Brussels (The Brussels Morning Newspaper) – The European Commission has proposed to amend the VAT Directive to permit for a digital VAT exemption certificate.
What is the EU’s new proposal for VAT exemptions?
The proposal seeks to amend EU Council Directive 2006/112/EC (the VAT Directive) by submitting an electronic exemption certificate to ensure that a transaction permits specific exemptions under the Directive. Presently, the VAT and/or Excise Duty exemption certification is paper-based and needs a handwritten signature.
This action to an electronic certificate aligns with the EU’s wider digitalization efforts, decreases administrative burdens, and permits Member States to complete EU legislation requirements for processing electronically signed documents.
Why is the EU moving to electronic VAT certificates?
The initiative’s roots lie in the increasing digital needs and a request from Member States for a feasibility investigation on the electronic exemption certificate’s implementation. Following broad backing in various EU meetings and expert groups, the proposal was created. It suggests using a PDF e-form escorted by a fully electronic process, leveraging existing technologies designed by DG TAXUD.
What changes does the VAT Directive amendment propose?
To ease the transition, Member States can persist using the paper version of the exemption certificate until June 30, 2030. This transitional period permits flexibility and ease in switching to the electronic system on a transaction-by-transaction basis. Additionally, there will be no difference between domestic and cross-border transactions, and the electronic certificate will apply to VAT exemptions given by refunds according to the VAT Directive.
The proposal also presents a new provision explaining that if the conditions for exemption are not satisfied or cease to apply, the eligible body or individual who administered the certificate is liable to pay any VAT due. This provides that taxable persons are not unfairly deprived by additional VAT declarations, as only the eligible body or individual would have the appropriate information on the exemption conditions. To bypass unnecessary burdens, Member States may permit these bodies or individuals to spend the VAT without full VAT registration.
What is the timeline for implementing the new VAT certificate?
The new rules are established to be applied from July 1, 2026, giving Member States adequate time to execute the new electronic VAT exemption certificate and procedure. The proposal is compatible with existing policy provisions, as it tracks the adaptation in 2022, which extended the range of exemptions under Article 151(1) of the VAT Directive to include Union actions under the Common Security and Defence Policy (CSDP) and actions in response to the COVID-19 pandemic.
The electronic VAT exemption certificate is also compatible with the EU’s digitalization policy, such as the Berlin Declaration on the Digital Society and Value-based Digital Government, and it helps Member States concede with EU requirements for advanced electronic signatures.
