The EU VAT package

What is it?

The EU VAT Package is a series of measures which changes the VAT rules relating to services, introduces a new VAT reporting obligation for cross border services and a new process for recovering VAT through the existing international VAT refund mechanism.

There are also further changes relating to the provision of certain B2C services such as telecommunications, broadcasting and electronic services with effect from 1 January 2015.
 

The changes being introduced will have an impact on the VAT affairs of any business which purchases or supplies services (both to/from third parties as well as inter-company) cross border. These changes are to ensure that VAT on services typically is accounted for in the country where consumption occurs, and to prevent distortions of competition between member states operating different VAT rates. In practice there should be a reduction in cross border VAT charged on business to business services.

What should I be doing?

The changes being introduced by the EU VAT Package will affect virtually every business. Although the extent to which it will impact businesses will vary, all businesses will be required to assess the impact of the VAT Package on their business and for many the impact may be profound. In order to prepare for and manage these changes while minimising disruption to business, affected businesses will need to:

• determine the extent to which the business receives or provides services both to/from third parties as well as inter-company and create a 'services footprint';
• assess the impact of the VAT Package changes on the above footprint;
• review the configuration of billing, accounting and Enterprise Resource Planning (ERP) systems, implement any process changes and train staff including both accounts planning and accounts receivable staff;
• review and where appropriate amend contracts, terms and conditions for sales and purchases of services;
• identify areas of risk and compliance issues for international operations as a result of the VAT Package changes;
• secure the internal budget and resource needed to ensure compliance for 1/1/2010; and
• maintain competitiveness by identifying and implementing any VAT efficiencies and opportunities that may result and seek to mitigate VAT costs.

If you would like advice on the VAT Package please call your local PwC contact or any of the people listed.

For more technical information please go to PwCPlus (registration will be required) and view our GlobalVATOnline and Indirect Tax Weekly Highlights (ITWH) information sources.