On 24 May 2019, government ministers approved the filing of the draft law providing for a transposition of Directive (EU) 2018/1910 of 4 December 2018 regarding the harmonisation and simplification of certain rules in the value added tax system for the taxation of trade between Member States (the "Directive"). The draft legislation introduces changes to the common EU VAT regime. The changes foresee four ‘quick fixes’ to improve the functioning of the VAT rules:
- Call-off stock: Transfers by a taxable person of goods forming part of his business assets to another Member State under call-off stock arrangements shall not be treated as a supply of goods for consideration. This new rule simplifies call-off stock operations as it does away with the inconvenient requirement that the supplier be identified for VAT purposes in the Member State of arrival of the goods.
- VAT identification number: To benefit from a VAT exemption for the intra-EU supply of goods, the VAT identification number of the customer will henceforth constitute a substantive condition, rather than only being a formal requirement.
- Recapitulative statements: In addition to the VAT identification number, suppliers must submit a recapitulative statement to benefit from the VAT exemption for the intra-EU supply of goods. This recapitulative statement must identify the persons to whom the goods have been supplied. By way of exception, the exemption will apply despite the supplier’s failure to submit recapitulative statements, if the supplier can duly justify his shortcoming to the satisfaction of the competent authorities.
- Chain transactions: Where the same goods are supplied successively and those goods are dispatched or transported from one Member State to another Member State directly from the first supplier to the last customer in the chain, the dispatch or transport shall be ascribed only to the supply made to the intermediary operator.
These quick fixes are being introduced ahead of more wide-ranging reforms to the EU's VAT rules. In fact, the European Commission is aiming to create a ‘definitive VAT regime’ in which goods and services are taxed in the Member State of the recipient, rather than in Member State in which the supplier is situated. According to the European Commission, a reformed VAT regime would mitigate opportunities for VAT fraud.
Member States must transpose the Directive by 1 January 2020. With the Luxembourg Government Council having approved the filing of the draft law, it will soon be subject to vote by the Luxembourg Parliament.