REPORT FROM THE COMMISSION TO THE COUNCIL on the application of Article 263 (1) of Council Directive 2006/112/EC concerning the reduction of timeframes
Date: 2012-06-26
Institutions: European Commission
Subjects: VAT, administrative formalities, intra-EU trade, national implementing measure, tax collection, tax evasion

EUROPEAN COMMISSION 

Brussels, 26.6.2012  
COM(2012) 337 final 

REPORT FROM THE COMMISSION TO THE COUNCIL 

on the application of Article 263 (1) of Council Directive 2006/112/EC concerning the 
reduction of timeframes 

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REPORT FROM THE COMMISSION TO THE COUNCIL 

on the application of Article 263 (1) of Council Directive 2006/112/EC concerning 
the reduction of timeframes 

1. 

INTRODUCTION 

In accordance with Article 2 of Council Directive 2008/117/EC of 16 December 
2008  the  Commission  is  required  to  present,  on  the  basis  of  information 
provided  by  the  Member  States,  and  no  later  than  30  June  2011,  a  report 
assessing  the  impact  of  Article  263(1)  of  Directive 2006/112/EC  on  Member 
States'  ability  to  fight  against  VAT  fraud  connected  with  intra-Community 
supplies  of  goods  and  services  as  well  as  on  the  usefulness  of  the  options 
provided  for  in  Article  263(1a)  to (1c),  and,  if  necessary,  to  make  appropriate 
proposals. 

A first concern of Member States when confronted with fraudulent transactions 
was that the information contained in the recapitulative statements was available 
only after 6 months, which was far too late for risk analysis purposes. Therefore, 
the first initiative taken by the Commission in this field was to submit a proposal 
to amend the VAT Directive in order to reduce the timeframe for submitting and 
transmitting the recapitulative statement to 1 month. 

The  adoption  of  Directive  2008/117/EC  of  16  December  2008  constituted  an 
initial  response  to  the  request  from  the  Member  States  to  strengthen  the  VAT 
system  and  to  assist  them  in  their  efforts  to  fight  VAT  fraud.  This  Directive 
amended  Article  263(1)  of  Directive  2006/112/EC  allowing  for  a  reduction  in 
the statutory time limits for the declaration of cross-border transactions for VAT 
purposes, together with a reduction in the time limits for the exchange of such 
information between Member States, so as to enable quicker detection of fraud, 
in particular as regards “VAT carousels”. The Article, which should have been 
implemented by 1 January 2010 requires that:  

As a general rule, as from 1 January 2010, cross-border transactions for VAT 
purposes will be declared on a monthly basis;  

Member States will nevertheless be able to authorise operators with turnover of 
less  than  EUR  50,000  (excluding  VAT)  a  quarter  for  cross-border  supplies  of 
goods  (optionally,  EUR  100,000  up  to  31  December  2011)  and  all  service 
providers to continue to submit recapitulative statements on a quarterly basis. 

The Commission’s report covers the following major questions:  

•  To what extent has speeding-up the exchange of information improved Member 
States’ ability to combat VAT fraud, for instance, has it resulted in quicker 
detection  of  missing  traders  or  in  improved  national  risk  management 
system?  

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•  Have the option mechanisms set out in article 263 of Directive 2006/112/EC had 
any impact on the objective of improving Member States’ ability to combat 
VAT  fraud  while  minimising  the  administrative  burdens  on  businesses  in 
line with the Lisbon Agenda?  

•  What impact has reducing the time frame for submitting recapitulative statements 
and  the  various  option  mechanisms  had  on  businesses,  considering  that  the 
Lisbon Agenda aims to minimise administrative burdens on businesses?  

In order to allow Member States some time to experience the functioning of the 
new provisions, the Commission decided to extend the deadline for submitting 
the report.  

2. 

SOURCES  OF  INFORMATION  USED  FOR  THE  EVALUATION  OF  THE  APPLICATION 
OF ARTICLE 263(1) 

The implementation and the application of Article 263 (1) is a matter of national 
responsibility  for  Member  States.  Consequently  this  evaluation  could  only  be 
based  on  information  received  from  the  Member  States.  In  order  to  gather  the 
necessary information to evaluate the impact of this newly-adopted legislation, 
the Commission sent two questionnaires to the Member States, one prior to the 
implementation  of  the  new  provisions  and  another  one  following  their 
implementation.  The  main  goal  of  the  questionnaires  was  to  compare  the 
situation  in  Member  States  before  the  implementation  of  the  reduced 
timeframes,  with  the  situation  in  Member  States  following  the  implementation 
of the new legislation. It is important to mention that not all Member States were 
in  a  position  to  apply  the  new  provisions  as  of  1  January  2010.  Furthermore, 
only 22 Member States replied to the questionnaire and the level of detail of the 
replies was sometimes insufficient to allow for a proper analysis.  

As  concerns  the  impact  of  the  reduction  of  timeframes  and  the  option 
mechanism on businesses, the Commission endeavoured to obtain the necessary 
information  through  a  study1.  For  this  purpose,  it  has  commissioned  PwC  to 
perform  an  expert  study  with  the  objective  of  examining  the  business 
perspective.  The  study  was  delivered  in  October  2011  and  is  available  at  the 
Commission website at the following address: 

http://ec.europa.eu/taxation_customs/common/publications/studies/index_en.ht
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PricewaterhouseCoopers:  Expert  study  on  the  issues  arising  from  a  reduced  time  frame  and  the 
options  allowed  for  submitting  recapitulative  statements  -  Application  of  Article  263(1)  of 
Directive 2006/112/EC (amended by Directive 2008/117/EC)  

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3. 

MAIN FINDINGS 

3.1. 

Short description of the way in which Member States have implemented the 
provisions of the new Article 263 (1) in their domestic legislation2  

Under the new Article 263(1) of Directive 2006/112/EC, the general rule is that 
as from 1 January 2010, recapitulative statements for intra-Community supplies 
of goods, including deemed supplies, and services are to be drawn up for each 
calendar month within a period not exceeding one month and in accordance with 
procedures to be set by the Member States.  

The  analysis  shows  that  (practical)  implementation  of  Article  263(1)  of 
Directive  2006/112/EC,  and  especially  the  options  laid  down  therein,  is  not 
uniform.  

For instance:  

– 

– 

– 

– 

17  Member  States  have  implemented  the  derogation  to  file 
recapitulative statements on a quarterly basis and 10 Member States 
have not implemented the derogation;  

5  Member  States  have  made  the  application  of  the  derogation 
mandatory and 12 have made it optional; 

2 Member States have a separate recapitulative statement for goods 
and  services  while  the  other  25  Member  States  have  a  combined 
recapitulative  statement.  In  4  Member  States,  there  may  be 
differences in the reporting periods for intra-Community supplies of 
goods, including deemed supplies, on the one hand, and services on 
the other hand;  

22  Member  States  require  electronic  filing  (in  10  Member  States 
exceptions  however  apply)  while  5  others  provide  for  optional 
electronic filing.  

A table attempting to summarise this complex situation is set out an Annex 1 

3.2. 

Consequences for the tax administrations 

3.2.1. 

Impact on the work of the tax administrations 

The majority of Member States confirmed that the data from the recapitulative 
statements  is  used  in  a  similar  way  to  that  used  before  the  introduction  of  the 
monthly  reporting  period.  There  is,  however,  now  a  higher  number  of 
recapitulative statements which are submitted both for goods and for services. 

While  a  number  of  Member  States  (such  as  CY,  DE,  PL,  SK,  SI  and  UK) 
indicated that they experienced an increase in the administrative burden for the 
tax  administration,  due  to  the  fact  that  the  recapitulative  statements  are  now 

2 

The short description is retrieved from the PwC Study. 

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submitted  more  frequently,  other  Member  States  (e.g.  ES)  defended  this 
situation on the grounds that it now allows them to spread the workload better 
over the whole year, thus avoiding bottlenecks every calendar quarter. Another 
reason  provided  for  the  increased  workload  is  the  inclusion  of  services  in  the 
recapitulative  statement,  another  innovation  arising  from  the  adoption  of  the 
VAT package.  

The  majority  of  the  Member  states  consider  that  reducing  timeframes  could 
increase 
information 
exchange,  a  more  efficient  risk  analysis,  more  efficient  audits  and  greater 
benefits for Eurofisc. 

tax  administration's  efficiency, 

through  faster 

the 

It  was  also  highlighted  that  there  is  a  trend  that  decisions  could  now  be  made 
more  accurately  and  the  need  to  send  information  requests  had  also  been 
reduced.  

3.2.2. 

Impact on risk analysis 

In  general,  the  Member  States  reported  that,  despite  the  fact  that  they  now 
receive  data  from  recapitulative  statement  on  a  monthly  basis,  no  changes  to 
their risk analysis practices have been made at this stage. The same parameters 
as before are used in a large number of the Member States. Some Member States 
(e.g. HU and FI) have announced plans to modernise their risk analysis systems 
by  introducing  additional parameters.  It was also pointed out  that  although the 
same  data  is  used  as  before,  receiving  the  information  quicker  enables  tax 
administrations to react more rapidly to anomalies.  

As regards data processing time, in general, most Member States answered that 
no  additional  resources  were  required  for  the  risk  analysis  process  as  the  data 
coming  from  the  recapitulative  statement  were  already  a  component  of  the 
overall  risk  assessment  of  taxpayers.  It  appears  to  be  difficult  to  calculate  the 
resources  needed  for  risk  analysis  purposes  only.  Further  comments  received 
from Member States indicated that sometimes they continue to carry out a risk 
analysis  on  a  quarterly  time  period  only  because  it  is  a  very  time-consuming 
activity, while  others  stated  explicitly that the implementation of the reduction 
of  time  frames  would  require  tax  administrations  to  allocate  more  resources, 
both human and IT, if the benefits of information received on a monthly basis 
were to be fully utilized. 

3.2.3. 

Impact on audits 

The  data  from  the  recapitulative  statement  are  normally  used  in  the  selection 
phase (selection of audits) and during the audit phase (conducting of audits).  

Such data is used for auditing in all Member States. It is an important part of the 
risk assessment system in general as data from recapitulative statements provide 
more  detailed  information  about  intra-community  transactions  during  a  certain 
period.  The  general  procedure  is  to  match  the  recapitulative  statements  with 
VAT returns and check the validity of VAT numbers through VIES. In cases of 
risk,  preliminary  findings  from  mismatching  data  in  general  lead  to  further 
investigation, including requests for information to other Member States in case 

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of IC trade: the sooner this analysis is done, the quicker an audit can be carried 
out.  The  reduced  time  frames  have  not  changed  this  practice  but  they  have 
enabled the auditing tax administration to send quicker queries or spontaneous 
information to the Member State of acquisition.  

3.2.4. 

Impact on detection of irregularities and fraud 

Although some Member States (such as GR, LT and RO) reported an increase in 
the  number  of  missing  traders  detected,  a  large  majority  of  Member  States 
indicated that it was too early yet to identify whether the reduced timeframe had 
lead  to  increased  detection  of  irregularities.  No  figures  in  this  respect  were 
provided.  

It  was  pointed  out  that  although  the  detection  of  irregularities  itself  had  not 
increased,  it  was  important  to  note  that  the  reduction  in  time  frame  for 
submitting  the  recapitulative  statement  combined  with  a  monthly  VAT  return 
had  reduced  the  time  period  during  which  a  conduit  company  could  operate 
before being detected. 

Furthermore, it was also noted that due to the fact that Member States may opt 
to continue to apply different reporting periods for the recapitulative statement 
compared to VAT returns, it was not possible to carry out a systematic check of 
the  data  contained  in  the  VAT  returns  with  the  data  received  through  the 
recapitulative statement on a monthly basis.  

The role of EUROFISC in more systematic detection of conduit companies was 
considered  useful  and  the  early  detection  triggered  several  audits  that  were 
started  up  sooner  than  would  use  to  be  the  case.  Unfortunately  most  Member 
States did not give details of the number of fraud cases detected and the amount 
of tax involved since the introduction of the new provisions.  

Few  Member  States  (namely  LT,  GR  and  EE)  detected  some  (potential)  fraud 
cases concerning services, but most of the Member States did not give specific 
figures on the amount of VAT loss due to fraud related to these cases. It seems 
to be too early to asses the effectiveness of the introduction of data on services 
in the recapitulative statements.  

3.2.5. 

Impact of the options 

Member States were asked whether they had experienced a negative impact as a 
result of the application of different options by several Member States on their 
ability to use the received information. From the replies received it appears that 
the cross-checking exercise between data from the Member State of supply and 
data  from  the  Member  State  of  acquisition  is  problematic.  Different  reporting 
periods  and  options  applied  by  other  Member  States  have  made  faster  data 
matching  in  the  Member  State  of  acquisition  more  difficult.  It  is  obviously 
almost impossible to rely on systematic matching on a monthly basis when (part 
of) the information is only submitted quarterly.  

Nevertheless, here it was argued that the options are only available for low risk 
areas  and  since  everybody  was  well  aware  of  the  options  used  in  the  different 

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Member States, any difficulties that availing of the options might cause should 
not be exaggerated.  

As a conclusion, the replies clearly show that most Member States consider the 
application  of  the  different  options  and  reporting  periods  to  pose  a  serious 
obstacle to speedy and accurate data evaluation. Therefore, the potential benefits 
arising from the reduction of timeframes cannot be exploited to its full extent. 

3.2.6.  Conclusion 

Overall,  Member  States  still  need  more  time  to  assess  the  new  situation 
accurately  and  provide  an  in-depth,  quantified  analysis.  Some  Member  States 
were  also  late  in  implementing  the  new  rules  fully,  which  prevented  them  to 
provide more in-depth analysis. 

Nevertheless,  the  new  provisions  of  Article  263  (1)  appear  to  have  had  a 
positive  effect  on  the  efficiency  of  anti-fraud  activities.  The  introduction  of  a 
reduction  in  the  timeframe  for  submitting  the  recapitulative  statements  and 
reporting into VIES is considered by Member State as a great improvement in 
their risk analysis activity. Consequently, quicker information exchange leads to 
quicker controls and audits. 

Applying different thresholds, options and reporting periods is now the biggest 
obstacle  to  making  fraud  detection  and  risk  assessment  procedures  more 
efficient.  Less  divergent  application  of  the  rules,  both  in  terms  of  different 
reporting  periods  and  divergences  between  Member  States  would  increase  the 
benefit  Member  States  can  make  of  the  reduced  timeframe  for  submitting 
recapitulative statements. 

3.3. 

Experiences from a business perspective  

3.3.1.  Preliminary remark 

One has to take into account certain limitations and precautions when evaluating 
the conclusions of the study by the external contractor. In particular, it must be 
borne in mind that the sample of 23 case study companies is too small to draw 
firm conclusions. The external contractor has acknowledged that there were no 
companies  in  the  sample  identified  that  were  affected  by  the  options.  This 
because  the  threshold  foreseen  in  Article  263  (1a)  was  either  exceeded  by  the 
companies selected in the sample or the companies had opted not to utilize the 
possibility for an alternative reporting period. 

Furthermore, due to the fact that the VAT package had to be implemented at the 
same  time  as  the  provisions  of  Article  263(1),  it  was  difficult  for  business  to 
separate the costs occasioned by the latter from the overall costs resulting from 
the  implementation  of  the  VAT  package.  It  also  proved  impossible  to  identify 
the costs linked to the introduction of the intra-community supplies of services 
in the recapitulative statements, as bundling supplies with services transactions 
is common business practice.  

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Since  the  external  contractor  clearly  stated  that  the  quantitative  results  of  the 
study  have  an  indicative  character  and  should  be  treated  with  caution,  the 
Commission's  paper  focuses  in  the  next  section  on  the  qualitative  feedback 
provided by the case study companies 

3.3.2. 

Impact on administrative burden and compliance costs  

Based  on  the  study,  the  qualitative  feedback  provided  by  the  23  case-study 
companies  highlights  some  relevant  considerations  on 
impact  of 
implementing Article 263(1) of Directive 2006/112/EC.  

the 

Although  monthly  submission  of  recapitulative  statements  and  monthly 
reconciliation  of  data  are  identified  as  additional  administrative  burdens,  they 
also motivate companies to carry out more frequent internal controls. This will 
impact positively  on the quality of company data. Looking towards the future, 
the  majority  of  companies  therefore  expects  a  positive  balance  between 
administrative  costs  and  advantages  in  terms  of  improved  data  quality  and 
reliability.  

The  level  of  automation  has  a  big  impact  on  the  perceived  complexity  and  on 
administrative  costs.  Introducing  automated  internal  processes  involves  an 
important one-time cost for companies because they have to change/update their 
systems  and  manage  the  internal  changes.  At  the  same  time,  companies 
appreciate that this will result in lower recurring costs over time.  

The  absence  of  harmonisation  within  the  EU  in  terms  of  submission  periods, 
format  and  level  of  detail  is  particularly  burdensome  for  companies  that  have 
multiple locations or registrations across the EU. Participants also suggest that 
harmonisation of timeframes should be accompanied by harmonisation of filing 
procedures  –  i.e.  a  move  towards  electronic  filing  and,  particularly,  a  simple, 
user-friendly interface that simplifies monthly filing as much as possible.  

Companies  supplying  both  intra-Community  goods  and  services  or  only  intra-
Community  services  experience  difficulties  in  gathering  complete  information 
to  create  the  recapitulative  statements.  Especially  the  addition  of  services  is 
viewed  as  a  higher  level  of  detail  to  be  provided  as  compared  to  before  1 
January 2010.  

The  case-study  companies  indicate  that  communications  with  tax  authorities 
have  increased.  As  more  supplies  (intra-Community  supplies of  services)  need 
to  be  included  in  more  frequent  recapitulative  statements  and  corrections  are 
also made more frequently, tax authorities tend to have more questions requiring 
follow-up by companies than before the implementation of the new legislation.  

Summarising  the  sentiments  expressed  by  the  case-study  companies,  three 
strands can be identified:  

– 

some  businesses  tend  to  perceive  the  regulatory  changes  as  having  a 
neutral impact on operations, with the notable exception of one-time costs 
related  to  updating/changing  their  system,  which  are  considered  a 
significant cost element;  

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– 

– 

other companies indicate a strong preference for the situation as it existed 
before  the  implementation  of  Article  263(1)  of  Directive  2006/112/EC, 
suggesting  it  has  led  to  important  new  cost  factors,  although  they  could 
not  specify  whether  these  costs  were  mainly  driven  by  the  fact  that 
services  are  now  to  be  included  or  by  the  fact  that  the  timeframe  for 
submission was reduced to 1 month;  

a number of companies see the advantages the new situation will have in 
the future, pointing inter alia to enhanced data quality and fewer incidents 
of tax fraud.  

3.3.3.  Potential impact of a more harmonised situation where Member States apply the 

same time frame without derogations and thresholds  

The  potential  impact  of  a  more  harmonised  situation  can  be  estimated  to  be 
positive from a qualitative point of view. Indeed companies indicated that they 
expect  harmonisation  across  European  Member  States  to  lower  the  costs 
incurred.  They  also  suggest  that  harmonising  the  time  frames  should  be 
accompanied  by  harmonising  the  filing  procedure  –  i.e.  a  move  towards 
mandatory  electronic  filing  in  all  Member  States  and,  mainly,  a  simple,  user-
friendly interface making monthly filing as easy as possible  

3.3.4.  Conclusion  

The  study  concluded  that  further  analysis  would  be  required  to  weigh  the 
additional  one-time  cost  and  the  recurring  cost  for  businesses  due  to  the  new 
VAT  legislation  against  the  aim  and  benefits  of  the  new  VAT  legislation, 
namely the reduction of the VAT gap through the quicker detection of fraud and 
decreasing the risk on VAT carrousels.  

Business  would  also  benefit  from  this  through  a  reduced  risk  for  being 
unwillingly  involved  in  and  being  held  liable  for  VAT  fraud.  As  such  it  may 
also help to reduce VAT fraud and unfair competition by fraudulent companies.  

Further analysis can be done on how the recurring cost can be decreased by e.g. 
harmonising the filing procedure through a single, user friendly interface for all 
Member States and/or through accepting XML files to be uploaded in the same 
format across all Member States.  

4. 

FINAL COMMENTS 

In general, Member States considered that is was too early to evaluate fully the 
impact  of  the  reduced  timeframe  for  submitting  recapitulative  statements.  The 
Commission recognises that Member States will need more time to adjust their 
risk analysis systems and benefit fully from this change in legislation. 

Nevertheless,  it  is  clear  at  this  stage  that  to  a  large  extent,  Member  States 
consider 
the 
recapitulative  statements  to  represent  a  real  benefit  for  their  ability  to  identify 
fraudulent  transactions  more  rapidly.  In  addition  to  the  quick  exchange  of 

the  quicker  availability  of 

information  contained 

the 

in 

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information  through  the  Eurofisc  network these new provisions allow Member 
States to target fraudsters quicker than before. 

On the other hand, the option allowing Member States to use different reporting 
periods is still considered as an obstacle to the measure achieving its full effect 
in the field of risk assessment and fraud prevention.  

From  a  business  perspective  it  is  clear  that  a  reduction  in  the  timeframe  for 
submitting  the  recapitulative  statement  leads  to  more  handling  costs  as  the 
number  of  statements  to  be  submitted  has  increased  considerably.  In  addition, 
this  has  lead  to  more  contacts  with  the  tax  administrations,  as  data  has  to  be 
corrected  or  verified  more  frequently.  Having  said  that,  the  fact  that  the 
information  must  now  be  provided  more  regularly  on  a  monthly  basis  means 
that its reliability should increase. 

As a general  conclusion, the Commission considers this report does not reveal 
sufficient elements which would at this stage justify a proposal for amending the 
current  provisions.  However,  if  new  elements  would  arise  in  future  the 
Commission may reconsider amending these provisions. 

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Annex 

Figure 1: Application of options 

1. No derogation from the monthly 
recapitulative statement 

2. Derogation from the monthly recapitulative statement 

2a. Derogation optional 

2b. Derogation mandatory 

Before(1) and as 
from 1 January 
2010 

As from 1 
January 2010 

Before(1) and as 
from 1 January 
2010 

As from 1 
January 2010 

Before(1) and as 
from 1 January 
2010 

As from January 
2010 

Bulgaria 
France 

Cyprus 
Estonia 
Finland 
Greece 
Latvia 
Lithuania 
Romania 
Slovenia 

Austria 
Ireland 
Italy 

Belgium 
Denmark 
Germany 
Luxembourg 
Malta 
Poland 
Sweden 
The Netherlands
United 
Kingdom 

Portugal 

Czech Republic 
Hungary 
Slovakia 
Spain 

(1) Only for goods 

Figure 2: separate and combined recapitulative statements 

1. Separate recapitulative 
statement 

France 
Luxembourg 

2. Combined recapitulative statement 

2a. Periodicity aligned 
Italy 
Latvia 
Lithuania 
Malta 
Poland 
Portugal 
Romania 
Slovakia 
Slovenia 
Spain 

Austria 
Belgium 
Bulgaria 
Cyprus 
Czech Republic 
Denmark 
Estonia 
Finland 
Greece 
Hungary 
Sweden 

2b. Different periodicity 

Germany 
Ireland 
The Netherlands 
United Kingdom 

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Figure 3: Paper and/or electronic filing of the recapitulative statements 

1. Mandatory 

1a. Before and as 
from 1 January 
2010 

1b. As from 1 
January 2010 
onwards 

Electronic filing 

2. Mandatory but exceptions apply 
2b. As from 1 
January 2010 
onwards 

2a. Before and as 
from 1 January 
2010 

3. Optional 

Bulgaria 
Portugal 
Slovenia 
Spain 

Cyprus(1) 
Czech Republic 
Denmark(1) 
Hungary 
Italy 
Latvia(2) 
Malta 
Slovakia 

Austria 
Belgium 
France 
Germany 
Greece 
Ireland 
The Netherlands 

Finland 
Luxembourg 
Romania 

Estonia 
Lithuania 
Poland 
Sweden 
United Kingdom 

(1) Corrective statements can be submitted on paper; (2) On and after 1 January 2011 

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