Press Release: VAT: Commission proposes Regulation to clarify interpretation and application of common rules

The European Commission presented a proposal on 26 October 2004 for a Council Regulation that would ensure more uniform application of the common VAT rules in the Community, thus providing transparency and legal certainty both for traders and for national administrations. The Regulation was meant to give legal force to some interpretations of elements of VAT law such as 'electronically supplied services', the place of supply of different types of services and the scope of exemptions from VAT. EU Member States working with the Commission in a Committee had over the years agreed on guidelines concerning these points. However, the guidelines had no legal force and were not published. The VAT Sixth Directive provided the general framework for an EU-wide system of VAT, but did not contain rules concerning the interpretation and application of the VAT system. Differences in the practical application by the Member States of the common VAT rules constituted major obstacles for firms wishing to take advantage of the Internal Market.