International agenda for VAT cooperation
The objective is to provide Member States with the necessary tools to enforce the VAT due by suppliers established in non-EU countries but selling to EU customers. International cooperation in the field of VAT is crucial with neighbouring countries, main trading partners and countries that are leaders in e-commerce in order to detect fraudsters and enforce VAT collection.
Mutual administrative assistance with non-EU countries is the logical necessary step to try to implement a wide range of tools ensuring compliance, antifraud measures and help enforce the collection of the missing VAT.
The Union has already concluded international agreements with Norway and the United Kingdom in the field of administrative cooperation for the exchange of information, fighting against VAT fraud and tax debt recovery assistance.
Cooperation with Norway
The EU-Norway Agreement on administrative cooperation, fight against fraud and assistance on recovery of claims in the field of VAT entered into force on 1 September 2018 after being initialled in May 2017.
The content of the Agreement reflects the administrative cooperation tools, laid down in Council Regulation (EU) No 904/2010 on administrative cooperation and fight against fraud in the field of VAT and Council Directive 2010/24/EU on mutual assistance for the recovery of claims relating to taxes, duties and other measures, with the exclusion of mutual access to electronic databases and systems.
The Agreement is the first of this type between the EU and a third country. It allows the tax authorities of the EU and Norway to exchange information and carry out joint activities in order to fight VAT fraud.
Article 41 of the Agreement sets up a Joint Committee (JC) composed of representatives of both parties to ensure the proper functioning and implementation of the Agreement.
The second meeting of the Joint Committee took place in November 2021 and was hosted by Norway. Representatives of 12 Member States were present as observers. During the meeting, Norway requested to open negotiations to amend the Agreement in order to implement some new administrative cooperation tools.
On 17 June 2022, the Council adopted a Decision empowering the Commission to open negotiations to amend the EU-Norway Agreement by introducing some of the new administrative cooperation tools. This would help to enhance the cooperation between the Member States and Norway and strengthen the fight against VAT fraud and the recovery of claims.
Cooperation with the United Kingdom
Negotiations on the future partnership between the EU and the UK started on 2 March 2020. On 24 December 2020, the EU negotiators reached an agreement with the United Kingdom on the terms of its future cooperation with the European Union. The agreement applied provisionally from 1 January 2021.
On 29 April 2021, the Council adopted a decision on the conclusion of the EU-UK trade and cooperation agreement and the security of information agreement. This was the last step for the EU in the ratification of the post-Brexit deal. Both agreements entered into force on 1 May 2021 (OJ L 149, 30.4.2021, p. 10–2539).
The UK-EU future economic partnership agreement reached on 24 December 2020 includes a protocol on administrative cooperation and combating fraud in the field of VAT, as well as mutual assistance for the recovery of claims relating to taxes and duties. The objective of the Protocol is to establish the framework for administrative cooperation and mutual assistance between the Member States and the United Kingdom, in order to enable their authorities to assist each other in ensuring compliance with VAT legislation and in protecting VAT revenue and in recovering claims relating to taxes and duties.
In particular, for what concerns administrative cooperation in the field of VAT, the Protocol lays down rules and procedures to ensure effective exchange of information between the EU and the UK, including spontaneous exchange of information and different forms of administrative enquiries, similar to what is available currently between the Member States.
In respect of tax debt recovery, the main elements that are in place between the Member States are also available for all indirect taxes (VAT, customs and excise duties). Moreover, the communication network and the standard forms may also be used for recovery assistance with other taxes, if there is another legal basis for such assistance.
The adoption of formal decisions and other practical solutions related to the implementation of some aspects of the Protocol will be the responsibility of the Trade Specialised Committee on Administrative Cooperation in VAT and Recovery of Taxes and Duties, provided for in the Trade and Cooperation Agreement.
Pending the adoption by this Specialised Committee of the detailed rules and in order to ensure the immediate functioning of the Protocol, the Tax Administrations of the Member States shall make use of the rules set out in the Annex to the Protocol.
The Commission and the UK are working on the full implementation of the VAT Protocol in order to finalise the adoption of the decisions by the Specialised.
Cooperation with China
The Commission has also initiated exploratory talks with the People’s Republic of China (‘China’) to establish a framework for administrative cooperation to fight against fraud and for tax debt recovery assistance in the field of VAT, especially in the field of e-commerce.
The idea of a future administrative cooperation framework received strong political support at the 8th meeting of the High Level Trade and Economic Dialogue between the EU and China in July 2020. As a compromise between TAXUD’s position of starting negotiations for an international agreement on exchange of information and the State Tax Administration of China (STA) inclination toward a non-binding cooperation framework, TAXUD and STA agreed to explore the idea of a common “staged approach”.
The Member States endorsed the Commission’s proposition of such “staged approach” (COREPER meeting of 3 March 2021: the Council authorised the Commission to enter into negotiations with China in view of the conclusion of a non-binding Memorandum of Understanding on administrative cooperation in the field of VAT.). In the short term, a Memorandum of Understanding would streamline the process towards a binding international agreement for the exchange of information to fight VAT fraud. The European Commission will explore how to follow-up the above mentioned political endorsements together with the Chinese counterpart.
Cooperation with other third countries
The Joint Statement of the 14 July 2021 EU-Canada summit includes a point for the development of a mutually beneficial administrative cooperation in the field of VAT/Goods and Services (GST) to fight against tax fraud, especially in the e-commerce sector, between the EU and Canada. The Commission and the Canada Revenue Agency will have to follow-up the above-mentioned political statement.
The Commission will keep an open approach toward other third countries that may represent a priority for the EU in terms of trade volume or strategic interest in the field of fighting VAT fraud.