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Luxembourg Ministers Endorse EU VAT 'Quick Fixes'

Wednesday, June 5, 2019

Luxembourg's Government Council, comprising government ministers, has approved legislative changes to the territory's VAT regime to introduce the four quick fixes to improve the functioning of VAT rules in the European Union.

The changes are included in Council Directive (EU) 2018/1910 of December 4, 2018, amending the EU VAT Directive as regards the harmonization and simplification of certain rules in the value added tax system for the taxation of trade between member states.

The four short-term "quick fixes" approved cover:

  • Call-off stock. The proposals provide for a simplified and uniform treatment for call-off stock arrangements, where a vendor transfers stock to a warehouse at the disposal of a known acquirer in another member state;
  • The VAT identification number. To benefit from a VAT exemption for the intra-EU supply of goods, the identification number of the customer will become an additional condition;
  • Chain transactions. To enhance legal certainty in determining the VAT treatment of chain transactions, the proposals establish uniform criteria;
  • Proof of intra-EU supply. A common framework is proposed for the documentary evidence required to claim a VAT exemption for intra-EU supplies.

The changes are being introduced ahead of comprehensive reforms to the EU's VAT rules, as set out in the Commission's vision for a "definitive VAT regime" that would be centered around the taxation of goods and services in the location of the recipient, rather than that of the supplier. The changes are in particular intended to reduce opportunities for fraud in the European Union, with fraudsters manipulating current rules to steal VAT that is due to the member state tax authorities on supplies acquired from other EU member states and then sold to the domestic market.

Member states are required to transpose Directive 2018/1910 by January 1, 2020. Following the Government Council's approval, the proposed legislative amendments will be tabled before Luxembourg's unicameral legislature, the Chamber of Deputies.