‘Simple’ EU Vat return to help firms

A new EU-wide standardised Vat return offering a much simplified method for companies to report and pay their tax irrespective of how many EU countries they operate in has been presented by the European Commission.

Research shows that the more difficult Vat return forms are, the less likely companies are to comply with the law and pay the tax, said taxation commissioner Algirdis Semeta.

The proposed changes would help governments collect the estimated €193bn a year they lose in Vat, he said.

Ireland has one of the most streamlined systems requiring the 1.16m companies to fill out just six boxes every two months or just four times a year for some micro businesses.

This contrasts with Italy’s more than 5m businesses that while they need to make a return just once a year, they must fill out 586 boxes.

Substituting the 28 different Vat return systems with one standardised one would save the EU’s 148m businesses around €9bn a year in administrative costs.

It would also remove obstacles to cross-border trade which the Commission’s impact assessment shows would be worth €3bn-€6bn.

Around 13% of businesses currently file Vat returns in more than one EU country.

The proposed new form would be filled out either every month or for businesses with a turnover of less than €2m a year, every two months.

There will be a mandatory five boxes to fill covering: chargeable Vat, deductible Vat, net Vat amount (payable or receivable), total value of input transactions and total value of output transactions.

There will be an optional extra 21 boxes that countries may require businesses to fill out which is designed to cater for differences such as a range of different Vat rates in any one country.

Returns will be once a month with an option of quarterly returns for micro businesses of which there are €130 million in the EU.

Member states may allow fewer returns a year, but they must be made at least annually.

The language used will be that of the country to which the return is being made.

The change was one of the those recommended by a high-level group established by the European Commission to consider where rules could be simplified for business.

The proposal will go to the member states’ Council who will consult the Parliament and the plan is to have it enter into force on the Jan 1, 2017.