Global News

Friday, October 1, 2010

by Nick Ryan

There are a number of interesting issues currently underway within the EU notably the infringement proceedings on VAT Groups and the Invoicing Directive effective 1 January 2013.
VAT Groups: on 24 June 2010 the European Commission commenced infringement proceedings against Ireland and a number of other EU states alleging that the VAT grouping rules in place in Ireland do not comply with EU legislation.
The Commission’s view is that the inclusion of exempt businesses within a VAT group contradicts the purpose of a VAT group which were designed for administrative simplification and to combat abusive practices. In the Commissions view VAT grouping is distortive when an exempt or partly exempt business is included. This can be exampled by the fact that supplies between group members are not subject to VAT and can provide for an advantage for exempt group members who incur high level support costs from other associate companies in the VAT group. Outside of a VAT group the VAT on these costs would be an additional cost to the business.
The arguments put forward by the Commission are so far not compelling and appear to rest on the interpretation of the reference to “persons” in the VAT grouping provisions in the 2006 Directive. In their view this should be regarded as meaning “taxable persons” and not other persons. I am not convinced this argument has much weight.
Should the Commission get its way then VAT groups with exempt or partly exempt members will cease to exist and VAT will become an increasing cost to the exempt or partly exempt businesses now excluded from VAT group membership.
We will keep you informed on developments.
VAT invoicing Directive: ECOFIN has adopted the VAT invoicing Directive effective 1 January 2013 which is to increase the use of electronic invoicing by businesses thereby reducing burdens in record keeping. It is also anticipated that these changes will support small and medium sized enterprises and assist Member States tax authorities in tackling fraud.
It is envisaged that these changes will place electronic or e-invoices as equal to paper invoices. For compliance purposes, the recipient of the e-invoice has to agree to their use and there must be measures in place to guarantee authenticity, integrity and legibility prior to their use. This could include advanced electronic signatures utilising a pre agreed certificate between the issuer and the recipient.
Other changes have been announced within the Directive and detail of these will be provided in the next issue.

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