REPORT FROM THE COMMISSION TO THE COUNCIL on Article 6 of Council Directive 2008/8/EC
Date: 2014-06-26
Institutions: European Commission
Subjects: VAT, administrative cooperation, broadcasting, domestic market, exchange of information, provision of services, telecommunications, television













EUR-Lex - 52014DC0380 - EN











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52014DC0380

REPORT FROM THE COMMISSION TO THE COUNCIL on Article 6 of Council Directive 2008/8/EC /* COM/2014/0380 final */









REPORT FROM THE COMMISSION TO THE COUNCIL
on Article 6 of Council Directive
2008/8/EC

1.                      
Background

Council Directive 2008/8/EC of
12 February 2008 amending Directive 2006/112/EC[1] as regards the place of
supply of services[2]
was adopted as part of the ‘VAT Package’ with a view to ensuring the proper
functioning of the internal market. It recognised that the place of taxation for
all supplies of services should, in principle, be the place where actual
consumption takes place. However, it also recognised that it would not be
possible at that moment to apply that principle in all cases, because of the
administrative burden and practical issues it could create for supplies to
final consumers (B2C transactions). Therefore, it was decided to limit taxation
at the place of consumption to certain sectors.
It was decided at the same time to set up a
single electronic portal to allow for the business‑friendly
implementation of the new rules. Council Regulation (EU) No 143/2008[3] therefore introduced
the necessary mechanisms for the introduction of this ‘one‑stop shop’.

2.                      
Scope of the report

Article 6 of Directive 2008/8/EC
provides that ‘the Commission shall, by 31 December 2014, submit a report
on the feasibility of applying efficiently the rule laid down in Article 5
for the supply of telecommunications services, radio and television
broadcasting services and electronically supplied services to non-taxable
persons and on the question whether that rule still corresponds to the general
policy at that time concerning the place of supply of services’.
Article 58 of the VAT Directive, as
replaced by Article 5 of Directive 2008/8/EC, provides that, as of
1 January 2015, all telecommunications, broadcasting and electronic
services provided to a non-taxable person will be taxable at the place where
the customer is established, has his/her permanent address or usually resides. This
reflects the principle of taxation at the place of
consumption.
Further provisions under Article 5 of Directive 2008/8/EC require a special scheme to be
set up to enable businesses engaging in activities in Member States where they
are not established to have a single point of electronic contact for VAT
identification, declaration and payment purposes. This scheme requires the use
of an electronic interface, referred to as a ‘mini one-stop shop’ (MOSS).
Since the amendment of the VAT Directive by
Directive 2008/8/EC entails fundamental changes for economic operators in the
telecommunications, broadcasting and electronic service sectors and is
generally aimed at redesigning the functioning of the VAT system, a series of
legislative initiatives and practical measures were required.
The relevant action has been taken by the
Commission’s legal and technical IT services. Member States and representatives
of the business sectors concerned were closely involved to ensure that this
process addressed the challenges faced by all stakeholders.
A crucial milestone for the effective
implementation of the new rules as of 1 January 2015 is the smooth and timely setting‑up of the MOSS
which will allow businesses and Member States to interact in a simpler, faster
and more efficient way.  
All the necessary legislation in this
respect was adopted by the Council by the end of 2013. In order to provide
further guidance to stakeholders, guidelines and explanatory notes on the new
rules were published in the first half of 2014. These were accompanied by a comprehensive
communication plan to inform businesses in Europe and around the world about
the functioning of the new system.
This report will therefore focus on the
action taken to ensure the proper and efficient implementation of the new rules
as of 1 January 2015.

3.                      
Action taken to ensure efficient implementation

The preparation for the entry into force of
the new rules started six years ago, immediately after the adoption of
Directive 2008/8/EC.
Since then, many steps have been taken to
strengthen communication between national authorities, to reach a uniform
understanding of the content of the new rules and to reach a common position on
how they should be implemented and applied by Member States.
In order to secure coherent and uniform
application of the rules, the Commission has worked intensively with Member
States to exchange points of view and search together for common and feasible
solutions to the technical questions linked to this important reform.
The action taken to ensure efficient
implementation covers five main areas:

 Preparing and
     adopting the relevant legal framework;
 Providing for
     common understanding on the application of the new place-of-supply rules
     and on related obligations (MOSS);
 Ensuring the IT
     implementation of the MOSS;
 Clarifying the
     audit approach in the framework of the MOSS; and
 Informing and
     raising awareness among stakeholders.
3.1.                
Adopting the relevant legal framework

The efficient implementation of the new
rules on the place of supply of telecommunications, broadcasting and electronic
services provided to non-taxable persons required the development of a sound
legal framework clarifying the concepts referred to in Article 5 of Directive 2008/8/EC and allowing
for the development of an electronic interface simplifying the compliance
obligations of the economic operators.
The following acts were proposed by the
Commission and subsequently adopted by the competent institutions:
·        
Council Regulation (EU) No 967/2012 of
9 October 2012 amending Implementing Regulation (EU) No 282/2011 as
regards the special schemes for non-established taxable persons supplying
telecommunications services, broadcasting services or electronic services to
non-taxable persons[4]. This lists the main obligations of taxable persons under the
special schemes and regulates issues such as registration, deregistration and
exclusions;
·        
Council Implementing Regulation (EU)
No 1042/2013 of 7 October 2013 amending Implementing Regulation (EU)
No 282/2011 as regards the place of supply of services[5]. This deals with the place-of-supply rules and clarifies how they
should be applied; and
·        
Commission Implementing Regulation (EU)
No 815/2012 of 13 September 2012 laying down detailed rules for the
application of Council Regulation (EU) No 904/2010, as regards special
schemes for non-established taxable persons supplying telecommunications,
broadcasting or electronic services to non-taxable persons[6]. This standardises declarations and exchanges of data between
Member States to ensure the full interoperability of the MOSS.
Great care was taken to avoid the problems of
interoperability that have been faced in relation to the implementation of the procedure
for the refunding of VAT incurred by non-established taxable persons, as provided
for under the VAT Refund Directive[7].
The use of implementing acts has been instrumental in enabling the Commission
to introduce standardised procedures.

3.2.                
Reaching common understanding on the application
of the new rules

Possible difficulties arising from the
application of the new rules on the place of supply of services were first
examined in a seminar (financed under the Fiscalis 2013 Programme) in Malta in November 2008.
The results of the discussions showed that,
with regard to telecommunications, broadcasting and electronic services, input
from business stakeholders would be needed in order to correctly identify and
address the practical challenges arising from the implementation of the new
taxation principle.
Taking this into consideration, a second Fiscalis
seminar was organised in Luxembourg in March 2012, where not only Member States but also representatives from the sectors concerned
were invited to share their expertise. The outcome of this seminar was an
important step in the process of preparing the Commission’s proposal of
December 2012,[8] which the Council adopted, as Implementing
Regulation (EU) No 1042/2013 (see point 3.1.).
During the discussions on the Implementing
Regulation in the Council, it was widely recognised that detailed explanatory
notes with more detailed information on the practical application of the new
provisions would be useful for business and Member States. As a result, the Commission services prepared draft explanatory notes on the VAT changes on the place‑of‑supply rules for
telecommunications, broadcasting and electronic services that enter into force
in 2015. These focus in particular on the provisions in Implementing Regulation
(EU) No 1042/2013 and are not legally binding.
In November 2013, the Commission convened a
Fiscalis workshop for Member States and business representatives in the Netherlands to discuss the draft explanatory notes. Following substantive and fruitful discussion
with business and Member State representatives at the workshop and in subsequent
meetings in Brussels, the notes were finalised.  
The document was made public[9] well in advance of the date of entry into force of the new rules, in
April 2014, so as to help tax authorities and businesses adapt their internal
processes, commercial and business tools to the new system.
It is considered that sufficient measures have
now been taken to provide stakeholders with a clear view on how the forthcoming
changes are to be applied, to ensure legal certainty and to limit the
administrative burden on tax administrations and economic operators in the
period needed to adapt to the new rules.
This collaborative work on a common
understanding on the new place-of-supply rules should prevent divergent
interpretations of the applicable legal framework and limit the risks of double
taxation.

3.3.                
Consequences of the new rules

Until 31 December 2014, services supplied by
suppliers established within the EU to non‑taxable EU persons are, as a
rule, to be taxed at the place where the supplier is established.
From 1 January 2015, all telecommunications,
broadcasting and electronic services will become taxable at the place where the
customer belongs (unless the rule on effective use and enjoyment applies), even
if the customer is a non-taxable person.
Therefore, for these services supplied to non-taxable
persons, EU and non-EU suppliers will have had to register for VAT purposes and
comply with the relevant obligations of the Member State where the customer is
established, has his/her permanent address or usually resides.
However, in order to relieve economic
operators of the obligation to register for VAT purposes in every Member State in
which they supply such services to non-taxable persons, to facilitate compliance
and to simplify business operations, the legislation provides that taxable
persons can make use of a special scheme allowing them to be identified for VAT
purposes in one Member State only instead of having to register in every Member
State of consumption.
This special scheme relies on an electronic
interface (the MOSS), the development of which represents a crucial milestone
but also a significant challenge that has required the Commission, Member States and business representatives to work in close cooperation.
Hence, special attention has been given to the
importance of starting to prepare for the implementation of the electronic
interface in all Member States well in advance in order to ensure good
operational results when the new rules enter into force. In addition, Member
States have been made aware in various fora of the need to allocate sufficient
resources to this project.

3.4.                
Facilitating business compliance and revenue
collection through a MOSS

The MOSS must be fully operational for the entry into
force of the new rules on the place of supply on 1 January 2015. However,
traders will be allowed to register for the special scheme as of 1 October
2014.
As indicated in the preamble of
Implementing Regulation (EU) No 815/2012, the Member States are primarily
responsible for the technical implementation of the electronic interface to be
used as a MOSS.
Given the compliance implications of the
new rules, the timely implementation and efficient functioning of the system is
of crucial importance for suppliers engaging in activities in Member States in
which they are not established.
To achieve this objective, the Commission
has taken consistent and timely action to help ensure that the electronic
interface is developed in a uniform manner in all Member States. Two workshops
were organised and financed under the Fiscalis 2013 Programme. The first,
dedicated to implementing the MOSS, was held in Malmö in June 2011 and paved
the way for the work to prepare implementing rules on the functioning of the
scheme and the standardisation of return and data exchanges. The second,
dedicated to preparing MOSS guidelines, was held in May 2013 in Cyprus.
The guide to the MOSS, aimed at ensuring a
better understanding of the changes that will enter into force in January 2015,
was published on the Commission’s website[10]
at the end of 2013. It provides practical guidance as to how the MOSS‑related
legislation and specifications are to be applied.
The guide was prepared by the Commission
services in order to meet the legitimate expectations, need for clarity and
legal certainty of stakeholders affected by the entry into force of the new
rules. It was discussed by the Standing Committee on Administrative Cooperation
(SCAC)[11] in October 2013 and is not legally binding.

3.5.                
IT implementation of the MOSS

The Commission is also coordinating the IT
implementation of the MOSS in all Member States. The functional and technical
specifications of the system (i.e. precise details of how the Member States
should implement their IT systems) were adopted by the SCAC in autumn 2012 and,
since then, the Member States have advanced well in the development of the
necessary IT framework.
Under the overall MOSS project, the
Commission services were responsible for producing the specifications,
developing the system, conducting conformity tests, deploying the system in
production and coordinating Member States’ activities. The scope of intervention
by the Commission was limited to the common domain, while business processes
were defined separately at national level.
A lot of work has been done in this area, in
particular through regular IT workshops with all Member States. Moreover,
bilateral monitoring missions were organised by Commission IT specialists in
all Member States in order to carry out an individual assessment of the
difficulties encountered in some particular cases and search for efficient
solutions.
It is of crucial importance that all Member
States continue to devote the necessary resources to this work in order to be
ready on time. During the months remaining before the entry
into force of the new rules, the state of play in each individual Member State will continue to be closely monitored by the Commission IT specialists.
If the electronic system is not ready or
correctly functioning in one Member State on 1 January 2015, the suppliers from that Member State will need to
continue to register and declare VAT, under the general rules, in all Member States where they supply telecommunications, broadcasting or electronic services to
non-taxable persons.
A question that emerges from this
experience, for the future, is whether it still makes sense, at a time of
fiscal consolidation, for such IT systems to be developed at national level, by
each administration, or whether it would be preferable to have an EU system or
at least Member States pooling their resources to develop certain modules in
common.

3.6.                
Audit of the MOSS

EU legislation on the MOSS provides for controls
and audits to be carried out by the Member State of consumption, although
several tools are available to improve the coordination of audits between
Member States.
Such audits may involve up to 27 different
foreign administrations (in the case of EU companies, or 28 in the case of
non-EU companies) auditing the same company without any coordination, leading
to information requests in multiple languages. Not only could this place disproportionate
administrative burdens on the e-business industry, but it could also jeopardise
the efficiency of the audits themselves and the level of voluntary compliance
(especially on the part of non-EU companies). Furthermore, the lack of a
coordinated approach will tie up auditing resources within tax administrations,
which could have an adverse impact on ‘auditing yield’ within Member States.  
A Fiscalis Project Group produced a set of
recommendations on the audit of the MOSS to address these issues. These were
discussed at an ‘Audit and control of the VAT mini one‑stop shop (MOSS)’ workshop
in Sweden in September 2013. The recommendations promote the principle whereby the
  Member State of identification coordinates audits, without prejudice to the
competence of the Member States of consumption to operate tax assessments in
line with the existing legislation.
The Project Group’s report recommended that
the Member State of identification, i.e. the Member State in which the
business is established or which it has chosen as a main contact authority,
will take on audit and control functions on behalf of the Member States of consumption. 

However, although a very large majority of
Member States strongly supported this work at a High‑Level Working Party
in the Council, as well as in the competent committee, not all Member States have
agreed to implement the recommendations.
The Commission services will publish on their
website the recommendations that are of interest for businesses[12] and consider that all
Member States should apply them in order to ensure maximum efficiency and
minimise the burden on businesses.

3.7.                
Communication and awareness-raising

An important component of the preparatory
work for the entry into force of the new place‑of‑supply rules is
the need to provide businesses and national tax administrations with sufficient
information on the scope and impact of the forthcoming changes.
The Commission has therefore decided to set
up an EU web portal dedicated to the implementation of the new rules. This
could form the ‘embryo’ of a broader web portal for EU VAT issues.
Since the reform will have implications not
only for European but also for world-wide operators, the guide to the MOSS and
the explanatory notes on the new place-of-supply rules will be available on the
web portal in Japanese, Russian and Chinese, as well as all the official EU
languages.
Further information on specific Member State rules that are relevant for businesses using the MOSS will be uploaded on this
EU web portal before the end of 2014, together with links to the national web
portals. This data will reflect existing specific requirements in the Member
States, notably with regard to invoicing obligations, use and enjoyment rules,
use of certain exemptions, etc. It is important to note that certain aspects of
national legislation will continue to apply in the context of the MOSS.
The objective of the web portal is to
facilitate the activity of businesses operating in different Member States by
providing them with a summary database, allowing them easily to obtain
information on applicable compliance obligations in the EU and thereby to reduce
compliance costs.
Also, a specific communication plan has
been put in place more broadly to reach stakeholders established in third
countries who may be affected by the new place-of-supply rules. Conferences are
being organised in order to raise awareness and understanding of the new rules.
In particular, a presentation was given to participants at the 2nd meeting of the OECD Global Forum on VAT in Tokyo, on 17-18 April 2014.[13] Events taking place in
the course of 2014 include conferences in Luxembourg on 15 May, in the United Kingdom on 2 June, in Poland on 9 September and in the United States later in September. Other events might be organised at a later stage.

4.                      
Feasibility assessment
4.1.                
Consistency of the new rules with the general
policy on the place of supply of services

Six years after the adoption of Directive
2008/8/EC, the new rules on the place of supply of telecommunications,
broadcasting and electronic services are still fully in line with the general
policy pursued with regard to the future of VAT.
On 6 December 2011, the Commission
adopted a Communication on the future of VAT[14]
in which it presented the fundamental characteristics of the reshaped VAT
system that should replace the current transitional arrangements, and identified
priority actions for the way forward.
The Communication acknowledged that the
objective of establishing a definitive VAT system based on the principle of
taxation in the country of origin is unachievable and should thus be abandoned
in favour of a system based on an alternative destination-based concept.
According to this new approach, the future
VAT system should be based on the principle that the place of supply is
situated in the Member State where consumption takes place, as required by the
new rules on the place of supply of telecommunications, broadcasting and electronic services coming into
force on 1 January 2015.
The fact that the Council endorsed this
Communication (in conclusions adopted on 15 May 2012) further shows
that the rule laid down in Article 5 of Directive 2008/8/EC not only
complies with general policy in the area of indirect taxation, but also
expresses its main future orientation.
This is also illustrated by the importance
that the Commission has assigned to the timely implementation of the MOSS. This
is a priority that has also received the full support of the Council.
In addition, it should be stressed that
this rule is fully consistent with the policy lines currently under discussion
at international level.
Under the OECD principles on the taxation
of e-commerce, as agreed in 1998 in Ottawa,[15]
consumption taxes (such as VAT) should result in taxation at the place where
consumption takes place. Those principles underlie the VAT/GST guidelines for
B2C services currently being developed by the OECD.
Moreover, the application of the
destination principle provides a basis for a sustainable solution to the
challenges raised by the development of the digital economy, as it ensures a
level playing field for operators providing goods and services from a remote
location. Therefore, it is also consistent with the line taken by the Commission’s
High‑Level Expert Group on Taxation of the Digital Economy and with the OECD
work on base erosion and profit shifting (BEPS).

4.2.                
Efficient implementation of the new rules by
1 January 2015

The introduction of the new rules on the
place of supply of telecommunications, broadcasting and
electronic services represents a major change in the current rules of the EU
VAT system. Its preparation has raised a number of challenges, both legal and
technical.
However, thanks to the numerous measures taken
years ahead of the deadline and to the fruitful cooperation with Member States and private‑sector stakeholders, a sound framework has been put into
place for consistent, efficient and timely implementation.
The Commission has taken the necessary action
to ensure that there is a sound legal framework in place, together with
practical and detailed guidance for businesses and Member States. It has also supported
and monitored Member States’ efforts to prepare for the technical
implementation of the electronic interface so as to allow proper functioning of
the MOSS.
Additional initiatives have been carried
out in order to raise awareness, inform the stakeholders affected by the new
rules and issue guidelines to allow their smooth implementation.
The Commission therefore concludes that
efficient application of the new rule on the place of telecommunications, broadcasting and electronic services to
non-taxable persons as of 1 January 2015 is feasible.
Until that date and after the entry into
force of the new arrangements, the Commission will continue to monitor Member
States’ progress in implementing the MOSS, which should constitute a major step
towards the simpler and more effective functioning of the internal market.

5.                      
Conclusions

As regards further steps to be taken before
the entry into force of the new rules on the place of supply of
telecommunications, broadcasting and electronic services provided to
non-taxable persons, the Commission calls on the Member States to accept full
accountability for the technical preparations and be ready for the
implementation of the MOSS.
Since all necessary action incumbent on the
Commission has been taken in due time, Member States should bring the project
to a successful conclusion and ensure that the new rules will apply efficiently
as of 1 January 2015.
In order to ensure a smooth transition to
the new rules, the Commission considers that a pragmatic approach should
prevail with regard to the transitional measures that Member States will
implement. These should ensure appropriate taxation while avoiding any possible
risks of double taxation. In this respect, the guideline agreed almost
unanimously by the VAT Committee[16]
should be the ‘line to take’ for all Member States.
Moreover, Article 221 of the VAT Directive
provides that Member States may impose on taxable suppliers an obligation to
issue an invoice[17]
for supplies made to non-taxable persons (B2C transactions). However, such
obligation can be burdensome for operators trading in different Member States. Therefore,
in order to further simplify the compliance of economic operators, the
Commission considers that Member States should not require businesses to issue
an invoice in B2C transactions covered by the MOSS.
Finally, the Commission notes that many
businesses are very concerned about the way in which possible differences between
Member States on the taxation of these services may be resolved in the future:
they fear that different VAT administrations will present them with tax demands
for the same service, with no procedure or mechanism to resolve disputes
between Member States. The Commission shares the concern as to the absence of
such a procedure or mechanism. The current legislative
framework provides no formal means of addressing such situations and the
Commission has been given no power to solve double taxation issues. Therefore, this
competence lies fully in the hands of the Member States.
The Commission considers it necessary that
a mechanism to resolve double taxation situations be put in place at European
level. Given the reluctance of Member States in the past to support such
initiatives, it urges the Member States to establish an easily accessible
contact point and to communicate details to the Commission services so that a
comprehensive list can be published on its website.[18] This would be a first port
of call in the search for solutions to cases of double taxation due to
divergent assessments by national tax administrations.

6.                      
Recommendations on the way forward

The Commission calls on Member States to:
·        
take all relevant actions to set up the
necessary IT infrastructure in due time;
·        
fully implement the audit guidelines;
·        
refrain from the option to require an invoice on
B2C supplies covered by the new place‑of‑supply rules; and
·        
designate an easily
accessible contact point for double taxation problems.
[1]     Council Directive 2006/112/EC of 28 November 2006 on the common
system of value added tax (the ‘VAT Directive’), (OJ L 347, 11.12.2006, p.1).
[2]     OJ L 44, 20.2.2008, p. 11.
[3]     Council Regulation (EU) No 143/2008 of 12 February 2008
amending Regulation (EC) No 1798/2003 as regards the introduction of
administrative cooperation and the exchange of information concerning the rules
relating to the place of supply of services, the special schemes and the refund
procedure for value added tax (OJ L 44, 20.2.2008, p. 1).
Regulation (EC) No 1798/2003 has since been replaced by Council Regulation (EU) No 904/2010 of
7 October 2010 on administrative cooperation and combating fraud in the
field of value added tax (recast) (OJ L 268, 12.10.2010. p. 1).
[4]    OJ L 290, 20.10.2012, p.1.
[5]    OJ L 284, 26.10.2013, p.1.
[6]    OJ L 294, 14.09.2012, p.3.
[7]     Council Directive 2008/9/EC of 12 February 2008 laying
down detailed rules for the refund of value added tax, provided for in
Directive 2006/112/EC, to taxable persons not established in the Member State
of refund but established in another Member State (OJ L 44,
20.2.2008, p. 23).
[8]     COM(2012) 763 final.
[9]     Telecommunications, broadcasting
& electronic services — European Commission : http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm#explanatory_notes
[10]    Telecommunications, broadcasting
& electronic services — European Commission : http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm#one_stop

[11]    This Committee is set up under Article 58 of Regulation
(EU) No 904/2010.
[12]    Telecommunications, broadcasting
& electronic services — European Commission : http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm
[13]    http://www.oecd.org/tax/consumption/.
[14]    See Communication from the Commission to the European
Parliament, the Council and the European Economic and Social Committee on The
future of VAT — Towards a simpler, more robust and efficient VAT system
tailored to the single market — COM(2011) 851 final.
[15]    http://www.oecd.org/ctp/consumption/Taxation%20and%20eCommerce%202001.pdf.
[16]    See 100th meeting of the VAT Committee, Working Paper
No 797 FINAL:     http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/key_documents/vat_committee/guidelines-vat-committee-meetings_en.pdf.
[17]    For the content of an invoice within the meaning of the VAT
legislation, see Article 226 of the VAT Directive.
[18]    http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm