Tax alert 29 – Extension of VAT simplification measures. VAT rates for electronic publications

In this issue:

  • Extended application of optional reverse-charge mechanism in relation to supplies of certain goods and services susceptible to fraud
  • VAT rates applicable for electronic publications

Extended application of optional reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud

The Council adopted, on 24 September 2018, a directive prolonging until 30 June 2022 the possibility for member states:

(i) to apply the reverse charge mechanism to combat existing fraud in supplies of goods and services included in article 199a(1) of the EU VAT Directive;

(ii) to use the quick reaction mechanism to combat VAT fraud.

The Directive will enter into force on the 20th day following that of its publication in the Official Journal of the European Union.

The application of the ‘domestic’ reverse charge mechanism (the implementation in the Romanian VAT law of the mechanism described under point (i) above), in case of certain supplies of goods / services, is currently regulated under art. 331 of the Romanian Tax Code and would, under the current VAT rules, be possible only until the end of this year.

The newly adopted directive allows the application of the so-called ‘VAT simplification measures’, as detailed above, until 30 June 2022.

It is intended that this directive will have effect until the date for implementing the new, ‘definitive’ VAT system at the level of the European Union.

The text of the directive can be accessed by using the below link:

Directive on the optional reverse charge mechanism and Quick Reaction Mechanism

VAT rates applicable for electronic publications

On 6 November 2018, the Council adopted also a directive allowing alignment of VAT rules for electronic publications and publications on physical support. The Directive will enter into force on the 20th day following that of its publication in the Official Journal of the European Union.

Thus, member states will be able to apply reduced, super-reduced or zero VAT rates, as currently applicable under their national VAT rules for publications on physical support, also to electronic publications.

Under the current European VAT rules, electronically supplied services are taxed at the standard VAT rate (19% VAT rate in case of Romania) while publications on a physical support may benefit from reduced / ‚super-reduced’ / zero rates. According to the Romanian VAT law, a 5% reduced VAT rate is applicable for the supply of e.g. books, magazines, newspapers.

Following the adoption of this directive, the same VAT treatment could also apply to electronic publications.

It is important to note that these new rules will apply until the introduction of a new, ‘definitive’ VAT system. There are currently proposals for the implementation of the new VAT system at the level of the European Union, which should increase, among others, the flexibility of member states in applying VAT rates.

The text of the directive can be accessed by using the below link:

Directive on VAT rates for publications

 

Author: Catalina Cambei – Manager, Indirect Tax

 

For additional information, please contact:

Alex Milcev, Partner – Head of Tax & Legal

Email: office@ro.ey.com



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