Europe: ECOFIN Debates VAT Modifications

April 21, 2017

The Economic and Financial Affairs Council of the European Union (ECOFIN) recently discussed two hot-button topics that could ultimately lead to changes in European VAT law. First, ECOFIN discussed whether Member States should be allowed to reduce-rate electronic publications. This option already exists for ‘physical’ books, newspapers, magazines, and the like, but EU authorities have consistently held that electronic publications should be taxed at the standard rate, similar to other electronically supplied services. Secondly, ECOFIN debated a proposal that would allow select Member States to apply, temporarily, a general reverse charge on all domestic supplies, thus shifting liability for VAT payments from the supplier to the customer. This measure has been suggested by Central European countries as a means of combating VAT fraud, but ECOFIN sees it as a short-term solution only.

Both proposals – for the reduced rate on electronic publications, and for the general reverse charge mechanism – would require unanimous consent by ECOFIN to move forward.

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