The growth of electronic commerce, e-commerce, facilitates the cross-border sale of goods and services to final consumers in the Member States. In that context, cross-border e-commerce refers to supplies upon which the VAT is due in a Member State, but the supplier is established in another Member State, in a third territory or in a third country. However, fraudulent businesses exploit e-commerce opportunities in order to gain unfair market advantages by evading their VAT obligations. Where the principle of taxation at destination applies, since consumers have no accounting obligations, the Member States of consumption need appropriate tools to detect and control such fraudulent businesses. It is important to combat cross-border VAT fraud caused by the fraudulent behaviour of some businesses in the area of cross-border e-commerce.
In the aforementioned context, the Council of the EU adopted, on February 18, a set of rules to facilitate detection of tax fraud in cross-border e-commerce transactions.
The new measures will enable member states to collect, in a harmonised way, the records made electronically available by payment service providers, such as banks. In addition, a new central electronic system will be set up for the storage of the payment information and for the further processing of this information by national anti-fraud officials.
Concretely, according to the press release, this set of new rules consists of two legislative texts:
- amendments to the VAT directive putting in place requirements on payment service providers to keep records of cross-border payments related to e-commerce. This data will then be made available to national tax authorities under strict conditions, including those related to data protection.
- amendments to a regulation on administrative cooperation in the area of VAT. These amendments set out the details of how national tax authorities will cooperate in this area to detect VAT fraud and control compliance with VAT obligations.
The texts complement the VAT regulatory framework for e-commerce coming into force in January 2021 which introduced new VAT obligations for online marketplaces and simplified VAT compliance rules for online businesses. The new measures will apply as of 1 January 2024.
For further information: E-commerce – new rules for exchange of VAT payment data