(1)

Council Directive 2006/112/EC (1) allows Member States to continue to apply their special schemes to small enterprises in accordance with common provisions and with a view to closer harmonisation. However, those provisions are outdated and do not reduce the compliance burden of small enterprises as they were designed for a common system of value added tax (VAT) based on taxation in the Member State of origin.

(1)

Council Directive 2006/112/EC (2) allows Member States to continue to apply their special schemes to small enterprises in accordance with common provisions and with a view to closer harmonisation. However, those provisions are outdated and do not fulfil their objective of reducing the compliance burden of small enterprises as they were designed for a common system of value added tax (VAT) based on taxation in the Member State of origin.

(2)

In its VAT action plan (3), the Commission announced a comprehensive simplification package for small enterprises aimed at reducing their administrative burden and helping create a fiscal environment to facilitate their growth and the development of cross-border trade. This would entail a review of the special scheme for small enterprises as outlined in the Communication on the follow-up to the action plan on VAT  (4). The review of the special scheme for small enterprises constitutes therefore an important element of the reform package set out in the VAT action plan.

(2)

In its VAT action plan (5), the Commission announced a comprehensive simplification package for small enterprises aimed at reducing their administrative burden and helping to create a fiscal environment to facilitate their growth and the development of cross-border trade, as well as to increase VAT compliance. Small enterprises in the Union are particularly active in certain sectors which operate across borders, such as construction, communications, food service and retail trade, and can constitute an important source of employment. To achieve the objectives of the VAT action plan , a review of the special scheme for small enterprises as outlined in the Communication on the follow-up to the VAT action plan (6) is necessary . The review of the special scheme for small enterprises constitutes therefore an important element of the reform package set out in the VAT action plan.

(3)

The review of this special scheme is closely linked to the Commission’s proposal setting out the principles for a definitive VAT system for cross-border business-to-business trade between Member States on the basis of the taxation of cross-border supplies of goods in the Member State of destination (7). The VAT system’s shift towards destination-based taxation has identified that a number of the current rules are not suited for a destination-based tax system.

(3)

The review of this special scheme is closely linked to the Commission’s proposal setting out the principles for a definitive VAT system for cross-border business-to-business trade between Member States on the basis of the taxation of cross-border supplies of goods in the Member State of destination (8). The VAT system’s shift towards destination-based taxation has identified that a number of the current rules are not suited for a destination-based tax system. The main difficulties of enhanced cross-border trade for small enterprises arise because of the complex and diverse rules across the Union relating to VAT, as well as the fact that the national exemption for small enterprises only benefits small enterprises in the Member State in which they are established.

(4)

In order to address the issue of the disproportionate compliance burden faced by small enterprises, simplification measures should be available not only to enterprises that are exempt under the current rules, but also to those considered small in economic terms. For the purposes of the simplification of the VAT rules, enterprises would be considered ‘small’if their turnover qualifies them as micro enterprises under the general definition provided for in Commission Recommendation 2003/361/EC (9).

(4)

In order to address the issue of the disproportionate compliance burden faced by small enterprises, simplification measures should be available not only to enterprises that are exempt under the current rules, but also to those considered small in economic terms. The availability of such measures is particularly relevant as a majority of small enterprises, whether exempted or not, are in practice obliged to use the services of advisors or external consultants in order to assist them in complying with their VAT obligations, which adds a financial burden on those enterprises. For the purposes of the simplification of the VAT rules, enterprises would be considered ‘small’if their turnover qualifies them as micro enterprises under the general definition provided for in Commission Recommendation 2003/361/EC (10).

(6)

Small enterprises may only benefit from the exemption where their annual turnover is below the threshold applied by the Member State in which the VAT is due. In setting their threshold, Member States should abide by the rules on thresholds laid down by Directive 2006/112/EC. Those rules, most of which were put in place in 1977, are no longer suitable.

(6)

Small enterprises may only benefit from the exemption where their annual turnover is below the threshold applied by the Member State in which the VAT is due. In setting their threshold, Member States should abide by the rules on thresholds laid down by Directive 2006/112/EC. Those rules, most of which were put in place in 1977, are no longer suitable. For reasons of flexibility and to ensure that it is possible for Member States to set appropriate lower thresholds proportional to the size and the needs of their economy, only maximum thresholds should be set at Union level.

(8)

Member States should be left to set their national threshold for the exemption at the level that suits their economic and political conditions best, subject to the upper threshold provided for under this Directive. In this regard, it should be clarified that where Member States apply different thresholds, this would need to be based on objective criteria.

(8)

Member States should be left to set their national threshold for the exemption at the level that suits their economic and political conditions best, subject to the upper threshold provided for under this Directive. In this regard, it should be clarified that where Member States apply different thresholds, this would need to be based on objective criteria. In order to facilitate cross-border business, the list of national thresholds for exemption should be easily accessible to all small enterprises willing to operate in several Member States.

(12)

Where an exemption applies, small enterprises availing themselves of the exemption should, at a minimum, have access to simplified VAT registration, invoicing, accounting and reporting obligations.

(12)

Where an exemption applies, small enterprises availing themselves of the exemption should, at a minimum, have access to simplified VAT registration, invoicing, accounting and reporting obligations. In order to avoid confusion and legal uncertainty in Member States, the Commission should produce guidelines on simplified registration and accounting, explaining in more detail the procedures to be simplified and to what extent. By ... [three years after the date of entry into force of this Directive], that simplification should be subject to evaluation by the Commission and Member States to assess whether it has an added value for, and a real positive impact on, enterprises and consumers.

(13)

Furthermore, in order to ensure compliance with conditions for exemption granted by a Member State to enterprises not established there, it is necessary to require prior notification of their intention to use the exemption. Such notification should be made by the small enterprise to the Member State where it is established. That Member State should thereafter, based on the information declared on the turnover of that enterprise, provide that information to the other Member States concerned.

(13)

Furthermore, in order to ensure compliance with conditions for exemption granted by a Member State to enterprises not established there, it is necessary to require prior notification of their intention to use the exemption. Such notification should be made through an online portal to be set up by the Commission. The Member State of establishment should thereafter, based on the information declared on the turnover of that enterprise, inform the other Member States concerned.  Small enterprises can at any time notify their Member State of registration of their wish to revert back to the general VAT system.

(15)

To reduce the compliance burden of small enterprises that are not exempted, Member States should be required to simplify VAT registration and record keeping and to prolong tax periods so as to provide for less frequent filing of VAT returns.

(15)

To reduce the compliance burden of small enterprises that are not exempted, Member States should be required to simplify VAT registration and record keeping. Moreover, a one-stop shop for filing VAT returns in different Member States should be established by the Commission .

(17)

The objective of this Directive is to reduce the compliance burden of small enterprises, which cannot be sufficiently achieved by the Member States and can therefore be better achieved at Union level. As a result, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the European Union. In accordance with the principle of proportionality as set out in Article 5, this Directive does not go beyond what is necessary in order to achieve these objectives.

(17)

The objective of this Directive is to reduce the compliance burden of small enterprises, which cannot be sufficiently achieved by the Member States and can therefore be better achieved at Union level. As a result, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the European Union. In accordance with the principle of proportionality as set out in Article 5, this Directive does not go beyond what is necessary in order to achieve these objectives. Nonetheless, VAT controls arising as a result of compliance processes are valuable anti-tax fraud instruments and easing the compliance burden for small enterprises is not to be done at the expense of the fight against VAT fraud.

(17)

Articles 291 to 294 are deleted;

(17)

Articles 291 and 292 are deleted;

(1)

improvements to the special scheme for small enterprises;

(2)

the adaptation of national systems as regards exemptions and graduated tax relief ;

(3)

the adaptation of the ceilings provided for in Section 2.

(17a)

(17b)