(-1)

The Union’s current VAT system which was introduced in 1993 is similar to the European customs system. However, equivalent checks are lacking, which makes it a target for cross-border fraud.

(1a)

The current VAT system would perform better if intra-Community supplies were taxed as if they were domestic transactions. A Council Directive proposal amending Directive 2006/112/EC as regards the introduction of the detailed technical measures for the operation of the definitive VAT system for the taxation of trade between Member States was issued in 2018 and remains under discussion. The provisions included in the amended Council Regulation (EU) No 904/2010 strengthen both the current system and a definitive VAT system.

(2)

Council Directive (EU) XX/XXX (15) [OP please insert number and year of the Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age adopted the same day as this Regulation] introduced into Council Directive 2006/112/EC (16) digital reporting requirements (‘DRR’). Those requirements oblige taxable persons identified for VAT purposes to submit to Member States information on each intra-Community supply of goods, on each intra-Community acquisition of goods and on each supply of a service that is taxable in a Member State other than the one in which the supplier is established. Member States need to exchange and process that information on intra-Community transactions to monitor the correct application of VAT and to detect fraud.

(2)

Council Directive (EU) XX/XXX (15) [OP please insert number and year of the Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age adopted the same day as this Regulation] introduced into Council Directive 2006/112/EC (16) digital reporting requirements (‘DRR’). Those requirements oblige taxable persons identified for VAT purposes to submit to Member States information on each intra-Community supply of goods, on each intra-Community acquisition of goods and on each supply of a service that is taxable in a Member State other than the one in which the supplier is established. Member States need to exchange and process that information on intra-Community transactions to monitor the correct application of VAT and to detect fraud. Those requirements do not apply to defence-related purchases, which are exempt pursuant to Articles 143 and 151 of Directive 2006/112/EC.

(3)

The existing cooperation between Member States’ tax authorities is based on exchanging aggregated information between national electronic systems. The introduction of DRR aims to increase tax collection by providing transaction-by-transaction data to tax administrations in a timely manner. To make those data available to other tax administrations in an efficient manner, and to facilitate a common implementation of analysis and crosschecks, as well as a common interpretation of those analyses and crosschecks, a central system where VAT information is shared is necessary.

(3)

The existing cooperation between Member States’ tax authorities is based on exchanging aggregated information between national electronic systems. The introduction of DRR aims to increase the effectiveness of tax collection procedures by providing transaction-by-transaction data to tax administrations in a timely manner. To make those data available to other tax administrations in an efficient manner, and to facilitate a common implementation of analysis and crosschecks, as well as a common interpretation of those analyses and crosschecks, a secure and up-to-date central system where relevant VAT information is shared is necessary.

(4)

In order to enable Member States to fight VAT fraud more effectively, a central electronic VAT information exchange system (‘central VIES’) for sharing VAT information should be established. That system should receive, from national electronic systems of Member States information about intra-Community transactions as reported by the respective suppliers and acquirers in different Member States. That system should also receive from Member States the VAT identification information of taxable persons making intra-Community transactions. Furthermore, whenever data are changed, the metadata for tracking the modification time should be uploaded into the central VIES as well.

(4)

In order to enable Member States , the European Public Prosecutor’s Office (EPPO), the European Anti-Fraud Office (OLAF), Eurofisc and the European Union Agency for Law Enforcement Cooperation (Europol) to fight VAT fraud more effectively, a central electronic VAT information exchange system (‘central VIES’) for sharing VAT information should be established. That system should receive, from national electronic systems of Member States information about intra-Community transactions as reported by the respective suppliers and acquirers in different Member States. That system should also receive from Member States the VAT identification information of taxable persons making intra-Community transactions. Furthermore, whenever data are changed, the metadata for tracking the modification time should be uploaded into the central VIES as well.

(5)

The VAT identification information of taxable persons making intra-Community transactions should be automatically updated in the central VIES without delay whenever identification information changes, except where Member States agree that such update is not pertinent, essential or useful. Such updates are necessary because the validity of the VAT identification numbers of taxable persons is subject to verification as regards the condition for exempting intra-Community supplies provided for in Article 138 of Directive 2006/112/EC. To provide a reasonable level of assurance to tax administrations with regard to the quality and reliability of such information, information on intra-Community transactions should be automatically updated in the central VIES no later than 1 day after the Member State received the information from the taxable person.

(5)

The VAT identification information of taxable persons making intra-Community transactions should be automatically updated in the central VIES without undue delay whenever identification information changes, except where Member States agree that such update is not pertinent, essential or useful. Such updates are necessary because the validity of the VAT identification numbers of taxable persons is subject to verification as regards the condition for exempting intra-Community supplies provided for in Article 138 of Directive 2006/112/EC. To provide a reasonable level of assurance to tax administrations with regard to the quality and reliability of such information, information on intra-Community transactions should be automatically updated in the central VIES no later than three days after the Member State received the information from the taxable person.

(8)

To assist Member States in their fight against VAT fraud and to detect fraudsters, VAT identification information and VAT information on intra-Community transactions should be retained for 5 years. That period constitutes the minimum period necessary for Member States to carry out controls effectively and investigate suspected VAT fraud or detect such fraud. It is also proportionate considering the massive volume of the intra-Community transaction information and the sensitivity of the information as commercial and personal data.

(8)

To assist Member States in their fight against VAT fraud and to detect fraudsters, VAT identification information and VAT information on intra-Community transactions should be retained for 5 years. That period constitutes the minimum period necessary for Member States and, where appropriate, the EPPO to carry out controls effectively and investigate suspected VAT fraud or detect such fraud. It is also proportionate considering the massive volume of the intra-Community transaction information and the sensitivity of the information as commercial and personal data.

(8a)

Union business data collected through e-invoicing and e-reporting should, for security reasons and economic sovereignty, be stored physically within the Union.

(9)

To detect mismatches in a timely manner and thereby improve the capability to fight VAT fraud, the central VIES should be able to automatically cross-check the information collected from both the supplier and acquirer through the DRR introduced by Directive (EU) XX/XXX [OP please insert number and year of the Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age adopted the same day as this Regulation (17) ]. The results of such cross-checking should be made available to Member States for the appropriate follow-up.

(9)

To detect mismatches in a timely manner and thereby improve the capability to fight VAT fraud, the central VIES should be able to automatically cross-check the information collected from both the supplier and acquirer through the DRR introduced by Directive (EU) XX/XXX [OP please insert number and year of the Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age adopted the same day as this Regulation (17) ]. The results of such cross-checking should be made available to Member States for the appropriate follow-up. For security reasons, the DRR do not apply to defence and national security contracts.

(10a)

To ensure a streamlined process, it is necessary for the central VIES to reflect, in real time, status updates regarding validations of bulk data and regarding company subscriptions to trading partners. It is necessary for such status updates to be reliable in terms of data quality and system stability.

(10b)

Since 2002, the Commission has made available on its website the ‘VIES VAT number validation’ functionality, to enable online checks of the validity of a VAT number. Given the significant increase of the demand on that functionality since its initial conception, significant upgrades are necessary to allow it to handle mass validations, to improve the quality of the information it contains, to enable real-time updates and to reduce downtime. Therefore, in order to allow for the reliable performance of real-time checks of VAT numbers and in order for the central VIES to be fully effective, it is essential that the Commission improve the performance of the VIES VAT number validation functionality.

(10c)

In the interest of simplification and limiting the compliance costs of both businesses, in particularly SMEs, and tax administrations, the Commission should develop a secure and reliable software to connect businesses and national administrations with central VIES.

(11a)

The safeguards provided for in Chapter XV of Regulation (EU) No 904/2010, in particular those provided for in Article 55 thereof, remain applicable to the processing of personal data.

(12)

Access to the information in the central VIES should be provided on a need-to-know basis. That information should not be used for other purposes than to monitor the correct application of VAT and combat VAT fraud. All users should be bound by the confidentiality rules laid down in this Regulation.

(12)

Access to the information in the central VIES should be provided on a need-to-know basis. That information should not be used for other purposes than to monitor the correct application of VAT and combat VAT fraud. All users should be bound by the confidentiality rules laid down in this Regulation. The exchange of information procedures and the access to data is to be pursued in compliance with Regulations (EU) 2016/679  (1a) and (EU) 2018/1725  (1b) of the European Parliament and of the Council and in respect of the Charter of Fundamental Rights of the European Union.

(13)

To fight VAT fraud, Member States’ Eurofisc liaison officials as referred to in Article 36 of Regulation (EU) No 904/2010 should be able to access and analyse VAT information on intra-Community transactions. To monitor the correct application of VAT laws, Member States’ officials who check whether the exemption of VAT for certain imported goods, which is laid down in Article 143(1), point (d), of Directive 2006/112/EC, applies, should also be able to access VAT identification information that is stored in the central VIES. Moreover, for the same reasons, Member States’ competent authorities should select other officials who need to have direct access to the central VIES and grant them such access where needed. Finally, duly accredited persons of the Commission should be able to access the information contained in the central VIES, but only to the extent that such access is necessary for the development and maintenance of that system.

(13)

To fight VAT fraud, Member States’ Eurofisc liaison officials as referred to in Article 36 of Regulation (EU) No 904/2010 and the EPPO, OLAF and Europol should be able to access and analyse VAT information on intra-Community transactions. To monitor the correct application of VAT laws, Member States’ officials who check whether the exemption of VAT for certain imported goods, which is laid down in Article 143(1), point (d), of Directive 2006/112/EC, applies, should also be able to access VAT identification information that is stored in the central VIES. Moreover, for the same reasons, Member States’ competent authorities should select other officials who need to have direct access to the central VIES and grant them such access where needed. Finally, duly accredited persons of the Commission should be able to access the information contained in the central VIES, but only to the extent that such access is necessary for the development and maintenance of that system. Accredited persons of the Commission should not under any circumstances infringe the taxpayers’ right to confidentiality. According to the EPPO’s annual report for 2022, 47% of the overall estimated amount for which the EPPO carried out an active investigation resulted from VAT fraud. For this reason, it is essential to grant direct access to the central VIES system to authorised staff of the EPPO. Following the same logic a similar authorisation should be granted to authorised officials of OLAF.

(14)

To investigate suspected VAT fraud and to detect such fraud, the information systems supporting the Eurofisc network in the fight against VAT fraud, including the Transaction Network Analysis system and the central electronic system of payment information (“CESOP”), should have direct access to the central VIES.

(14)

To investigate suspected VAT fraud and to detect such fraud, the information systems supporting the Eurofisc network in the fight against VAT fraud, including the Transaction Network Analysis system and the central electronic system of payment information (“CESOP”), the EPPO, OLAF and Europol should have direct access to the central VIES.

(14a)

The EPPO should also have direct access to the central VIES in so far as necessary for the performance of its tasks referred to in Article 4 of Council Regulation (EU) 2017/1939  (1a) , and in accordance with Article 43 of that Regulation.

(16)

In order to ensure uniform conditions for the implementation of Regulation (EU) No 904/2010, implementing powers should be conferred on the Commission in respect of the tasks to be carried out by the Commission for technically managing the central VIES, the technical details concerning the identification and access of officials and electronic systems to the central VIES, the technical details and format of the information transmitted to the central VIES and the roles and responsibilities of Member States and the Commission when acting as controller and processor under Regulations (EU) 2016/679 (18) and (EU) 2018/1725 (19) of the European Parliament and of the Council. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (20) .

(16)

In order to ensure uniform conditions for the implementation of Regulation (EU) No 904/2010, implementing powers should be conferred on the Commission in respect of the tasks to be carried out by the Commission for technically managing the central VIES, the technical details concerning the identification and access of officials and electronic systems to the central VIES, the technical details and format of the information transmitted to the central VIES and the roles and responsibilities of Member States and the Commission when acting as controller and processor under Regulations (EU) 2016/679 (18) and (EU) 2018/1725 (19) of the European Parliament and of the Council. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (20). Any draft implementing act is to be submitted to the European Parliament for information, in order to enable the exercise of its rights.

(17)

VAT fraud is a common problem for all Member States. Member States alone do not have the information necessary to ensure that the VAT rules are correctly applied and to tackle VAT fraud. Since the objective of Regulation (EU) No 904/2010, the fight against VAT fraud, cannot be sufficiently achieved by the Member States because of the cross-border nature of the internal market, but can be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(17)

VAT fraud is a common problem for all Member States. Member States alone do not have the information necessary to ensure that the VAT rules are correctly applied and to tackle VAT fraud. Since the objective of Regulation (EU) No 904/2010, the fight against VAT fraud, cannot be sufficiently achieved by the Member States because of the cross-border nature of the internal market, but can be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective. The level of collection, centralisation and automatic processing of data on intra-Community transactions, which allows the tax authorities of the Member State to carry out a complete mapping of the flows between companies within the Union, requires the establishment of a control process at Union level to ensure the proper functioning of the system and to avoid any deviation in the use of those data.

(17a)

The mechanism by which carousel fraud functions has been clearly laid out by the Commission in its report of 16 April 2004 to the Council and the European Parliament on the use of administrative cooperation arrangements in the fight against VAT fraud.

(21)

The abuse of Import One-Stop-Shop (‘IOSS’) VAT identification numbers has been identified by stakeholders as a potential risk. To better secure the correct use and the verification process of IOSS VAT identification numbers, it is necessary to extend Article 47h of Regulation (EU) No 904/2010 granting customs authorities access to information about the IOSS registered trader, which will improve the risk management and control capabilities of those customs authorities.

(21)

The abuse of Import One-Stop-Shop (‘IOSS’) VAT identification numbers , whether intentionally or negligently, has been identified by stakeholders as a potential risk. To better secure the correct use and the verification process of IOSS VAT identification numbers, it is necessary to extend Article 47h of Regulation (EU) No 904/2010 granting customs authorities access to information about the IOSS registered trader, which will improve the risk management and control capabilities of those customs authorities.

(22a)

The changes related to the IOSS scheme require a realistic implementation schedule. Therefore, the extension of the scope of the IOSS scheme should apply from 1 January 2026 in order to avoid fragmented compliance and implementation that would increase the administrative burden for businesses, in particular SMEs, and for platforms facilitating business-to-customer sale, in particular small marketplaces.

(24)

This Regulation respects the fundamental rights and observes the principles recognised by the Charter of Fundamental Rights of the European Union. In particular, this Regulation seeks to ensure full respect for the right of protection of personal data laid down in Article 8 of the Charter. In that regard, this Regulation strictly limits the amount of personal data that will be made available to the tax authorities. The processing of intra-Community transaction information pursuant to this Regulation should only occur for the purposes of this Regulation.

(24)

This Regulation respects the fundamental rights and observes the principles recognised by the Charter of Fundamental Rights of the European Union. In particular, this Regulation seeks to ensure full respect for the right of protection of personal data laid down in Article 8 of the Charter. In that regard, this Regulation strictly limits the amount of personal data that will be made available to the tax authorities, since access by tax authorities to information on the personal purchases of individuals poses a serious risk to privacy . The processing of intra-Community transaction information pursuant to this Regulation should therefore occur only for the purposes of this Regulation.

(24a)

In line with the principles of proportionality and the protection of fundamental rights, the transmission of data by businesses is to be used only in the context of the fight against VAT fraud. The authorities concerned are to respect the trade secrets, in accordance with the Directive (EU) 2016/943 of the European Parliament and of the Council  (1a) , namely the know-how and expertise related to the products and services of Union businesses, so as not to jeopardise the competitiveness of such businesses.

(25)

The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 and delivered an opinion on […]

(25)

The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 and delivered an opinion on 3 March 2023.

(25a)

In keeping with the public interest and the financial interests of the Union, whistleblowers enjoy effective legal protection under Directive (EU) 2019/1937 of the European Parliament and of the Council  (1a) .

(27a)

Article 36 of Regulation (EU) No 904/2010 has been amended to take into account the role of Europol and OLAF. It should also reflect the role of the EPPO. As laid down in Article 13(1) of Regulation (EU) 2017/1939, the European Delegated Prosecutors of the EPPO act on behalf the EPPO in their respective Member States and have the same powers as national prosecutors in respect of investigations, prosecutions and bringing cases to judgment. In this capacity, they may engage with the Eurofisc liaison official in their respective Member State. They should be granted the same power in their capacity as European Delegated Prosecutors pursuant to Article 43 of Regulation (EU) 2017/1939. In so far as necessary for the performance of the tasks of the EPPO, direct reporting from Eurofisc to the EPPO should be authorised. Selected staff of the EPPO should also be allowed to request information from Eurofisc.

(1a)

in Article 2(1), the following points are added:

‘(va)

“European Delegated Prosecutors” means the European Delegated Prosecutors as referred to in Article 13(1) of Council Regulation (EU) 2017/1939  (*) ;

(vb)

“staff of the EPPO” means staff of the EPPO as defined in Article 2, point (4) of Regulation (EU) 2017/1939;

(vc)

“officials of OLAF” means officials employed by the European Anti-Fraud Office established by Commission Decision 1999/352/EC, ECSC, Euratom  (**) and to whom the Director General granted investigations powers.

(3a)

in Article 17, the following paragraph is inserted:

(3b)

in Article 33, paragraph 1 is replaced by the following:

(3c)

in Article 33(2), the following point is added:

‘(da)

cooperate with the EPPO, Europol and OLAF, in accordance with their respective mandates and competences, in particular Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council  (*) .

(3d)

in Article 36, the following paragraph is added:

(a)

to store the information referred to in points (b), (c) and (d) of this Article and Article 24g(2) of this Regulation ;

(a)

to store the information referred to in points (b), (c) and (d) of this Article and Article 24g(2) of this Regulation , in a secure, resilient and reliable infrastructure ;

(c)

to aggregate information in respect of persons to whom a VAT identification number was issued and collected pursuant to Article 213 of Directive 2006/112/EC and make the following details accessible to the officials or electronic systems referred to in Article 24k:

(c)

to aggregate information in respect of persons to whom a VAT identification number was issued and collected pursuant to Article 213 of Directive 2006/112/EC and make the following details accessible to the officials or electronic systems referred to in Article 24k , in a secure system that ensures confidentiality :

(e)

to make the information referred to in Article 24g(2) and in points (b), (c) and (d) of this Article accessible to the officials or electronic systems referred to in Article 24k.

(e)

to make the information referred to in Article 24g(2) and in points (b), (c) and (d) of this Article accessible to the officials or electronic systems referred to in Article 24k , in a secure system that ensures confidentiality .

(ba)

European Delegated Prosecutors and the relevant staff of the EPPO who hold a personal user identification for the central VIES and where that access is in connection with an investigation into suspected VAT fraud or is to detect VAT fraud;

(bb)

the relevant officials of OLAF, where that access is in connection with an investigation into suspected VAT fraud or is to detect VAT fraud;

(bc)

Europol staff who cooperate with EPPO in the framework of the Working Arrangement establishing cooperative relations between the EPPO and Europol, which entered into force on 19 January 2021, where the investigation aims to prevent and combat any form of serious organised and international crime and cybercrime and affecting the financial interests of the Union;

(d)

the electronic systems carrying out swift exchange, processing and analysis of targeted information on cross-border fraud by Eurofisc.

(d)

the electronic systems carrying out swift exchange, processing and analysis of targeted information on cross-border fraud by Eurofisc and the EPPO .