REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Eighth report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures
Date: 2017-12-18
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, VAT, VAT resource, information technology, tax authorities, tax collection, tax rebate, tax reform

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 18.12.2017  COM(2017) 780 final  REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Eighth report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures  
 
 
Table of Contents 

1. 

2. 

3. 

Introduction .................................................................................................................. 3 

The importance of VAT as an EU revenue .................................................................. 3 

Main findings ............................................................................................................... 4 

3.1. 

General remarks ........................................................................................................... 4 

3.1.1.  Tax administration organisation ................................................................................... 4 

3.1.2.  Digitalisation and Information Technology (IT) ......................................................... 5 

3.1.3.  Analysing the VAT Gap .............................................................................................. 6 

3.2. 

VAT registration and de-registration ........................................................................... 7 

3.2.1.  VAT registration .......................................................................................................... 7 

3.2.2.  VAT de-registration ................................................................................................... 10 

3.2.3.  VIES registration and de-registration ......................................................................... 10 

3.3. 

VAT filing and payment ............................................................................................ 11 

3.3.1.  Filing .......................................................................................................................... 11 

3.3.2.  Payment ...................................................................................................................... 12 

3.4. 

3.5. 

3.6. 

4. 

5. 

Recovery of VAT debts ............................................................................................. 13 

VAT refund ................................................................................................................ 14 

VAT audit and investigation ...................................................................................... 15 

Implementation of recommendations from the Seventh Article 12 Report and Staff 
Working Document .................................................................................................... 16 

Towards better Tax (VAT) Administration by cooperation ...................................... 18 

1 

 
 
 
 
 
List of Tables 

Table 1: EU’s total revenue from the VAT own resource in the reporting period (2013-2015) 3 

Table 2: Evolution of VAT returns in EU Member States for the period 2013-2015 .............. 12 

List of Figures 

Figure 1: VAT Gap in EU 2011-2015 (in percent of VAT total liability (VTTL) and in EUR 
billion) ........................................................................................................................................ 4 

Figure 2: Evolution of VAT registration requests in 21 EU Member States (2013-2015) ........ 7 

Figure  3:  Availability  of  main  features  in  registration  procedures  in  28  EU  Member  States 
(2016) ......................................................................................................................................... 8 

Figure  4:  Time  needed  for  obtaining  a  VAT  and  a  VIES  number  in  22  EU  Member  States 
(2013-2015) .............................................................................................................................. 10 

Figure 5: Possibility to file electronically in 28 EU Member States (2013-2015) .................. 11 

Figure 6: Electronic filing rate in 28 EU Member States (2013-2015) ................................... 11 

Figure 7: Possibility for VAT e-Payments in 28 Member States (2013-2015) ........................ 12 

Figure 8: Late payment reminders in 28 Member States (2013-2015) .................................... 12 

Figure  9:    Recovery  of  VAT  debts  -  overview  of  main  tools  and  practices  used  in  28  EU 
Member States (2016) .............................................................................................................. 13 

Figure 10: VAT collection and VAT assessed after audits in 22 EU Member States (2013  – 
2015) ......................................................................................................................................... 15 

Figure 11: Implementation rate of the recommendations per section for 27 Member States . 17 

Figure 12: Overall implementation rate of previous recommendations .................................. 17 

List of Recommendations 

Recommendation 1: Tax administration organisation ............................................................... 5 

Recommendation 2: Digitalisation and IT ................................................................................. 6 

Recommendation 3: VAT Gap calculation and analysis ........................................................... 7 

Recommendation 4: VAT registration for foreign taxpayers ..................................................... 8 

Recommendation 5: VAT identification numbers ..................................................................... 9 

Recommendation 6: Validity of VAT and VIES registration .................................................... 9 

Recommendation 7: Post registration controls ......................................................................... 11 

Recommendation 8: Post registration controls ......................................................................... 14 

Recommendation 9: Late VAT refund payments .................................................................... 14 

Recommendation 10: Audit and compliance strategy .............................................................. 16 

Recommendation 11: Customs 42 procedure ........................................................................... 18 

2 

 
 
1. 

INTRODUCTION 

Article  12  of  Council  Regulation  1553/89  on  the  definitive  uniform  arrangements  for  the 
collection of own resources accruing from VAT requires the Commission to submit a report 
every three years to the European Parliament and the Council on the procedures applied in the 
Member States for registering taxable persons and determining and collecting VAT, as well as 
on the modalities and results of their VAT control systems.  

The present eighth report covers the developments in the period 2013 to 2016. The numerical 
data  refer  to  the  period  between  2013  and  2015.  For  the  preparation  of  this  report,  the 
Commission  collected  information  from  all  EU  Member  States  tax  authorities  through  a 
questionnaire. Additionally, in order to obtain more precise information and clarify some of 
the answers to the questionnaire, the Commission services visited ten Member States.  

Chapter 2 of the report explains the importance of VAT and the challenges stemming from the 
VAT gap for tax administrations. The main findings are presented in chapter 3 of this report, 
following the core phases of VAT administration: VAT registration and deregistration, VAT 
filing and payment, recovery of VAT debts, VAT refund, VAT audit and investigation. The 
findings  reveal  certain  trends  in  VAT  administration  and  lead  to  recommendations  so  as  to 
complement  the  ongoing  modernisation  of  the  EU  VAT  System.  The  recommendations  are 
presented  with  the  relevant  findings.  Chapter  3  reports  on  the  implementation  of 
recommendations made in the previous Article 12 report that encompassed suggestions for tax 
administration  improvements.  Finally,  a  strategic  view  on  the  VAT  administration  is 
highlighted in chapter 4.  

This  report  is  based  on  information  received  from  national  tax  administrations.  The  quality 
and  accuracy  of  the  data  varied  significantly.  Furthermore,  since  tax  administrations  are 
increasingly  organised  around  integrated  processes  for  all  types  of  taxes,  it  was  sometimes 
difficult  to  isolate  specific  VAT  issues  from  the  wider  tax  administration  structure.  Finally, 
social  political,  geographical,  economic  and  historical  specificities  influencing  the  structure 
and organization of a national VAT collection and control system are beyond the scope of this 
report. 

2. 

THE IMPORTANCE OF VAT AS AN EU REVENUE  

VAT revenues are an important source of income for the Member States' and the EU budgets. 
The  total  VAT  based  own  resource  revenue  for  the  EU  budget  increased  from  EUR  14.019 
billion in 2013 to EUR 18.087 billion in 2015. This corresponds to the relative share of VAT 
own resource revenue paid by the Member States in total own resources increasing by three 
percentage points from 9.4 percent in 2013 to 12.4 percent in 2015.  

Table 1: EU’s total revenue from the VAT own resource in the reporting period (2013-2015) 

 VAT OWN RESOURCE 
(EUR million) 

Total EU VAT revenue 

Percentage of EU's total 
revenue 

2013 

2014 

2015 

14 019 

17 667 

18 087 

9.4 % 

12.3% 

12.4 % 

Source: EU budget (DG BUDG Financial reports 2013, 2014, 2015) 

3 

 
However, the size of the VAT Gap, that is the difference between the amounts of total VAT 
revenue collected and the theoretical amounts that are expected to be collected, is significant 
in the EU. In the period 2011-2015, the VAT Gap first increased, reaching its top in 2013, and 
then decreased, reaching its lowest percentage in 2015 (around 152 billion euro). 

Figure 1: VAT Gap in EU 2011-2015 (in percent of VAT total liability (VTTL) and in EUR billion) 

15%

15%

14%

14%

13%

13%

12%

VAT Gap (percent of VTTL) 

14,73% 

14,78% 

13,98% 

14,09% 

165

160

155

150

145

140

135

12,77% 

VAT Gap (EUR billion) 
161,99 

160,22 

159,53 

146,98 

151,53 

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

Source: Study and Reports on the VAT Gap in the EU-28 Member States: 2017 Final Report1 

(%)

EUR billion

The  collection  of  VAT  is  among  others  impacted  by  the  efficiency  and  effectiveness  of  tax 
administration processes and procedures. Consequently, the performance of tax administration 
influences  the  amount  of  VAT  own  resources  due  by  Member  States  to  the  EU.  Therefore, 
managing the VAT system is a critical part of tax administration.2 

3. 

MAIN FINDINGS 

3.1. 

General remarks 

3.1.1.  Tax administration organisation 

In the period 2013 – 2016, several Member States have reformed or are in the process of 
reforming (parts of) their tax administration. The trend of changing from a tax-type based 
administration  towards  a  tax  administration  organised  around  types  of  taxpayers  (large 
companies,  SME's  and  private  persons)  or  functions  (registration,  filing,  payment,  etc.)  is 
continuing. Therefore, instead of separate processes for Value Added Tax (VAT), Corporate 
Income Tax, Personal Income Tax etc., these processes are integrated into a single one for all 
taxes. Hence, measuring the effectiveness of VAT procedures as mentioned in Article 12 of 
the Regulation implies an assessment of the main functions of a tax administration regardless 
of the type of tax. 

Tax authorities are facing increasing challenges that are often perceived as risks, such as the 
complexity  and  innovations  in  business  models  (in  particular  in  the  field  of  the  so-called 
collaborative  economy),  new  financial  products,  large  numbers  of  taxable  persons  and 
services, digitalisation of the economy and the booming of e-commerce. At the same time, tax 
administrations  are  requested  to  improve  their  efficiency  and  accountability  while  reducing 

1  
2  

https://ec.europa.eu/taxation_customs/sites/taxation/files/study_and_reports_on_the_vat_gap_2017.pdf  
Tax administration can be described as a set of measures, procedures and tools, which a Tax Authority 
uses to administer and manage the tax policy decisions, with the aim of collecting the correct amount of 
revenue according to the laws in the most effective way and at the least administrative costs. 

4 

 
 
 
                                                            
budgets  and  staff  recruitments.  This  forces  tax  administrations  to  look  for  new  and  flexible 
actions and approaches to collect taxes, including VAT.  

To create synergies and cut costs, several Member States merged the tax administration with 
the  customs  administration  and/or  financial  investigation  departments.  Furthermore,  all  tax 
authorities are using to a greater or lesser extent a risk-based approach when performing their 
core  tax  administration  functions.  Several  tax  administrations  have  created  a  dedicated  data 
analytics and risk management function responsible for the detection of risks and the design 
and  implementation  of  a  risk  management  strategy.  Others  have  incorporated  risk-based 
procedures in all or part of the core functions of tax administration in order to better allocate 
resources and be more efficient and effective. 

Moreover,  due  to  legislative  changes  (for  instance  the  introduction  of  the  Mini  One  Stop 
Shop3,  the  application  of  the  reverse  charge  mechanism  in  certain  sectors,  changes  in  VAT 
rates or the cash accounting scheme4), the VAT system had to be modified at national level.  

Recommendation 1: Tax administration organisation 

For  assessing  the  impact  of  changes  in  managing  the  VAT  system  (i.e.  reforms  in 
organisation,  processes  and  procedures),  Member  States  should  have  a  monitoring  and 
evaluation system in place to report on the efficiency and effectiveness of the measures taken.  

3.1.2.  Digitalisation and Information Technology (IT) 

Current  administrative  processes  are  characterised  by  digitalization  and  IT.  These 
developments  impact  the  relationship  between  taxpayers  and  tax  administrations:  they 
facilitate  the  fulfilment  of  taxpayers'  obligations  and  help  tax  authorities  in  detecting  and 
analysing  VAT  risks.  Due  to  a  need  for  more  revenues,  greater  efficiency  and  improved 
compliance in an environment of shrinking resources, tax authorities are increasingly relying 
on digital tax data gathering and analysis. It allows tax authorities to collect tax data in almost 
real time, in particular when the information can be collected directly from the taxpayer’s own 
systems. VAT is one of the first taxes to be fully digitized. E-services, taxpayer accounts, e-
invoicing, the use of national control statements5 are examples of these developments. 

In  the  reporting  period,  this  trend  towards  an  increasing  use  of  IT  is  clearly  identified, 
although  the  level  of  implementation  differs  between  the  Member  States.  Data  mining  and 
analysis  are  playing  a  growing  role  in  compliance  and  audit  initiatives.  Based  on  the  data 
received  from  taxpayers,  tax  authorities  are  better  equipped  to  uncover  complex  business 
relationships and fraudulent activities, which for instance trigger audits or stop the payment of 
refunds. 

3  

4  

5  

The Mini One Stop Shop legislation is in force as of 1 January 2015. It concerns the place of supply for 
telecommunication services, radio and television services and electronically supplied services. 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.  
The scheme allows taxpayers to account for VAT on the basis of received payments instead of issued 
invoices 
Control statements cover the VAT invoices, enabling the tax authorities to cross-check transactions   

5 

 
                                                            
The  use  of  data  analytics  for  compliance  purposes  is  expanding.  In  the  field  of  VAT, 
several  Member  States  have  taken  or  are  in  the  process  of  introducing  initiatives  to  collect 
information  on  invoice  level,  with  a  view  to  improving  the  transparency  of  transactions  in 
their  territory  or  are  gathering  data  about  movements  of  goods.  Whereas  IT  helps  tax 
administrations  in  gathering  more  and  more  data,  increasing  amounts  of  information  do  not 
necessarily  lead  to  a  better  risk  assessment:  too  much  information  could  even  hinder  the 
identification  of  relevant  data  and  result  in  less  compliance.  Therefore,  tax  administrations 
need to strike a proper balance between the need for information and its proper processing and 
analysing on the one hand, and the administrative burden put on businesses on the other hand.  

Furthermore,  tax  authorities  feel  constraints  when  it  comes  to  investing  in  IT.  Often,  IT 
systems (hardware and software) are costly and not always compatible with each other, which 
can  hamper  the  exchange  of  information  between  tax  authorities  and/or  with  other 
government bodies. Member States  may  benefit from  a closer cooperation  between  each 
other in order not to duplicate efforts and systems, cut IT-costs and gain mutual advantages by 
investing in compatible IT solutions.  

Recommendation 2: Digitalisation and IT 

As  digitalisation  and  IT  turned  into  critical  elements  of  tax  administration,  Member  States 
should carry on digitalizing and automating data and tasks. Subsequently, together with other 
Member States, they should explore ways how their domestic data could be best used in also 
helping other Member States. To this end, the ongoing Transaction Network Analysis (TNA) 
project6 could serve as useful point of reference. 

3.1.3.  Analysing the VAT Gap 

In  the  reporting  period  the  VAT  Gap  showed  a  slight  decrease  in  volume  as  well  as 
percentage  (see  figure  1).  Nevertheless,  at  individual  level  the  differences  in  the  VAT  Gap 
between  the  Member  States  are  still  significant  (ranging  from  0  percent  to  36.9  percent). 
Although  there  might  be  various  reasons  for  the  decrease  in  the  size  of  the  VAT  Gap,  for 
instance  improved  data  or  economic  growth,  the  reduction  might  be  related  to  better  tax 
administration as well. In the assessed years (2013-2016) many tax authorities have taken a 
number  of  sometimes  far-reaching  measures  aiming  at  reducing  the  VAT  Gap.7  Although 
there is no hard evidence of the impact of these measures on the size of the VAT Gap, it is 
likely  that  they  influenced  the  level  of  compliance  and  thus,  the  size  of  the  VAT  Gap.  In 
addition  to  the  VAT  Gap  report  published  by  the  Commission,  an  increasing  number  of 
Member States are calculating their own VAT Gap, and at a more detailed level, for instance 
by calculating the VAT Gap per economic sector or geographical area. 

Recommendation 3: VAT Gap calculation and analysis 

6  

7  

The purpose of the TNA-software is to apply a data mining technique to VAT-related data in order to 
rebuild fraudulent networks. This tool is to improve the current working practices of Eurofisc.   

Examples:  Bulgaria,  Estonia  and  Slovak  Republic  –  Domestic  control  statements;  Belgium  – 
Transaction network analysis for detection of VAT fraud. 

6 

 
                                                            
Member  States  should  invest  or  continue  investing  in  calculating  their  own  VAT  Gap  and 
analysing this gap in more detail.  

3.2. 

VAT registration and de-registration 

Member  States  must  have  in  place  a  tax  registration  system  that  identifies  their  VAT 
taxpayers8  and  must  store  the  relevant  data  on  intra-EU  taxable  transactions  in  the  VIES 
system9.  

3.2.1.  VAT registration 

An  efficient  registration  procedure  and  correct  attribution  of  VAT  identification  numbers 
strengthen  key  administrative  processes  associated  with  filing,  payment,  assessment, 
collection  and  dispute  resolution.  To  this  aim,  the  information  collected  at  the  moment  of 
registration and stored in the tax administration databases  should  be complete, accurate and 
up-to-date.  It  is  critical  that  tax  authorities  follow  the  registration  and  deregistration 
procedures  accurately,  since  non-performance  in  this  area  will  have  a  major  impact  on 
VAT collection in the other Member States. 

While  the  registration  process  needs  to  be  fast  in  order  not  to  hamper  taxpayers  in  doing 
business,  it  is  vital  to  avoid  that  VAT  identification  numbers  are  given  to  taxpayers  with 
fraudulent  intentions.  Therefore,  a  balanced  approach  between  rapidity  and  safekeeping  is 
important. 

Figure 2: Evolution of VAT registration requests in 21 EU Member States (2013-2015)10 

100%

80%

60%

40%

20%

0%

+0.78 % 

+0.92 % 

Legend: 

7
9
1
,
6
1
2
,
4

5
1
1
,
9
4
2
,
4

9
0
9
,
4
5
2
,
4

2.32 % 

2.33 % 

3.71 % 

2013

2014

2015

  VAT Registration Requests  

(total number) 

  VAT Registration Requests  

compared to 2013 
(evolution) 

  Refused registrations 

Source: Member States' answers to 2017 Questionnaire  

In the reporting period the overall number of registration requests for VAT purposes in the 21 
Member States in the graphic is more or less stable, while the number of deregistrations from 
the VIES system increased significantly in 2015. No specific reason for this increase has been 
identified. 

8  

9  

10  

Council  Directive  2006/112/EC  on  the  common  system  of  Value  Added  Tax,  28  November  2006, 
Article 214. 

VIES is the VAT Information Exchange System. The information available through VIES and the use 
of the system are regulated in Chapter V of Council Regulation (EU) No 904/2010. 

Data  is  available  only  for  21  out  of  28  Member  States  (no  data  sets  for  Austria,  Croatia,  Finland, 
France, Germany, Luxembourg and Sweden) 

7 

 
 
 
 
 
 
 
 
 
 
 
                                                            
 
 
 
 
Registration  procedures  are  in  place  in  all  the  Member  States.  "One-stop-shop"  registration 
facilities  are  available  in  some  countries.  Instead  of  registering  for  different  purposes  in 
several  offices  (for  instance  Chamber  of  Commerce,  Commercial  Court  and  tax  office) 
businesses  can  register  for  all  commitments  in  one  single  place.  This  implies  integrated 
databases and exchange of information between the relevant institutions.  

Figure  3:  Availability  of  main  features  in  registration  procedures  in  28  EU  Member  States 
(2016)  

VAT registration info 
for taxpayers is 
available 

In foreign languages 

Online VAT 
registration is possible 

Authenticity of VAT 
registration is verified 

Pre-VAT registration 
checks are in place 

IT assisted VAT and 
VIES registration 
system 

VIES post-registration 
verifications 

26 Member States 

23 Member States 

25 Member States 

26 Member States 

23 Member States 

28 Member States 

19 Member States 

Source: Member States' answers to 2017 Questionnaire  

In  line  with  the  trend  towards  better  services  to  taxpayers,  on-line  registration  is  also 
becoming a standard practice11.  

Information  about  registration  procedures  and  obligations  is  communicated  to  the  taxpayers 
mainly  via  the  tax  administration’s  website.  However,  still  in  some  Member  States  this 
information  is  not  available  or  accessible  in  a  foreign  language,  which  may  cause 
difficulties for non-established taxpayers to fulfil the registration conditions.  

Recommendation 4: VAT registration for foreign taxpayers 

Despite  the  recommendation  in  the  previous  report,  some  Member  States  should  still  invest 
more in assisting foreign taxpayers in fulfilling their VAT registration obligations. 

Member  States  have  different  numbering  practices  in  place  to  identify  taxpayers.  It 
varies  from  one  single  identification  number  for  all  taxes  including  VAT  to  different 
identification  numbers  for  VAT  and  other  taxes.  In  some  Member  States,  even  the  VIES 
registration number is different from the VAT identification number. This fragmentation of 
VAT identification practices may result in extra administrative burdens for businesses 
operating in different Member States. 

Recommendation 5: VAT identification numbers 

11  

In 25 Member States it is possible to register for VAT on-line (currently Croatia, Cyprus and Romania 
do not offer on-line VAT registration). 

8 

 
 
 
                                                            
With  a  view  of  reducing  this  administrative  burden,  Member  States  and  the  Commission 
should  reflect  on  the  allocation  of  VAT  identification  numbers  and  VIES  registration 
numbers. 

In  order  to  avoid  that  a  VAT  registration  number  is  used  for  fraudulent  activities,  tax 
administrations  have  to  ensure  that  the  information  provided  by  the  taxpayer  is  authentic, 
accurate and complete. For this purpose, a large number of Member States have in place an 
end-to-end  process  that  includes  verification  of  the  taxpayer’s  identity,  preliminary  checks 
before  registration,  based  on  risk  analysis,  cross-checks  with  third  party  information,  post-
registration  monitoring  programs  for  risky  traders,  and  deregistration  procedures  in  case 
taxpayers  no  longer  fulfil  the  conditions  for  registration.  Although  a  number  of  Member 
States  have  implemented  this  end-to-end  process,  the  accompanying  activities  are  often 
carried out on an ad hoc basis, which increases the risk of unreliable  data in the registration 
system.  With  a  more  systematic  approach  tax  administrations  are  better  equipped  to  tackle 
risks in the registration procedure. 

Recommendation 6: Validity of VAT and VIES registration 

Member  States  should  check  the  validity  of  the  VAT  and  VIES  registration  data  in  a  more 
systematic way. 

In  general,  Member  States  are  moving  towards  a  registration  procedure  based  on  risk 
assessment.  In  order  to  avoid  that  such  an  approach  could  entail  a  delay  in  issuing  VAT 
identification numbers, several tax administrations have put in place procedures that mitigate 
this risk.12 Member States indicated in their replies that the time needed for submitting a VAT 
and/or  VIES  identification  number  is  within  one  week,  ranging  from  one  to  five  days. 
Therefore,  it  seems  that  the  risk  assessment  approach  does  not  result  in  significant 
delays of submitting a registration number for VAT and/or VIES. 

Figure  4:  Time  needed  for  obtaining  a  VAT  and  a  VIES  number  in  22  EU  Member  States 
(2013-2015)13 

6

5

4

3

2

1

0

2013

2014

2015

Source: Member States' answers to 2017 Questionnaire  

Minimum time in
days (average)

Minimum time in
days (median)

VIES (average
days)

VIES (median
days)

12  

13  

For instance by separating the requests for registration in a green line (no risk - immediate registration) 
and a red line (potential risk - further enquiries needed before registering). 

Data  is  available  for  22  out  of  28  Member  States  (no  data  sets  for  Cyprus,  Estonia,  Finland,  France, 
Ireland and Spain). 

9 

 
 
                                                            
In  all  Member  States  the VAT registration  database  is  available in  electronic format, which 
allows tax authorities to link the registration information with other IT subsystems dedicated 
to VAT filing and payments, collection and audit. 

Finally,  it  should  be  noted  that  the  vast  majority  of  tax  administrations  have  compliance 
strategies in place that include initiatives to detect non-registered taxable persons. Information 
campaigns14, on-the-spot visits and checks of domestic control statements15 are examples of 
such initiatives. 

3.2.2.  VAT de-registration 

In  all  Member  States  tax  administrations  deregister  taxpayers  on  their  request  or  ex  officio, 
when the economic activities have ceased. A few Member States introduced a possibility of 
deregistering  taxpayers  when  for  a  number  of  months  they  did  not  submit  VAT  returns.  In 
other cases, such as suspicion of fraud, most Member States do not have a legal possibility to 
deregister these taxpayers from the VAT system.  

3.2.3.  VIES registration and de-registration 

There are different approaches towards registration of VAT taxpayers in the VIES. In some 
Member States, all national VAT registrations are automatically included in the VIES system. 
Other Member States only include in VIES those taxpayers that, at the moment of registration 
or subsequently, declare to carry out intra-EU transactions.  

Member  States'  replies  showed  that  more  than  thirty  percent  of  the  tax  administrations 
did  not  implement  a  post-registration  control  procedure.16  Other  Member  States'  tax 
administrations only carry out ad hoc post registration controls.  

Recommendation 7: Post registration controls 

Member States which conduct only preliminary checks before registration, should implement 
post-registration controls to ensure the reliability of VIES data 

3.3. 

VAT filing and payment 

VAT  is  a  consumption  tax.  It  is  paid  by  the  final  consumer  to  the  supplier,  who  is  a  VAT 
taxable  person  that  collects  the  output  VAT  on  its  sales,  offsets  it  with  input  VAT  on  its 
purchases  and  pays  the  balance  of  VAT  due  to  the  State  Budget.  Since  the  taxable  person 
serves as a tax collector for the State Budget, it is important that VAT returns are filed and 
payments are made on time.  

3.3.1.  Filing 

To improve compliance almost all Member States offer the possibility to file the VAT returns 
electronically. In most Member States, electronic filing is compulsory for all VAT-registered 

14  

15  

16  

For example in the tourism sector taxpayers are made aware via media to register when they rent their 
apartments during the holiday season. 

Domestic  control  statements  are  submitted  by  VAT  taxpayers  and  include  declarations  of  sales  and 
purchases within the territory of registration.  
According to Article 22 of Council Regulation (EU) 904/2010  Member States are obliged to conduct 
post registration controls if they conduct only preliminary checks before registration. 

10 

 
                                                            
companies.  Some  Member  States  have  allowed  some  exceptions,  for  instance  for  small 
companies.  

All  Member  States  offer  electronic  filing  and  a  large  number  of  Member  States  made  it 
compulsory  for  many  VAT  taxpayers.  The  electronic  filing  rate  increased  from  over  83 
percent in 2013 to almost 95 percent in 2015. 

Figure 5: Possibility to file electronically in 28 
EU Member States (2013-2015) 

  Figure  6:  Electronic  filing  rate  in  28  EU 

Member States (2013-2015) 

  Available 
(optional) 

  Compulsory 

25% 

18% 

  Compulsory 
(for some  
taxpayers only) 

57% 

100%

90%

80%

70%

94,81% 

89,23% 

83,58% 

2013

2014

2015

Source: Member States' answers to 2017 Questionnaire 

          Source: Member States' answers to 2017 Questionnaire  

All Member States monitor filing deadlines in an automatic way. In the period 2013  - 2015 
the  compliance  rate  for  on-time  filing  of  VAT  returns  increased  and  almost  reached  89 
percent in 2015. When taking into account the VAT returns submitted within 30 days after the 
deadline was expired, the compliance rate reached over 96 percent. 

Table 2: Evolution of VAT returns in EU Member States for the period 2013-201517  

Number of expected returns in EU Member States (million) 

VAT returns submitted on time (%) 

VAT returns delayed for less than 30 days (%) 

Compliance rate in VAT returns (received/expected; %) 

Source: Member States' answers to 2017 Questionnaire  

2013 

127.9 

87.1 

4.6 

91.2 

2014 

2015 

130.1 

88.6 

132.3 

88.9 

4.4 

4.7 

95.9 

96.4 

In case of late filing, most Member States send reminders (automatically or  manually) after 
the deadline has expired. A few Member States send alerts prior to the forthcoming deadline. 
According to these Member States, this practice reduced the number of late-filers. 

All Member States have a sanction system in place to encourage taxpayers to file declarations 
on time. If no VAT returns are filed the majority of Member States calculate an estimation of 

17  

Based on complete datasets from 21 Member States and 6 partial datasets; no datasets for Croatia were    
available. Data was collected in 2017 for years 2013-2015. For EU figures, median values are used. 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
the  VAT  due  and  add  a  penalty.  A  simplified  VAT  filing  system  for  small  taxpayers  is 
applied in half of the Member States. 

3.3.2.  Payment 

In  the  majority  of  Member  States,  tax  authorities  offer  the  possibility  to  pay  the  VAT  due 
electronically. However, only in 50 percent of the Member States electronic payment of VAT 
is compulsory. A few Member States still offer the possibility to pay the VAT due in cash, but 
are promoting the use of electronic means. 

Also  payment  deadlines  are  monitored  electronically.  The  general  practice  is  that  when 
deadlines  expire,  the  tax  authorities  send  automatic  reminders.  For  small  taxpayers,  tax 
authorities offer a special simplified payment regime18. 

Figure  7:  Possibility  for  VAT  e-Payments  in  28 
Member States (2013-2015) 

  Figure  8:  Late  payment  reminders  in  28  Member 

States (2013-2015) 

  Available   

  Not 

available 

14% 

86% 

14% 

7% 

Issued 
automatically 

Issued 
ad-hoc 

Not 
issued 

79% 

Source: Member States' answers to 2017 Questionnaire  

             Source: Member States' answers to 2017 Questionnaire  

In  case  of  late  payment,  all  Member  States  apply  a  penalty  and  interest  system.  The 
Commission  is  currently  in  the  process  of  identifying  Member  States'  practices  in  the 
field of imposing penalties, so as to analyse legal constraints and the impact of penalties 
on compliance19. 

3.4. 

Recovery of VAT debts 

VAT collection is based on self-assessment and voluntary payment. Tax administrations aim 
at  achieving  high  rates  of  voluntary  on-time  payment  and  low  numbers  of  tax  arrears.  To 
reach this goal, a high level of on-time filing of VAT returns is required for establishing the 
amounts of VAT owed and a quick follow-up action is needed when payment is overdue. In 
general this action consists of imposing penalties and interest and executing a debt recovery 
plan. 

To improve efficiency, all Member States have established dedicated debt collection units or 
trained specialist debt recovery staff in their tax administration, or outsourced the recovery of 

18  

19  

An example is the VAT cash accounting scheme, which allows small businesses to pay their VAT due 
when they have received the money from their buyers (which in practice is later  than in the standard 
practice where they have to pay when the invoice is issued). 

See: Twenty measures to tackle the VAT Gap.  
https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/tax_cooperation
/vat_gap/2016-03_20_measures_en.pdf.  

12 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
debts to a semi-governmental body. In case of "in-house" recovery activities, these are mainly 
operated at national level.  

The vast majority of tax administrations have an accurate overview of the VAT arrears, often 
classified by year, amount or origin (i.e. self-assessed or a result of an audit). For some of the 
Member States this overview is real-time available.  

Figure  9:    Recovery  of  VAT  debts  -  overview  of  main  tools  and  practices  used  in  28  EU 
Member States (2016)  

New debtors: early 
contacting  procedure 

Procedure for 
offsetting tax credits  

Use  of instalment 
plans 

Possibility to write-off 
uncollectable debts 

Liability of company's 
management for VAT 

VAT can be paid by 
the buyer (outside the 
reverse charge)  

20 Member States 

28 Member States 

28 Member States 

23 Member States 

18 Member States 

13 Member States 

Source: Member States' answers to 2017 Questionnaire  

The  legal  tools  and  approaches  for  debt  collection  differ  between  the  Member  States.  The 
general  approach  in  tax  debt  collection  is  to  put  resources  where  there  is  a  chance  of 
collecting the money. Many Member States have a procedure in place that provides for early 
contacts  with  new  debtors20  (by  phone  or  email),  either  systematically  or  occasionally. 
Furthermore,  emphasis  is  put  on  "young"  claims  for  which  assets  have  been  identified. 
Practice  indeed  shows  that  the  rate  of  success  in  recovering  old  debts  is  more  limited.21 
However,  some  tax  administrations  have  a  legal  obligation  to  enforce  all  their  claims,  and 
recovered amounts are first imputed on their oldest claims.  

Instalment  arrangements  and  offsetting  tax  credit  entitlements  (e.g.  VAT  refunds)  against 
outstanding  VAT  debts  are  common  practice.  Less  conventional  and  under  discussion  is 
the offsetting of a foreign VAT debt against a foreign VAT refund.  

In case of uncollectable tax debts, a large number of tax administrations may apply write-off 
procedures, as part of their management of public tax debts. Although several Member States 
have the legal possibility to enforce VAT arrears against a company's management or a buyer 
(joint and/or several liability), this tool is difficult to apply because the burden of proof is on 
the tax administration. 

20  
21  

New debtors are VAT taxpayers that enter into the debt collection database for the first time. 
See: OEDC, Forum on Tax administration, Working smarter in tax debt management, September 2013. 

13 

 
 
 
                                                            
 
 
The Commission is publishing an evaluation of the Directive on mutual assistance in the field 
of recovery. Member States are invited to take notice of this report. 

Recommendation 8: Post registration controls 

As recovery contributes to tax fairness, Member States should enhance the use of all available 
recovery instruments, including the mutual assistance mechanism. 

3.5. 

VAT refund  

Resource  constraints  on  the  side  of  the  tax  administration  and  the  need  for  businesses  to 
receive the money within due time require that tax authorities strike the right balance between 
a swift repayment of VAT to legitimate businesses and a thorough control in case of mistakes 
and fraud.  

Almost  all  Member  States'  tax  administrations  have  procedures  in  place  based  on  risk 
assessment methods, which ensure that a significant part of low-risk VAT refund requests are 
promptly processed, while the risky ones are closely controlled. In most Member States, these 
procedures are automated through electronic processes. In a few Member States, all requests 
for  VAT  refunds  need  to  be  controlled  before  the  payment  can  be  made  (systematic  prior 
controls), which may cause a delay in the refund procedure. Budget constraints may also have 
an  impact  on  the  timeline  for  refunding  VAT.  Both  situations  (systematic  prior  controls 
and  late  refunds  due  to  budget  constraints)  put  financial  pressure  on  legitimate 
businesses and cause an obstacle for cross-border trade.  

Recommendation 9: Late VAT refund payments 

The Commission launched a study on domestic and cross border VAT refunds. In the context 
of this study, and together with Member States, it will explore how to improve and speed up 
this process. 

3.6. 

VAT audit and investigation 

All  tax  administrations  have  audit  departments  within  their  organisation  that  in  many  cases 
also  include  dedicated  anti-fraud  units.  Furthermore,  in  addition  to  the  traditional  way  of 
auditing, all tax administrations implemented e-audit techniques.22  

General  audit  strategies  and/or  programmes  are  designed;  often  targeted  ones  for  VAT  are 
added. A variety of VAT audits (comprehensive field audits, issue-related audits, desk audits, 
etc.)  are  carried  out  to  check  the  correctness  of  the  data  declared  in  the  VAT  returns. 
However, audit is an expensive tool as it is time-consuming and requires a large number of 
human resources. Moreover, the percentage of audit contribution to the total VAT collection 
is limited. 

Nowadays,  many  tax  administrations  recognise  that  (full)  audit  coverage  is  no  longer 
expected to be the most efficient and effective means to deter non-compliant behaviour. 
Instead, these administrations consider audit as an ultimate enforcement measure to be applied 

22  

In  a  traditional  audit  the  auditor  visits  the  premises  of  the  taxpayer  or  his  accountant  to  check  the 
bookkeeping.  E-audit is an audit methodology with data acquisition via internet-connected applications 
so that auditors can access financial and non-financial data in real time from their office. 

14 

 
                                                            
when  other  proactive  initiatives  that  focus  on  enhancing  voluntary  compliance  with  the  tax 
laws  and  obligations  are  not  or  no  longer  effective.  Striking  the  right  balance  between 
compliance  increasing  initiatives  and  VAT  control  is  one  of  the  major  challenges  of  a  tax 
administration.  

Figure 10: VAT collection and VAT assessed after audits in 22 EU Member States23 (2013 – 
2015) 

s
n
o
i
l
l
i

B

400

350

300

250

200

150

100

50

0

VAT assessed after audits 

100 % 

100 % 

100 % 

7.85% 

2.59% 

2013

Total VAT collection

11.49% 

3.17% 

2014

15.23% 

3.93% 

2015

VAT assessed after audits (not the VAT actually collected)

Top 5 Member States (% of VAT assesed after audits in total VAT collection)

Source: Member States' answers to 2017 Questionnaire  

Other tax administrations base their  (VAT) compliance  approach mainly  on  monitoring and 
control.  Under  this  approach,  it  is  standard  practice  to  use  risk  management  techniques  to 
improve the effectiveness of audits, in particular in audit case selection. Measures are taken to 
support  risk  analysis,  for  instance  by  introducing  control  statements  that  allow  the  tax 
authorities  to  cross-check  sales  and  purchases  at  domestic  level.  Also,  the  increased  use  of 
third  party  information  contributes  to  a  more  targeted  audit  approach.  The  information 
gathered from this approach proved to be an important element for the detection of fraud. 

An obstacle from moving away from an audit approach to preventative measures is the way 
tax  administration’s  efficiency  is  measured.  If  the  efficiency  is  measured  based  on 
audit/collection statistics, shifting to a compliance-based approach requires that other metrics 
are  used,  such  as  VAT  Gaps  and  the  assessment  by  businesses  of  fairness  in  treatment 
received from the tax administration within the competitive environment.  

Recommendation 10: Audit and compliance strategy 

Member States should ensure that their audit strategy is part of an overall (VAT) compliance 
strategy and not a stand-alone approach. 

23  

Data  is  available  for  22  out  of  28  Member  States  (no  data  sets  for  Belgium,  Germany,  France, 
Netherlands, Sweden and United Kingdom). 

15 

 
 
                                                            
 
Finally, combatting VAT fraud is still one of the priorities of tax administrations and of the 
Commission.24 In particular in the case of combatting cross-border VAT fraud, administrative 
cooperation between Member States' tax authorities needs to be strengthened. This is why the 
Commission has evaluated the current administrative cooperation arrangements and is 
tabling a proposal  to amend the Council Regulation on Administrative Cooperation in 
the field of VAT. 

4. 

IMPLEMENTATION  OF  RECOMMENDATIONS  FROM  THE  SEVENTH  ARTICLE  12 
REPORT AND STAFF WORKING DOCUMENT

25 

The  seventh  Article  12  report  and  accompanying  Staff  Working  Document  include  32 
recommendations  addressed  to  twenty-seven  Member  States.26  The  recommendations  were 
grouped  into  seven  sections:  (a)  VAT  Identification,  registration  and  deregistration;  (b) 
Customs Procedure 42; (c) Filing and Payment of VAT returns; (d) VAT collection and debt 
recovery;  (e)  VAT  audit  and  investigation;  (f)  Tax  dispute  resolution  and  (g)  VAT 
compliance.  Each  recommendation  was  applicable  for  at  least  two  up  to  twenty-seven 
Member States.  

Figure 11: Implementation rate of the recommendations per section for 27 Member States27 

A. VAT Registration

90,9% 

B. Customs 42

56,1% 

C. VAT Returns

D. Collection and
Recovery

E. VAT Audit

F. Tax Dispute
Resolution

67,4% 

68,9% 

83,3% 

61,0% 

G. VAT Compliance

77,0% 

Source: Seventh Article 12 Report (previous recommendations); Member States' answers to 2017 Questionnaire  

Based on the Member States’ replies, it appears that over two third of the recommendations 
were  fully  or  partially  taken  on  board.  However,  a  closer  look  at  the  individual 
implementation  rates  per  Member  State  and  per  recommendation  shows  a  considerable 

24  

25  

26  
27  

The  Commission  has  recently  released  a  video  about  VAT  carousel  fraud  to  raise  awareness  of  EU 
citizens. https://www.youtube.com/watch?v=7rPzXzCoxkI 
Report from the Commission to the Council and the European Parliament, Seventh report under Article 
12 of Regulation (EEC, Euratom) no. 1553/89 on VAT collection and control procedures, COM (2014) 
69  final;  Commission  Staff  Working  Document  accompanying  the  document  Seventh  report  under 
Article 12 of Regulation (EEC, Euratom) no. 1553/89, SWD (2014) 38 final. 
Croatia was not part of the EU at that time. 
For the computation of the "Implementation rate" (%) the total number of previous recommendations 
and  the  number  of  recommendations  appearing  as  implemented  is  used.  The  calculation  is  based  on 
Member  States'  replies  (self-evaluation)  and  takes  into  account  only  the  Member  States  who  were 
concerned by the respective recommendations. 

16 

 
 
                                                            
variation. Some Member States hardly took the proposals on board, while others implemented 
most  of  the  suggestions.  Some  recommendations  were  well  received  (for  instance  on  VAT 
registration  and  audit),  while  others  were  hardly  implemented  (for  instance  in  the  field  of 
dispute resolution). 

In particular, keeping the VIES system accurate and up-to-date remains a major concern. 
Still today in a number of Member States the validity of the data in the VIES system is not 
checked on a regular basis, which causes considerable difficulties for traders doing business 
in the internal market (see also paragraph 2.2.3).  

Figure 12: Overall implementation rate28 of previous recommendations  

29,2% 

70,8% 

60,7% 

39,3% 

Not implemented 

Implemented 

out of which:  

Fully implemented 

Partially implemented 

Source: 7th Article 12 Report (previous recommendations); Member States' answers to 2017 Questionnaire 

Furthermore,  as  also  stressed  by  the  European  Court  of  Auditors29,  the  application  of  the 
Customs  42  procedure30  continues  to  be  problematic.  A  systematic  check  by  customs  of 
the VAT number in VIES is still lacking, as well as the transmission of data to the national 
tax authority, the inclusion of risk criteria, etc. 

The weaknesses relating to the functioning of the VIES and the Customs 42 procedure 
have  serious  consequences  and  affect  the  functioning  of  the  internal  market.  In  fact, 
fraudsters take profit of these shortcomings by remaining in the VAT system and thus causing 
VAT  losses  to  Member  States'  Budgets  and  consequently  having  a  negative  impact  on  the 
VAT own resources.  

This demonstrates that the overall 70.8 percent implementation rate of the recommendations 
(as resulting from the answers received by the Member States) does  not  give as  such a real 
indication  of  the  improvement  of  tax  administrations'  efficiency  in  VAT  collection.  Other 
self-assessment  tools  could  help  Member  States  to  carry  out  a  more  systematic  and  reliable 
evaluation  of  the  performance  of  their  tax  administration.  Tools  such  as  the  Fiscal 

28  

29  

30  

The  line  between  "not  implemented"  and  "partially  implemented"  is  not  very  clear  and  the  degree  of 
partial implementation varies from one Member State to another. The data result from a self-assessment 
by the Member State providing the answers. 
Court’s  Special  Report  No  24/2015  “Tackling  intra-Community  VAT  fraud:  More  action  needed”, 
paragraph 83. 
Customs procedure 42 is a mechanism an EU importer uses in order to obtain a VAT exemption. It is 
applied when goods imported from outside the EU into one Member State will be transported to another 
Member State. In such cases, the VAT is due in the latter Member State of destination.  

17 

 
 
 
 
 
 
 
 
 
 
 
                                                            
Blueprints31 and the Tax Administration Diagnostic Assessment Tool32 are publicly available 
to support Member States in this exercise.  

Recommendation 11: Customs 42 procedure 

Recalling the recommendation in the previous report, Member States should still ensure that 
the Customs authorities check the VIES number and exchange the information with the tax 
authorities. 

5. 

TOWARDS BETTER TAX (VAT) ADMINISTRATION BY COOPERATION 

In a continuously changing environment, the collection of taxes is becoming increasingly 
challenging. Digitalisation, globalisation, new business models, tax fraud and avoidance, and 
resource constraints urge tax administrations to review their practices and find additional or 
alternative  ways  of  collecting  taxes.  Also,  the  quality  of  tax  administration  in  terms  of 
efficiency  and  effectiveness  should  be  ensured  to  avoid  impacting  the  collection  of  VAT 
revenues in their own and other Member States. 

Thus, it is time to act and work together. Many tax administrations realize that they can no 
longer act in isolation. Already today, tax authorities of smaller Member States are working 
closely together on common issues so as to benefit from economies of scale (Benelux, Nordic 
countries  and  Baltic  States).  Topics  in  the  field  of  IT,  compliance  approaches,  risk 
management,  fight  against  tax  fraud  and  administrative  capacity  building  appear  on  their 
agendas. However, the beneficiaries of these regional initiatives are confronted to the limits of 
their geographical coverage in a larger Union, and often try to expand their initiatives to the 
EU  level.  Sometimes  the  Member  States  do  not  manage  to  give  a  proper  follow-up  to  their 
commitments  because  of  lack  of  resources  or  political  engagement.  In  addition,  some  tax 
administrations  are  engaged  in  structural  reforms  and  would  like  to  share  their  experiences. 
With  the  support  of  the  Commission,  these  Member  States  can  inform  and  assist  other 
administrations when reforming their organisation. There are already tools such as the Fiscalis 
2020  Programme33  and  the  Structural  Reform  Support  Programme34  that  can  be  used  by 
Member States to enhance their tax administrations capacities.  

In  view  of  the  above,  Member  States  may  benefit  from  a  structured  strategic  dialogue  at 
EU  level  on  the  main  challenges  such  as  the  impact  of  the  digital  economy  and  new 
technologies,  the  use  of  administrative  cooperation  to  fight  against  VAT  fraud,  investing  in 
data analytics  tools and processes  and in  IT collaboration,  sharing  experiences in  reforming 

31  

32  
33  

34  

See: 
https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/common/publications/inf
o_docs/taxation/fiscal_blueprint_en.pdf 
See: http://www.tadat.org/ 
Fiscalis  2020  is  an  EU  cooperation  programme  enabling  national  tax  administrations  to  create  and 
exchange  information  and  expertise.  It  allows  developing  and  operating  major  trans-European  IT 
systems in partnership, as well as establishing various person to person networks by bringing together 
national officials from across Europe. 
The  EU  structural  reform  support  programme  is  intended  to  help  Member  States  to  design  and 
implement institutional, administrative and structural reforms and to use EU funds that are available for 
such purposes more efficiently and effectively. 

18 

 
                                                            
tax  administrations  and  assess 
management. 

their  performance,  compliance  approaches  and  risk 

Together with the Member States, the Commission will organise a meeting for Heads of Tax 
Administration in 2018 to discuss these challenges and how to address them.  

Furthermore, IT systems are essential for the implementation of tax policies, the fight against 
fraud  and  the  use  of  data  for  better  policy-making.  Tax  administrations  are  increasingly 
relying  on  data  collected  from  different  sources  (taxpayers,  other  government  bodies  and 
institutions, other Member States, etc.). Handling this enormous amount of data has become a 
major challenge as it can no longer be dealt with in a traditional way. New tools are needed to 
be able to process and analyse the data. Thus, Member States are forced to continue investing 
in  IT  solutions.  Further  cooperation,  coordination  and  transparency  between  EU  Member 
States  in  this  area  would  help  to  significantly  reducing  costs  by  benefiting  from  a  joint 
approach and economies of scale.35  

Member  States  as  well  as  the  Commission  are  exploring  the  use  of  new  technological 
products  and  digital  techniques  for  data  sharing  and  analytics.  Enhanced  collaboration 
between  the  Commission  and  the  Member  States’  tax  administrations,  and  between  these 
administrations,  is  the  best  way  to  bring  compatible  benefits  for  all  in  the  single  market. 
Moreover, it would facilitate the implementation by the Member States of their commitments 
in the field of tax administration. 

35  

An example of such collaboration is the Commission expert group: the IT Catalyst Group 

19