The Commission, private sector stakeholders and representatives of the VAT authorities of all 27 Member States are meeting in Luxembourg in early March.
This will be the last significant interaction between and among these stakeholders before the remaining guidance for the one stop shop (OSS) VAT reporting schemes is finalized. (See prior blog for a description of the current (B2C supply of electronic services) and future (B2C supply of electronic, broadcasting and telecommunication services) OSS regimes). The Commission is sponsoring the two-day seminar under the auspices of its Fiscalis program. Fiscalis promotes cooperation between and among the tax authorities of the Member States through various established initiatives, including seminars such as the one taking place in Luxembourg. The Luxembourg seminar follows the only other Fiscalis seminar to date on OSS, in Malmo Sweden last June.
Why the sense of urgency today for reporting rules which are only to become effective in 2015 ? The Member States require final guidance, realistically before the end of this year, in order to identify and allocate the “human and technical resources” which are required for them to put into place the infrastructure to properly process the OSS filings. This includes two automated IT system interfaces, one between the electing supplier (both EU and non-EU establishments) and the VAT authority of the Member State of identification and one between the Member State of identification and the relevant Member States of consumption under the OSS reporting. The substantive issues underlying the latter Member State interaction will also get some attention at the Fiscalis Seminar, as the OSS regime contemplates new levels of exchange of information interaction between the Member State of identification and the qualifying Member States of consumption, in the first instance. Some guidance already exists and more is to be expected.
Companies (and their advisors) need the Commission guidance (expected in the form of implementing regulations), also before the end of this year, in order to have enough time to evaluate properly and timely the decision whether to elect the OSS regime for VAT reporting periods beginning in 2015.
Likely the Fiscalis working group has already reached many conclusions as to what its outstanding final guidance should cover. New material issues are unlikely to emerge from the seminar. The value of the Fiscalis seminar, in addition to the realtime interaction and relationship building among these stakeholders, will be to validate the working group´s compliance proposals and to have one more chance to insure that all material issues have been carefully considered before finalizing the implementing regulations. Last, but certainly not least, is the desire on which all stakeholders can agree to have a common form for OSS reporting which will take place exclusively through a web portal.
One of the open issues is the level of proof required of the supplier to determine the place of supply. This requirement is not entirely new and it is hoped that the final guidelines will retain some flexibility for the supplier to rely on reasonable efforts for making this determination. This issue will be particularly important for SMEs compliance (small and medium sized enterprises), for which the OSS regime may end up being mostly relevant. The SMEs are usually under more pressure to expand their markets more quickly yet having the resources to understand and meet timely its EU VAT compliance requirements is often a challenge, if not an obstacle to expansion. In that respect, the OSS regime at least in theory offers a more efficient option for VAT compliance for such companies.
The concepts of place of establishment and fixed establishment will continue to have significance for VAT reporting in 2015 and beyond but are not likely to be developed in future guidance. The Commission already issued a regulation in 2011 which seeks to codify ECJ guidance on the interpretation of these two concepts. The ECJ guidance remains valid, however, and there are likely to be more national cases on these concepts if not a future ECJ decision. For the OSS regime, the Member State of identification can only be the Member State in which the EU supplier has its place of establishment. An electing supplier (whether established in the EU or not) can only report revenues under OSS from those Member States of consumption in which it does not have an establishment.
The best of intentions underly the creation of the 2015 OSS regime but it is so far difficult to predict how many EU-established businesses will elect to use it in 2015. Maybe the Luxembourg seminar will shed some more light on this based on the private sector input at the seminar. Under the current OSS regime, introduced in 2003, only non-EU established suppliers are eligible to make the election. Based on unofficial statistics, it appears that less than 1,000 non-EU suppliers are registered for OSS with a Member State of identification as of 2011. The 2015 reporting regime will be an important “test case” for an eventual expansion of the regime to the EU supply of other services and, possibly, goods. Thus the issues which the Fiscalis working group are reviewing at the seminar will have potentially an impact on VAT compliance which goes well beyond the 2015 OSS regime.
