The Digital VAT Package / The Definitive VAT System

As part of the EU trying to tighten up on VAT compliance for Online sellers there have been 2 components put in place to ensure this. The Digital Vat Package and The Definitive VAT System. 

Below is a brief break down of their significance and impact on the VAT system:

The Digital VAT Package 

First came to light by the European Commission on the 5th of Dec 2017. 

The digital VAT Package introduced changes to the invoicing and rules for record keeping. Whenever a taxable person makes supplies to customers in the other EU States the main rule is wherever the supplies take place, is where the rules for invoicing are set.

Non-EU businesses who have a VAT number within the EU are not able to benefit from the simplified registration mechanism for electronic services. 

As a consequence of this, they need to register in all EU countries where non-taxable customers are.  

The Definitive VAT System 

This represents the largest reform of EU VAT rules in a quarter of a century.

It is to replace the current system for Intra-Community trading. Whenever a supply of goods that are transported to another Member State it gives rise to 2 taxable transactions which are a zero-rated Intra-community supply in the country of departure, and an Intra-community acquisition by the customer in the country of arrival. 

Whenever the customer is due to input a VAT deduction, he can reduce the VAT paid on the acquisition as VAT deducted within the same return. Within the current VAT rules, the treatment for call-off stock arrangements in cross border situations is treated as follows. Transferring of goods by the supplier to a member state gives rise to a deemed supply where the goods depart, and an Intra-community acquisition (where the goods arrived in the member state)

Member states currently apply diverging requirements regarding the documents that serve as evidence that are significant conditions for the zero-rating of Intra-Community supplies are used.

As the compliance burden increases for Intra-EU traders, the fourth proposes the rules on documentary evidence required to apply the zero-rate into Intra-community supplies.

Cross Border VAT is your way of maintaining EU compliance on the sales of your goods. Why not see the benefits of its use through our 30 day free trial in which you will be provided a free VAT report! 

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