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Taxation and Customs Union

Single VAT Area

On October 4th of 2017, the European Commission has proposed a series of fundamental principles and key reforms for the EU's VAT area.

This proposal aims at improving and modernising the current VAT system to…

  • avoid VAT fraud and the huge losses in government revenue due to it
  • make life simpler for companies wanting to do business in the EU Single Market


The Commission proposes:

The cornerstones presented today will be followed in 2018 by another proposal that will lay down detailed technical provisions needed to operate the definitive VAT system.


The October proposal contains several fundamental principles or cornerstones for a definitive VAT regime.

  1. The principle of taxation at destination for intra-EU cross-border supplies of goods. Under this principle the VAT rate of the Member State of destination is charged.
  2. The confirmation that the vendor is liable in the case of an intra-EU supply of goods as a general rule, which means that the seller is responsible for charging and collecting the VAT.

However, if the buyer is a reliable taxpayer, a so called "certified taxable person" it is he who is liable for payment of the VAT due directly to the treasury of the Member State of destination.

  1. The One Stop Shop will be extended. Businesses will be able to make declarations, payments and deductions for cross-border supplies of goods through a single online portal, as is already the case for the supply of e-services.

Member States will then pay the VAT to each other directly, as is already the case for the supply of e-services.

(click on the image to enlarge)

More information on the One Stop Shop in the factsheet.


The Commission also presented four quick fixes to improve the day-to-day functioning of the current VAT system, until the definitive regime will have been fully agreed and implemented.

  • Simplification of VAT rules for companies moving goods from one Member State to another Member State where they are to be stored before being supplied to a customer known in advance. The described situation is referred to as "call-off stock arrangements". This simplification is limited only to certified taxable persons – a concept which is explained in the following section;
  • Simplification provided for chain transaction situations identifying the supply with which the intra-Community transport of goods should be linked. This simplification is limited only to certified taxable persons;
  • Simplification of the proof of transport of goods between two Member States needed for the application of the exemption to intra-Community supplies. This simplification is limited only to certified taxable persons;
  • Clarification that, in addition to the proof of transport, the VAT number of the commercial partners recorded in the electronic EU VAT-number verification system (VIES) is required in order to apply the cross-border VAT exemption under the current rules.


A business can apply to its national tax authority and become a Certified Taxable Person (CTP) by proving compliance with pre-defined criteria such as:

  • regular payment of taxes
  • internal controls
  • proof of solvency

Once certified, the company will be considered a reliable tax-payer.

Both the CTP and the companies that do business with it will enjoy a number of simplified procedures for the declaration and payment of cross-border VAT.

The status of Certified Taxable Person will be mutually recognised by all EU Member States.


  • Instead, fraudsters are known to use this money to finance criminal and possibly even terrorist activities.
  • The VAT system needs to be made more fraud-proof to protect government revenue.
  • Life needs to be made simpler, especially for small companies, which currently experience barriers to selling in the Single Market.


The proposals will be forwarded to the European Parliament and the European Economic and Social Committee for consultation, and to the Council for their agreement. They will require unanimous agreement from all Member States in the Council before they can enter into force.

The proposals are the first step in a long term plan to modernise the VAT area. The next planned steps are…

November 2017

  • Proposal for a modernised system of setting VAT rates, giving greater flexibility to Member States as regards VAT rates.
  • Proposal to reinforce administrative cooperation between Member States, enabling Member States to share information more quickly and to cooperate more.
  • Proposal to simplify VAT for SMEs by updating special VAT rules for smaller companies.

Spring 2018

  • Full technical adaptation of the VAT directive to reflect the changes needed to practically implement the VAT definitive regime as proposed by the Commission.

In 2022

  • Entry into force of the Single EU VAT area, once agreed.


How does VAT fraud operate?

VAT fraud can occur when a company that has collected the VAT from its buyer and should pay this amount to the tax authority does not pay, but is liquidated instead and its owner or manager walks away with the money.

Nevertheless, if the company purchased the goods in its own Member State it paid VAT on the purchase.

Therefore the fraud is limited to the difference between the VAT paid when buying the goods and the VAT collected when selling them.

More money is at stake when the company buys goods from another Member State, because purchasing the goods is VAT free, and when selling the goods the company receives VAT, and therefore has the entire VAT.

Proportionally more money can be stolen.

Because the company disappears, this type of fraud is also called missing trader fraud.

Carousel fraud goes even further. In this case the same goods are bought and resold by the fraudster via middlemen several times.

Each time the amount of collected VAT increases and the company goes into liquidation before the tax authority can collect the accumulated VAT.

The name carousel fraud reminds of the way the same product goes around several times before the fraudsters disappear.

For a more detailed explanation about how VAT Fraud works and how the new proposal will make the system more fraud-proof – please consult the MEMO.

Background information and related pages