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November 12, 2019

2019-2020  EU's VAT system to tackle fraud in e-commerce

Following the meeting of the European Unions (EU) Council of Finance Ministers (ECOFIN) on 8 November 2019, it was reported that the EUs value-added tax (VAT) system will be amended to help tackle fraud in the e-commerce sector, which is estimated at around €5 billion a year in the EU. New rules provisionally agreed by the EU Member States will make relevant data regarding online purchases available to anti-fraud authorities to fight VAT fraud in the sector.1

The new rules will allow anti-fraud experts in EU Member States to have access to VAT-relevant data held by payment intermediaries (such as credit card and direct debit providers), who currently facilitate over 90% of online purchases in the EU. Amendments to the VAT Directive will require payment service providers to provide Member States VAT authorities with certain payment data from cross-border sales. Strict conditions will apply to data collection (including rules related to data protection). Anti-fraud specialists (the Eurofisc network) can then access and analyze the collected data.

It is expected that these measures will allow the EU authorities to identify online sellers who do not comply with VAT obligations, including businesses that are not located in the EU. Similar provisions that are already in place in some Member States and in other countries are reported to have had a tangible effect in tackling fraud in the e-commerce sector.

The new rules will now need to be confirmed by the European Parliament before entering into force in January 2024.

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1 The text of the agreement on payment data is available here: http://data.consilium.europa.eu/doc/document/ST-13519-2019-INIT/en/pdf.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Amsterdam

  • Gijsbert Bulk, Global Director â€" Indirect Tax
    gijsbert.bulk@nl.ey.com

Ernst & Young LLP (United Kingdom), London

  • Kevin MacAuley, EMEIA
    kmacauley@uk.ey.com

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