but also safer thanks to the introduction of the EU electronic invoicing.
This last news will provide accurate informations about the single cross-border operations, nearly real-time, to every EU states cause data will be acquired, elaborated and conservated, by a new centralized database, led by EU commission, called Central VIES.
Genesis of the transitional operation of the intra-Community trade regime.
Chronicle of a death foretold.
In 1993, The fall of physical customs barriers between the then E.E.C. Member States led to the need to find a system for defining for VAT purposes intra-Community transactions carried out between taxable persons.
Will be faced, at the time, two theories, the ambitious principle of taxation at the place of origin. This principle wasn’t possible cause the diversity between VAT systems in EU states (such as tax rates). The other principle was the principle of taxation at the place of destination of the goods.
Therefore, the (obligatory) choice fell on the latter mechanism, which provided for the legal splitting of the intra-Community sale into two transactions: a non-taxable supply in the country of departure of the goods and a taxable purchase, via reverse charge, in a different Member State of arrival.
It was clear from the outset that the solution, which was in any case a pure compromise, was to be of a transitional nature.
There was the legislative commitment to attain a definitive regime based on the taxation at the origin.
The facts but have demonstrated that the transitory regime is still into force although the countless extensions.
By last, it was proposed to substitute the transitory regime with a definitive one, different from the past one, even the changes are still in a political stalemate.
About the control of the intra-community operations, it was thinking to substitute the physical “presidium” to the borders, essentials to monitorate the passage of the goods, with a digital archive managed by EU commission called VIES. In the VIES both the codes of the traders authorised to carry out intra-Community supplies and the periodic recapitulative statements of the transactions carried out are stored.
In the course of time, it has been observed that this intra-EU trade system was prey of evasive actions (for example carousel frauds and ghost agent) cause allow to easily transfer a good, inside the single market, without the taxation ( cfr. Most recently European Court of Auditors, Fight against intraCommunity VAT fraud: further action needed. Special Report No 24/2015).
It’s difficult to check the cross-border operations cause the national sovereignty to regard the fiscal control is an exclusive national competence. It’s missing a EU audit office.
Not particularly relevant it has been revealed the VIES contribution cause the summary lists underlying it showed major criticalities, as:
1 Figure extracted from: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52017SC0428
– They provide data in aggregate form for each taxable person and not point-by-point information per transaction
– They don’t allow, often, to make a comparison between the data on supplies and those on acquisitions since the VAT Directive does not impose an obligation, but merely gives Member States the option, to report information on intra-Community acquisitions
– They don’t result timely. Due to time differences between Member States, the data are made available to other tax authorities with serious delays both because of the frequency of submission but also because of the time needed to send the data into VIES
The recent EU response to Missing Trader Intra-Community Fraud. Digital Reporting Requirements and Central VIES coming soon.
Having said that, EU commission, understand that the VAT intra EU frauds don’t allow to each member states to contain the evasive behaviours, actualizing the subsidiarity principle ex Article 5 TEU, has proceeded with a coordinate EU action to restrict the evasive behaviours,
EU institutions, in view of the encouraging results achieved by some Member States in terms of antifraud, as well as simplification, with the domestic introduction of electronic invoicing (including its surrogates), envisaged, with the ViDA, the introduction of uniform European norms and standards for real-time digital reporting obligations of VAT transactions, including intra-Community transactions (in force, in any case, from July 2030), with the aim of providing tax administrations with information on individual sales in order to:
– Allow a timely data cross – check and so increase the control capacity of tax administrations. – Create a deterrence
Contextually, it was provided a new and effective database called Central VIES, supervised and managed by EU commission. It will receive both digital communication data and taxpayers’ identifying information, including their VAT code.
It may:
– carry out automatic cross-checks of the information collected (including through data aggregation), both at the supplier’s and at the purchaser’s premises through the digital reporting obligation, the results of which will be made available to the Member States for appropriate follow-up.
– treat the information received together with all other information communicated or collected pursuant to Regulation (EU) No 904/2010.
– be integrated with the customs surveillance system and coordinated with the information in the Central Electronic System of Payment (Cesop).
Access to the information contained in the Central VIES will, however, be limited and carried out on a need-to-know basis, i.e. allowed by means of authorisations and records that safeguard the data contained therein, and the rights of taxpayers will also be guaranteed and protected
De jure condendo observations
The strategy adopted by the European Commission is praiseworthy, but given the many different sovereign states involved, it requires medium to long implementation times and cannot provide for minimum standards in this regard. It could happen that technological and professional shortcomings of an individual country undermine the effectiveness of the planned instruments.
Otherwise, and the EPPO has clearly pointed this out in its last Report, criminal organisations do not wait and continue to put in place a structured and professional business action to find, in an easy and low-risk way, illegal financial resources from tax fraud, VAT for what is of interest here (but think also of the domestic sphere of credits from building bonuses For a more in-depth study:
– G. Liberatore, the definitive intra-EU VAT regime kicks off. But will it be simple, efficient and fraud-free? L’IVA, 2018, 1, pp. 7-14.
– G. Liberatore, Intra-EU VAT gets nice, safe and easy, L’IVA, 2018, 10, pp. 10-20.
– G. Liberatore, fighting cross-border VAT fraud: towards a new integrated Central VIES, L’IVA, 2025
-M. Rossi, New EU measures against VAT fraud and increased protection of financial interests,
STEPPO – EU LAW, 2024