Value-added tax challenges for cross-border commerce and SMEs

SUMMARY

Value-added tax (V.A.T.) on goods and services varies widely across the EU in terms of the level of the tax, the threshold of firms’ turnover above which it applies, and bureaucratic burdens that apply. Such differences have hampered cross-border trade within the (digital) single market. Removing those barriers would help small to medium-sized enterprises (SMEs), often cited as drivers of the economy, to grow.
In 2015, after 7 years of development, the mini One-Stop-Shop for services was implemented, whereby sellers can settle their VAT obligations in their own country even if the consumer is in another Member State. The regulation was successful as measured by the adoption rate and reduction in compliance cost. The system is planned to be extended to B2B and to the supply of goods as well as by the introduction of a threshold.

Four challenges for a transnational system are
• harmonizing thresholds across different Member States, but also VAT numbers and other regulation such as call-off stock,
• compliance costs such as system setup costs
• simplification of documentation requirements, and
• communication with SMEs, as many fail among the first few years and cannot afford to get professional advice regarding VAT.
The e-commerce representative called for increased efforts in the digital single market and highlighted the importance of thresholds for to improve the situation for small business sellers. One of the biggest challenges is the burden of collecting information on different VAT regulations.

Event Notes by Robert Kalcik, Research Assistant

 Video and audio recording