Yesterday the European Commission adopted its Action Plan on VAT and published the long awaited details on its strategy to modernise VAT within the European Union. The key objective of the plan is the introduction of a single VAT area which aims to support a fairer single market whilst supporting SMEs and other businesses. It is also hoped that measures outlined today will efficiently tackle the VAT gap whilst adapting the existing system to the challenges of the Digital Economy.

Key objectives include;

  • Principles for a future single European VAT area (2017);
  • Simplifications to VAT rules for e-commerce in the context of the Digital Single Market Strategy and for a comprehensive VAT package for SMEs (2016);
  • Immediate measures to combat VAT fraud under the current rules (2016);
  • Updates to the framework for VAT rates and autonomy for Member States set their own (2016).

Currently, businesses within the EU are at a competitive disadvantage as certain non-EU traders can import goods VAT free. The current VAT system for cross border e-commerce is expensive and complicated and companies struggle to ensure compliance due to these issues. The Commission has stated that by the end of 2016, it will unveil legislative steps to simplify VAT for cross-border e-commerce as a part of the Digital Single Market strategy. These include:

  • Including cross-border e-commerce and distance sales in the current One Stop Shop concept.
  • Simplifying the process on an EU-wide basis to help start up and small e-commerce businesses
  • Streamlining home country audits
  • Removing the VAT exemption on the import of small consignments from third country suppliers

This legislation will also include a proposal to allow e-publications the same reduced rates as physical and print publications. The second stage of the modernisation will be the 2017 announcement of a proposal to simplify VAT rules designed to further improve the growth of SMEs by facilitating easier cross-border trading.

Today’s plans are an example of the Commissions dedication to boost jobs, support trade and increase competitiveness whilst keeping up with the ever growing e-commerce and global digital economy.




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