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The latest changes to VAT rates from countries within the European Union. 

Denmark

From 1 January 2015 the Danish authorities will allow companies 100% input VAT recovery on hotel accommodation costs. This applies uniformly to resident and non-resident companies as previously only 75% was allowed. In 2014 Denmark made a similar change when it increased the percentage of input VAT recovery for restaurant VAT to 75%, previously 50%.

As of 1 July 2014 Denmark implemented an extended reverse charge for domestic supplies of consumer electronic goods:

  • mobile devices
  • laptops
  • computers
  • games consoles.

The reverse charge only applies to business that do not ‘mainly or exclusively sell to private individuals’. The definition of ‘mainly or exclusively’ is simply defined as more than 50% of total sales. These changes will bring their own problems, firstly making sure accounting or not accounting for VAT is done correctly and secondly as there is no definitive list a business will need to see if their product falls within this reverse charge regime. 

Lithuania

On 1 January 2015 Lithuania will join the Euro, making it the 19th member of the Euro area. The decision was granted by the General Affairs Council of Ministers of the European Union. The fixed exchange rate has been set at:

  • Euro 1 = LTL 3.45280.

Further guidance will be issued later, as businesses dealing with Lithuania will be concerned about invoicing and reporting and whether the Lithuanian tax authority will be taking a ‘light touch’ approach to errors.

Czech Republic

The Czech Republic has been given permission by the EU to introduce a second reduced rate of VAT, a 10% rate. This will apply to foodstuffs, medications for humans and books. The additional rate will be implemented from 1 January 2015. The Czech Republic already has a reduced rate at 15% and this new reduced rate will work alongside this. The standard rate of VAT remains unchanged at 21%. 

France

In an effort to attract importers, the French government will be implementing an import VAT deferment simplification. This is an option available to EU countries and has been taken up by many.

In terms of how the scheme works, the EU member state can opt to defer the collection of import VAT until the VAT return has been submitted. The other option is the import VAT is paid to the Customs authority when the goods are cleared. Not using the deferment scheme puts the importer at a cash flow disadvantage.

From 1 January 2015 France will be adopting the import VAT deferment with the hope of attracting new importers, with one catch. This deferment will only be available to importers that have implemented a simplified procedure which allows Economic Operators to use the local clearance procedures or they are allowed to use the simplified declaration procedures in their member state. In France that is known as PDU or the Procedure de Domiciliation Unique.

Portugal

From 1 January 2015 the standard rate of VAT will increase by 0.25% to 23.25%. It is widely accepted that this due to economic issues faced by Portugal. VAT has already been raised twice in recent years, by 1% in 2008 and a further 2% in 2011. There is also going to be an increase in employees’ social security contribution to help Portugal achieve its deficit target. 

Standard EU VAT return

The idea of completing a standardised VAT return across the EU comes a step closer. The initial proposal was made in October 2013 which will standardise the VAT return to five compulsory boxes that need to be completed. There will be some compromise allowing individual state members up to a maximum of 26 additional optional boxes.

The proposal was to standardise the VAT returns across the EU, where currently the number of boxes that need to be completed varies from four to over 100. This is seen as a real barrier for businesses wishing to operate outside their own jurisdiction and against what the single EU market represents.

The other standardisation is requiring returns to be submitted monthly with concession for smaller businesses with an annual turnover below €2m to submit quarterly returns.  Annual returns will no longer be an option.

Currently a political consensus has been reached by all 28 member states tentatively moving towards the target implementation date of January 2017, though there are many stages to go through.

(article by ACCA)