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VAT News (see indent 8). The latter enables the customer to claim the VAT for the period in which it becomes chargeable. In respect of cross-border transactions for which the customer is liable to account for VAT under the reverse charge mechanism, the invoice no longer needs to indicate the VAT rate and the corresponding amount of VAT due (see indents 9 and 10) because it may be difficult for the non-resident supplier to determine the correct rate of VAT applicable in his customer’s Member State. Are there any other details required on a full VAT invoice? Yes, the other details that must be mentioned on a full VAT invoice depend on the nature of the supply, such as: – in respect of exempt12 supplies, the code “EX” must be indicated on the invoice; and – in respect of transactions that are subject to the reverse charge mechanism, the code “RC” must be indicated on the invoice. The currently applicable references to the VAT Directive or national legislation, or any other indications that the supply is exempt or subject to the reverse charge mechanism are removed. What are the changes that affect electronic invoicing? As regards electronic invoicing, the changes can be summarized as follows. Businesses will be able to send electronic invoices under the same conditions as they would send paper invoices. The condition that electronic invoices must be sent under an advanced electronic signature or through “electronic data interchange” (EDI) are removed. The other optional conditions for sending electronic invoices are also removed. The recipient of an electronic invoice will no longer be required to expressly accept it. The normal commercial practice of tacit acceptance of invoices will also apply to electronic invoices. What are the changes that affect the storage of invoices? As regards storage of invoices, the proposed changes can be summarized as follows. The option for Member States to require storage of invoices in their original format is removed, which enables businesses to store paper invoices in electronic form. The option for Member States to set the period of storage is withdrawn. The proposed common storage period for VAT invoices is set at six years. Member States will continue to be able to request that invoices are translated into their national language. However, any Member State requesting such a translation must state to which “particular invoices” the request relates, which puts an end to the different approaches of the Member States in this respect. As regards the place of storage, Member States can only impose the condition that the invoices must be made available without undue delay. The requirement that invoices must be made available electronically (online) where they are stored outside of the Member State of the supplier or customer is removed. Businesses will no longer be required to notify the tax authorities of the place where they store their invoices. Member States currently have the option to require that, in respect of B2C supplies, private individuals keep the invoices received or that non-taxable legal persons store the invoices. Those options will be withdrawn. In which Member State do the invoicing rules apply? The issue of invoices is subject to the rules applicable in the Member State where the supplier is identified for VAT. However, if the supply is subject to the reverse charge mechanism, the rules applicable in the customer’s Member State apply. Storage of invoices received by the customer is subject to the rules applicable in the Member State where the customer is indentified and storage of the duplicates of the invoices issued by the supplier is subject to the rules applicable in the Member State where the supplier is indentified. What is the change to the rule on the chargeability of VAT for intra-Community supplies? Invoices issued before the 1 th day of the month following the date of an intra-Community supply will no longer give rise to chargeability of the tax. Instead, the chargeability of the tax in respect of intra-Community supplies will be determined only by the date of the supply. Will the chargeability of VAT for intra-Community acquisitions also change? Yes. The chargeability of the tax on intra-Community acquisitions will arise only when the supply is made, i.e. no longer on the 1 th day of the month following the supply or at the time of issue of the related invoice. What is the change as regards holding a valid invoice to claim deduction? In general, in order to exercise their right to deduct input tax, taxable persons are required to hold a valid VAT invoice, even if the supply is subject to the reverse charge mechanism. Nevertheless, Member States may continue to base the right to deduct on other evidence. What is the change in respect of accounting for VAT on a cash basis? Member States will have the option, without having to apply for authorization to derogate from the VAT Dir- 12. Editor’s note: It should be noted that the Community term “exemption” refers to both true exemptions (i.e. transactions in respect of which the supplier is not entitled to deduct related input tax), and zero rates. 142 INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 © IBFD
ective, to introduce a cash accounting scheme under which businesses account for output VAT when they receive payment from their customers and deduct input VAT when they pay their suppliers. Members States can set the ceiling for use of that scheme at an annual turnover EUR 2 million, which is the EU definition of a “micro enterprise”. Member States may allow the customer of a business that applies the cash accounting scheme to deduct the VAT immediately, rather than having to wait until he pays his supplier. The amended information on the invoice will enable the customer to determine when he can exercise his right to deduct the related VAT. Will businesses be able to store invoices electronically, instead of on paper? Yes. Member States that currently require that the invoice must be stored in their original format will have to allow businesses to store those invoices electronically. Will all the rules on invoicing be harmonized throughout the European Union? No. All the VAT rules on invoicing will be harmonized with one exception. Member States continue to have the option to provide whether an invoice is needed in respect of B2C transactions. However, the B2C invoice in that case can only be a simplified invoice. All the other options currently available to Member States are either withdrawn or harmonized. Is the VAT amount on an invoice still required in the currency of the Member State where the tax is due? Yes. In order to ensure that the VAT declared matches the VAT deducted, the amount of VAT must be stated on the invoice in the currency of the Member State where the tax is due. However, the rules for conversion of amounts expressed in another currency have been simplified to help businesses. The exchange rate that must be used is the exchange rate published by the European Central Bank (ECB). The various facilities that the ECB offers should reduce the burden of this requirement on businesses. Why is there still the option for Member States to continue to require businesses to issue an invoice for B2C supplies? That option is retained to help the tax authorities control fraud. However, the conditions under which the option can be exercised are made more business friendly. If they are required, B2C invoices only must contain the details required for simplified invoices. Are there any benefits for distance sellers in this proposal? Yes. Distance sellers are only required to issue simplified invoices if, for the same supply, businesses established in that Member State are also required to issue an invoice in respect of B2C transactions. The requirement that dis- © IBFD INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 VAT News tance sellers must issue an invoice under all circumstances is removed. How will businesses know that a simplified invoice is required for B2C supplies? Currently, the invoicing rules applicable in the Member States are published on the Commission’s website (see http://ec.europa.eu/taxation_customs/taxation/vat/ traders/vat_community/index_en.htm). The Commission will keep that information up to date and, in addition, Member States may be required to publish the information on their websites. Is the requirement to issue an invoice by the 15th of the month following the date of the supply not too short a period? It is true that, for businesses in certain Member States, the new condition will be stricter than that which currently applies. For businesses in other Member States, the period will be longer than they are used to. Any harmonized period by which invoices must be issued requires a balance between the interest of the issuer, who must be able to issue the invoice within that period, and that of the customer, who needs a valid invoice to recover the VAT. If the period is too short, the issuer may experience difficulties to comply with his obligation to issue the invoice in time and if it is too long, the customer may face the burden of having to finance the VAT. The deadline set creates a reasonable balance and is equal to the existing deadline relating to intra- Community supplies. Has the public been consulted on the changes to the VAT rules on invoicing? Yes, the Commission launched a public consultation to involve all stakeholders in the review of the VAT invoicing legislation. A detailed summary report of the results of the public consultation is available at: http://ec.europa.eu/ taxation_customs/common/consultations/tax/index_ en.htm. European Commission’s website. Proposed Directives – Mutual assistance in recovery of taxes On 2 February 2009, the European Commission presented two proposals for new Directives intended to improve mutual assistance between the tax authorities of the Member States as regards the assessment and recovery of taxes. The proposal on mutual assistance as regards the assessment of taxes does not apply to VAT because mutual assistance in that field of taxation is already covered by a fairly recent Community instrument, i.e. Regulation No. 1798/200 of 7 October 200 . The existing arrangements on mutual assistance between the tax authorities of the Member States as regards the recovery of taxes is in principle based on a Directive that was designed in the mid-1970s of the pre- 14
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