With the end of the Brexit transition period looming, the EU have announced new measures:
e-commerce VAT fraud
The first measure is the European Commission (EC) approving (this month) new measures to transmit and exchange payment data in order to fight e-commerce VAT fraud. Member States will be assisted in their fight against e-commerce VAT fraud by the launch of a Central Electronic System of Payment (CESOP) information arrangement.
CESOP will keep records of cross-border payment information within the EU, as well as payments to third countries or territories, for a period of five years. This will allow tax authorities to properly control the correct fulfilment of VAT obligations on cross-border Business to Consumer (B2C) supplies of goods and services.
The measures will be implemented on 1 January 2025.
Simplified rules for small businesses
The EC has also recently adopted simplified VAT rules applicable to small businesses. The new measures are intended to reduce the administrative burden and compliance costs for small enterprises and create a fiscal environment which will help small enterprises grow and trade across borders more efficiently.
The measures foresee that small enterprises will be able to qualify for simplified VAT compliance rules where their annual turnover remains below a threshold set by a Member State concerned, which cannot be higher than 85 000 EUR. Under certain conditions, small enterprises from other member states, which do not exceed this threshold, will also be able to benefit from the simplified scheme, if their total annual turnover in the whole of the EU does not exceed 100 000 EUR.
The new rules will apply as of 1 January 2025.
New rules for exchange of VAT payment data
In addition to the anti e-commerce fraud proposals above, new measures will enable Member States to collect, in a harmonised way, the records made electronically available by payment service providers, such as banks. These complement the VAT regulatory framework for e-commerce coming into force in January 2021 which introduced new VAT obligations for online marketplaces and simplified VAT compliance rules for online businesses.
The new measures will apply as of 1 January 2024.
How these new incentives affect UK businesses remains to be seen as our future trading relationship with the EU is, to put it diplomatically, unclear.