European Parliament’s Committee on Internal Market and Consumer Protection commissioned Copenhagen Economics to undertake a study on simplifying and modernising VAT system in digital single market for e-commerce.

The study highlights a number of barriers that the current VAT system presents to cross-border sales of physical and in particular digital content e-commerce products. To mention a few, differences in VAT rates within the EU for the same types of  e-commerce products, problem of identification of B2C digital services when the destination principle is put in place since 2015 (who, where are you selling the service to and when?) and others.   To address the problems; the study suggests, among others, three priorities to be taken.

First is to provide more clarity to traders and VAT authorities on how the identification problems can be addressed in practice.

Second is to achieve consistent and non-distorting application of VAT rules across Member States.

Third is to design a guiding principle of proportionality: a balance between protecting the interest of Member States and the compliance cost on traders. The study also recommends a new VAT collection system as there is a substantial scope for reducing both compliance costs and the VAT gap by improving the existed VAT collection system.

You can find the link to our study published by EP here

For more information, contact partner Sigurd Næss-Schmidt