EU to Adopt VAT Rules to Increase Fraud Detection, 'Cut Red Tape'

The Council of the European Union reached an agreement on a new set of rules relating to exchanges of value-added tax payment data, which will help detect tax fraud in cross border transactions and simplify reporting obligations, the council said Nov. 8. The new rules will allow EU countries to collect electronic records of “payment service providers” and will create a new “central electronic system” for processing by anti-fraud officials. The measures are expected to increase compliance with EU VAT obligations, the council said.

Through a streamlined VAT record system, the regulations will also “help to cut red tape” and “administrative burdens” for small and medium-sized businesses, the European Commission said Nov. 8. It will “create a level playing field for businesses regardless of where they are established in the EU, since a patchwork of approaches across the EU means that thresholds to qualify from VAT exemption vary,” the commission said. Some companies will be eligible for “further simplifications in dealing with VAT obligations such as registration and reporting,” according to the commission.

The rules will be adopted by the council after a legal review of the agreement text, the council said. The commission expects the new rules surrounding fraud detection to take effect in January 2024, and the “new and improved VAT scheme” for small and medium-sized businesses to take effect January 2025.