The European Commission (EC) released its December 2021 infringements package on 2 December 2021 specifying cases where the EU member states fail to comply with the Commission’s obligations under the EU law. Member states who were given a “letter of formal notice,” have two months to address the limitations indicated by the Commission. If the response of the member state fails to satisfy the Commission, they will be moved to the second stage which is to send a “reasoned opinion,” i.e., a formal request to comply with EU law. The package covers various sectors and EU policy areas that aims to ensure proper application of EU law for the benefit of citizens and businesses.
The December 2021 infringement package includes key decisions in respect of Value Added Tax:
Reason opinions are to be sent to:
a) Cyprus
- Two reasoned opinions are to be sent to Cyprus.
- Reason is the member state failed to notify the measures for the transposition into national law of EU directives 2017/2455 and 2019/1995 (the “VAT e-commerce” directives).
- EC requested to transpose new VAT e-commerce rules to simplify VAT obligations for companies and consumers involved in cross-border online sales within the EU.
- The rule also aims to create a fairer environment for EU sellers by removing the VAT exemption for low-value imports from outside the EU.
- Member states should have adopted and published the necessary national provisions by 30 June 2021.
b) Germany
- EC requested Germany to exchange information regarding call-off stock arrangements.
- The member stat has failed to fulfil its obligation to grant other EU member states automated access to the information concerning call-off stock arrangements via the electronic system VIES (VAT Information Exchange System).
- The IT system requirements intends to allow EU member states to exchange electronic data with each other efficiently.
- The requirement also aims to fight fraud.
- Call-off stock arrangements are one of the VAT simplifications referred to as “quick fixes” that entered into force on 1 January 2020. The arrangement requires member states to adapt their IT systems in order to allow for the exchange of information between member states. This is required by Council Regulation 904/2010.
- The lack of participation of Germany makes it harder for other Member States to carry out the controls necessary to prevent VAT fraud and/ or tax evasion.
The EC also announced 90 cases where the issues have been solved by the member states and is considered as closed. These includes Value Added Tax proceedings against:
- France: Incorrect application of the VAT directive to Corsican wines;
- Germany: VAT exemption for 10 kilometer-zone passenger transport and VAT refunds to taxable persons not established in Germany;
- Hungary: Incompatibility of the Electronic Control System for Road Freight Transport (EKAER) with the EU principal VAT directive and the EU Charter of Fundamental Rights;
- UK: VAT treatment in the Isle of Man of acquisitions, leasing, and leasing for purchase of aircraft.
Source: European Commission, (December infringements package: key decisions)