Mutual assistance between the Member States in the tax field has since long time been established. Since 1977 mutual assistance in the field of direct taxation has been possible in accordance with Council Directive 77/799/EC. This Directive complements the existing provisions on mutual assistance in bilateral tax treaties concluded between the Member States. This directive was extended to cover VAT from 1981, Council directive 79/1071/EEC and to excise duties in 1993, Council Directive 92/12/EEC.
When the internal market was created and the physical border controls were abolished, it was necessary to set up a control system to manage the VAT control of intra-community trade, the VAT Information Exchange System (VIES). The necessary arrangements for administrative cooperation in the VAT field were set up by the Council Regulation 218/92/EC.
Mutual assistance in recovery of taxes, customs and certain fees was established in the Community 1976, when Directive 76/308/EC was adopted. This directive was extended to VAT by Directive 79/1071/EC, to excise duties by Directive 92/108/EC, and to taxes on income and capital and on insurance premiums by Directive 2001/44/EC.
Modernisation
The creation of the internal market with no physical borders has rendered a steadily increased cross border trade, increased mobility as well as the feature of electronic markets. This has made it necessary to continuously modernise the legal instruments for mutual assistance and make cooperation between tax administrations more efficient.
The following documents reflect the most recent update of these legal instruments:
· Administrative cooperation in the field of VAT was reformed by the Council Regulation 1798/2003;
· Administrative cooperation in the field of Excise has been reformed by Council Regulation 2073/2004 and Council Directive 2004/106;
· Mutual assistance in the field of Direct taxation has been modernised by Council Directive 2004/56/EC;
· Mutual assistance in the field of Recovery of claims has been modernised and extended by Council Directive 2001/44/EC and Commission Directive 2002/94.
Most tax claims (or debts) due to national treasuries are collected promptly through spontaneous payment by the debtor. When the claims are not settled promptly, national tax administrations can resort to a range of powers to recover the claim. At the limit, the claim can be recovered through the seizure and sale of the debtor's property by the tax administration ("enforcement").
The original Community arrangements for mutual assistance between Member States were put in place because it was recognised that it was increasingly likely that the debtor, or recoverable assets belonging to the debtor, were within the jurisdiction of another Member State . Arrangements at Community level were necessary to ensure that taxpayers did not successfully evade their obligations in this way. These arrangements (Council Directive 76/308/EEC), though originally developed to cover agricultural levies and customs duties as sources of Community revenue (traditional own resources), were later extended to certain essentially national taxes with the addition of VAT (Council
Directive 79/1071/EEC) and excise duties (Council Directive 92/108/EEC) to the scope.
The arrangements for recovery under the original rules became ineffective and were too complicated when the internal market has made citizens and assets increasingly mobile, where mobility could be abused to avoid payment of tax. To reinforce the rules the Commission made a proposal (COM(1998) 364), which was adopted by the Council in 2001 (Council Directive 2001/44/EC) with new rules coming into force on 1 July 2002.
The new rules extend the possibilities to recover also taxes on income and capital as well as taxes on insurance premiums. Recovery will be faster as the instrument permitting enforcement of the claim now shall be directly recognised and automatically treated as an instrument of the requested Member State . Furthermore it envisages for the recovery to be supported by an electronic communication system.
Commission Directive 2002/94 sets out detailed implementation arrangements concerning the Directive on tax recovery, dealing with matters such as the details of the electronic communication system, shorter deadlines for responses, simplification of administrative procedures and reimbursement arrangements for costs linked to recovery of debts. Commission Directive 2004/79 applied these implementing arrangements to the new Member States.
The aim of mutual assistance is to improve administrative cooperation between Member States.
Administrative cooperation concerns the tax and customs administrations of EU Member States cooperating with one another to share information. Close cooperation between these bodies is vital to detect and reduce tax fraud.
This type of fraud costs the Member States of the European Union millions of euros annually. In addition, it distorts competition for honest traders and undermines confidence in the European taxation systems. Very simply, the current system does not efficiently and effectively combat this problem.
The Commission has thus launched the following initiatives in several areas of taxation:
· Direct tax Directive amending 1977 Directive;
· VAT administrative co-operation Regulation;
· Excise duty proposal for Regulation;
· Savings taxation.
For further information please read the most recent Commission report on the use of administrative cooperation arrangements in the fight against VAT fraud.
* Directive amending 1977 Mutual Assistance Directive for direct tax purposes
The Council on 26 April 2004 adopted a Directive that is designed to speed up the flow of information between the tax authorities of Member States.
The Directive which relates to direct taxation (income tax, company tax and capital gains tax), together with Insurance Premium Tax, enables Member States to
· co-ordinate their investigative action against cross-border tax fraud and
· carry out more procedures on behalf of each other.
The Directive is based on a Commission proposal (COM(2003) 446 of 28/07/2003 ) and updates and rectifies weaknesses in the existing Directive on Mutual Assistance, 77/799/EEC. Modern technology and increased cross-border activity have made it more important than ever for information exchange and co-operation between tax administrations to be improved. A Council report on tax fraud of June 2000 (Council documents 8053/00 and 8668/00) noted that the existing EU directives and regulations were inadequate for the combat of fraud, which in the direct tax area involves, in particular, problems of under-invoicing and over-invoicing (transfer pricing).
This Directive complements other recently adopted EU legislation in the field of information exchange: the agreement on savings income and the Regulation on strengthening administrative co-operation in the VAT area.
For further information see press releases IP/04/539 and IP/03/1226
* VAT and Administrative Cooperation
The Council of the European Union adopted a new Regulation on administrative cooperation in the field of Value Added Tax on 7 October 2003.
The aim of the Regulation is to improve administrative cooperation between Member States concerning VAT.
The following links provide information about the new Regulation.
· What is administrative cooperation and why is it important?
· Why is there a new Regulation?
· What does the new Regulation provide for?
· Clear and binding rules
· Devolving cooperation to enhance effectiveness
· Stepping up data exchange to improve the fight against fraud
· What has not changed?
· Taxing insurance premiums
· Flanking measures
· When do the Regulation and Directive take effect?
· Need more information?
What is administrative cooperation and why is it important?
Administrative cooperation concerns the tax and customs administrations of EU Member States cooperating with one another to share information. Close cooperation between these bodies is vital to detect and reduce tax fraud.
In the field of VAT, this system of administrative cooperation has, until now, been based on Regulation Nr 218/92 and Council Directive 77/799/EEC. However, a new Regulation Nr 1798/2003 of 7 October 2003 now sets up a single legal framework merging the legal apparatus of Regulation Nr 218/92 and the provisions of Directive 77/799/EEC on VAT.
Why is there a new Regulation?
VAT fraud costs the Member States of the European Union millions of euros annually. In addition, it distorts competition for honest traders and undermines confidence in the European taxation systems. Very simply, the current system does not efficiently and effectively combat this problem.
The current system of VAT administrative cooperation, based on Regulation Nr 218/92 and Council Directive 77/799/EEC , no longer meets modern requirements arising from the ever closer integration of economies within the internal market. It is too general, too centralised and not sufficiently intensive to cope with the requirements of the current VAT.
What does the new Regulation provide for?
The new Regulation sets up a single legal framework merging the legal apparatus of Regulation Nr 218/92 and the provisions of Directive 77/799/EEC on VAT. The amendments as compared to the previous legal frame work are of three kinds:
Clear and binding rules
The new Regulation provides an arrangement specifying the rights and obligations of all interested parties and laying down procedures which govern administrative cooperation between Member States in the field of VAT. It lays down clear and binding rules for, inter alia:
· facilitating information exchange
· form requirements for both information requests and information provided;
· time limits to provide the information;
· possibilities for the use of information;
· procedures and situations for refusing information requests;
· procedures for handling information exchange with non Member States.
. facilitating VAT investigations
· requesting other Member States to conduct administrative enquiries;
· presence of foreign officials during controls;
· cross-border notification of decisions emanating from the tax authorities of another Member State ;
· procedures for organising multilateral controls.
Devolving cooperation to enhance effectiveness
The new Regulation also provides for more direct contact between tax inspectors of different Member States, with a view to making cooperation faster and more effective while retaining the pivotal function of the central liaison offices. Direct communication between inspection staff or fraud units is the only effective way to speed up the exchange of information.
Stepping up data exchange to improve the fight against fraud
The new provisions aim to intensify the spontaneous exchange of information between administrations in order to combat fraud more effectively.
This Regulation provides for two types of spontaneous exchange:
· structured automatic exchange and
· automatic exchange.
The sole difference between these two types of exchange is that where the authority responsible for transmission is unable to collect the information to be exchanged on a regular basis, structured automatic exchange will take place. It will be impossible, for example, for a Member State to exchange information automatically where taxable persons in that Member State are under no obligation to communicate such information.
The Regulation specifies that Member States should, at the very least, exchange information in the following situations:
· where taxation is deemed to take place in the Member State of destination (for example in cases of distance sales);
· where there is a suspicion of a breach of VAT legislation in the other Member State (for example in cases of significant discrepancies between intra-Community supplies and acquisitions); and
· cases which represent a risk for tax loss (due to fraud or avoidance) in the other Member State (for example, cases of carousel fraud).
However, the precise category of information and the way in which the exchange will be handled by each Member State will be decided via the Committee Procedure. The flexibility of the new system lies in the this Procedure, according to which it will be possible to conclude an agreement under which e.g. 10 Member States will exchange information automatically while the other five will do so in a structured automatic way.
What has not changed?
The following exchange of information has not been changed but is now incorporated in the new Regulation:
Exchange of information specific to intra-community transactions
Since 1 January 1993 , a computerised VAT Information Exchange System (V.I.E.S.) enables companies to rapidly obtain confirmation of the VAT numbers of their trading partners and enables VAT administrations to monitor and control the flow of intra-Community trade to detect all kinds of irregularities
Exchange of information specific to e-commerce
In addition, from 1 July 2003 onwards, the Regulation provides additional measures necessary for
· registering foreign e-commerce traders for VAT purposes and
· distributing VAT receipts to the Member States where the services were actually used.
For more information on VAT and e-commerce see here.
Taxing insurance premiums
The amendment of Directive 77/799/EEC (concerning mutual assistance in the field of direct taxation) means that Member States will now be able to exchange information concerning certain taxes imposed on insurance premiums. Henceforward tax administrations will be able to request information on transactions of insurance companies established in other Member States and to recover the taxes due on their territory.
Flanking measures
Another important instrument encouraging administrative cooperation in the field of VAT and mutual assistance on insurance taxes is the FISCALIS 2007 Decision.
FISCALIS 2007 provides for funding for e.g. multilateral controls and exchanges of tax officials between Member States.
When do the Regulation and Directive take effect?
1 January 2004
Need more information?
· The text of the Regulation on administrative cooperation in the field of VAT
· The text of the Directive regarding administrative cooperation for insurance premium taxation
· The press release for the Regulation and Directive on administrative cooperation in the field of VAT
· The European Commission's Proposal for a Regulation on administrative cooperation in the field of value added tax
· The press release for the Commission's Proposal for a Regulation on administrative cooperation in the field of value added tax (IP/01/857)
· VAT fraud FAQ (MEMO/01/230)
· SCADPLUS (summaries of European Commission legislation)
* Excise duty regulation
On 16 November 2004, the Council adopted a new Council Regulation (see Official Journal L 359 of 4 December 2004) in order to simplify, decentralise and reinforce the mechanisms of administrative cooperation contained in the current Directive 77/799/EEC and Directive 92/12/EEC. On the same day, the Council adopted a Directive modifying Directives 77/799/EEC and Directive 92/12/EEC in order to remove from both of them any reference to mutual assistance on excise duties. Therefore, the only applicable text for administrative cooperation in the field of excise duties is the Regulation that has been discussed in the appropriate forums (see press release IP/04/1362).
The Regulation has three main objectives:
· To lay down clearer and more binding rules governing the exchange of information;
· To provide for more direct contacts between national anti-fraud agencies;
· To facilitate more extensive exchange of information.
This Regulation will then be followed by an implementing Commission Regulation in order to set up detailed rules of functioning for certain provisions.
These new texts are based on a Commission proposal of 18 December 2003 (COM(2003) 797, see press release IP/04/28) the Commission proposed a modification of these Directives.
* Savings taxation
The Council agreed on 3 June 2003 as part of a package of three measures to tackle harmful tax competition on a Directive to ensure effective taxation of savings income.
Under the Directive which as anticipated will apply from 1 July 2005 , each Member State will provide information to other Member States on interest paid from that Member State to individual savers resident in those other Member States. But for a transitional period, Belgium , Luxembourg and Austria will be allowed to apply a withholding tax instead of providing information, at a rate of 15% for the first three years, 20% for the subsequent three years and 35% thereafter.
The EU's Council of Ministers and the European Parliament adopted in June 2003 a Decision to computerise the system under which excise goods - alcohol, tobacco and energy products - are moved between traders in the Community under duty-suspension arrangements.
The Decision introduces a system which will provide Member States with real-time information about consignments in transit, enabling them to plan checks and inspections in advance. The current paper-based system is unable to cope with increasing levels of tax evasion fraud involving alcohol and tobacco, and is also unpopular with traders who find it cumbersome.
The Commission proposes that this computerised system could be used as a vehicle for computerised information exchange under the improved mutual assistance arrangements.
Please find further information on this page.
The European Parliament and Council Decision 2235/2002/EC of 3 December 2002 instituted a Community Action Programme "Fiscalis 2003 - 2007" intended to improve the operation of the taxation systems in the internal market. It covers Value Added Tax and Excise Duties, Direct Taxation and Taxes on Insurance Premiums. The programme runs from 1 January 2003 to 31 December 2007 .
The overall objective of the programme shall be to improve the proper functioning of the taxations systems in the internal market by increasing the co-operation between participating countries, their administrations and officials.
For the VAT and Excise fields, the programme is designed:
· to enable officials to achieve a high common standard of understanding of Community law and of its implementation in Member States,
· to secure efficient, effective and extensive cooperation among Member States , and
· to ensure the continuing improvement of administrative procedures to take account of the needs of administrations and taxpayers through the development and dissemination of good administrative practice.
For the Direct Taxation field, the programme is designed:
· to provide support for information exchange in the field of mutual assistance and
· to raise awareness of Community law applicable in the field of direct taxation.
Finally, for taxes on insurance premiums, the programme intends:
· to improve cooperation between Member States,
· ensuring better application of the existing rules.
One of the reasons for setting up the programme is to deal with the problem of tax fraud. Therefore the programme assists to:
· encourage closer co-operation between the authorities in the Member States,
· to provide training for national officials to familiarise them with the different kinds of fraud and
· develop prevention, detection and investigation methods based on risk analysis.
The tools available for realising these objectives are
(1) Communication and Information exchange systems
Communication and information exchange infrastructure has a vital part to play in reinforcing the VAT and Excise systems and in particular in guaranteeing the effectiveness and efficiency of their administration.
An example is the VAT Information Exchange System (VIES). With the introduction of the single market on 1 January 1993 , fiscal customs based controls at internal frontiers were abolished and a new VAT control system was put in place for intra-Community trade. Under the current VAT system intra-Community supplies of goods are exempt from VAT in the Member State of despatch when they are made to a taxable person in another Member State who will account for the VAT on arrival. Therefore any taxable person making such supplies must be able to check quickly and easily that their customers in another Member State are taxable persons and hold a valid VAT identification number. For that purpose, inter alia, each tax administration maintains an electronic database containing the VAT registration data of its traders which can be consulted.
(2) Exchanges
The Commission and Member States organise exchanges of officials. The exchanges vary in length, but may not exceed one month. Each exchange is targeted on a particular aspect of work activity and has to be sufficiently prepared so that the full advantage can be obtained. Afterwards the officials and administrations concerned evaluate the exchange to see what lessons can be learned from the experience. Member States enable exchange officials to play an effective part in the host administration's activities. To this end officials are authorised to carry out the task relating to the duties entrusted to them by the host administration in accordance with its legal system.
(3) Seminars
Seminars constitute a good framework for the exchange of ideas on particular topics between officials of the national administrations, Commission representatives and other experts, if necessary. From the seminars suggestions may emerge for improving the legal instruments in force or facilitating co-operation between administrations. In 2003 and 2004, seminar topics included among others:
· Simplified Procedures for Movement of Excisable Goods (Egmond aan Zee 2004)
· Operators' Liability in the intra-Community movement of products subject to excise duties (Bordeaux 2003)
· New VAT Invoice Legislation (Gothenburg 2003)
· The fight against fraud in the motor industry (Lille 2003)
· VAT treatment of services in the public interest (Lisbon 2003)
· Heads of Central Liaison Offices Meeting (Athens 2003, Budapest 2004)
· Heads of Excise Liaison Offices Meeting (Birmingham 2004)
· Improvement in the Quality of Multilateral Controls (Egmond aan Zee 2004)
· Mutual assistance for recovery of tax claims in the area of Direct taxation (Allicante 2003)
· Training seminars for Candidate countries on Risk Analysis, Special VAT Schemes, Transfer Pricing, Computer Audit, VAT Warehouse Arrangements, carousel fraud and e-services.
(4) Multilateral controls
They involve the collaboration of at least two tax administrations, integrating and co-ordinating their controls of "taxable persons" (multinationals) having indirect tax obligations in each of the Member States concerned, to ensure nothing gets "overlooked". Multilateral control exercises are also intended to develop new forms of co-operation and to identify obstacles to co-operation to be tackled and eliminated. It is the only tool which is exclusively focused on in-the-field control activities. The tool has provided a clear example of the benefits of administrative co-operation in practice.
- Participating in Fiscalis
Officials of the Member States can participate in seminars, exchanges and multilateral controls.
All applications for participation in the Fiscalis programme are processed by the national Fiscalis co-ordinators. Click on Contact in order to obtain their co-ordinates.
The Fiscalis 2003-2007 programme has also been opened for the participation of acceding and candidate countries. Memoranda of understanding have been signed.
* Legal Texts and other documents
Legal texts
· COM (2005) 111 : Communication from the Commission to the Council and the European Parliament : Community Programmes Customs 2013 and Fiscalis 2013
· Decision No 2235/2002/EC of the European Parliament and of the Council of 3 December 2002 adopting a Community programme to improve the operation of taxation systems in the internal market (Fiscalis programme 2003-2007) - see Official Journal L 341 , p. 1
· Commission Decision N° 2000/565/EC of 7 September 2000 amending Decision 98/467/EC establishing certain implementing provisions for European Parliament and Council Decision N° 888/98/EC establishing a programme of Community action to improve the functioning of the indirect taxation systems of the internal market (Fiscalis programme).
· Commission Decision N° 98/532/EC of 8 July 1998 concerning certain measures necessary for carrying out activities relating to communication and information-exchange systems and to linguistic training tools under the FISCALIS programme.
· Commission Decision N° 98/467/EC of 2 July 1998 establishing certain implementing provisions for the FISCALIS programme.
· European Parliament and Council Decision N° 888/98/EC of 30 March 1998 establishing the FISCALIS programme.
· Council Decision N° 93/588/EC of the 29 October 1993 adopting programme Matthaeus-Tax of Community action on the subject of the vocational training of indirect taxation officials.
... and the following documents
· Mid-term evaluation of the Fiscalis 2007 programme: SEC (2005) 1045 and annex II
· Report on the implementation of the Fiscalis programme (1998-2002): COM/2003/0678 final
· Interim evaluation report on the Fiscalis programme 1998-1999: SEC(2001)1328 .
Other texts relating to administrative cooperation
· Council Regulation N° 218/92 of 27 January 1992 establishing VIES.
· Regulation (EEC) N° 218/92 establishing SCAC.
· Proposal COM(2001)294 final for a regulation of the European parliament and of the Council on administrative cooperation in the field of value added tax.
Proposal for a Directive of the European parliament and of the Council amending Council Directive 77/799/EEC concerning mutual assistance by the competent authorities of the Member States in the field of direct and indirect taxation.
Other reports
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COM(2004) 855
20/01/2005
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Report from the Commission to the Council and the European Parliament: Fifth report under article 12 of Regulation (EEC, Euratom) No 1553/89 on VAT collection and control procedures - see also annex
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COM (2000) 28
28/01/2000
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Report from the Commission to the Council and the European Parliament: Third Article 14 Report on the Application of Council Regulation (EEC) No 218/92 of 27 January 1992 on Administrative Cooperation in the Field of Indirect Taxation (VAT) and Fourth Report under Article 12 of Regulation (EEC, EURATOM) No 1553/89 on VAT Collection and Control Procedures.
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COM (1996) 681
8/01/1997
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Report from the Commission to the Council and the European Parliament - Application of Council Regulation (EEC) 218/92 of 27 January 1992 on administrative coopeation in the field of indirect taxation (VAT) - second article 14 report
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COM (1994) 262
23/06/1994
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Report from the Commission to the Council and the European Parliament - Application of Council Regulation (EEC) N° 218/92 of 27 January 1992 on administrative cooperation in the field of indirect taxation (VAT)
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* Fiscalis 2007
On 3 December 2002 the European Parliament and the Council adopted the Fiscalis 2003-2007 programme. This was published on 17 December as Decision No 2235/2002/EC of the European Parliament and of the Council of 3 December 2002 adopting a Community programme to improve the operation of taxation systems in the internal market (Fiscalis programme 2003-2007).
The European Commission originally adopted the proposals for two programmes in January 2002, "Fiscalis 2007" and "Customs 2007", to help Member States work more closely together against tax and customs fraud, through improved electronic systems for information exchange between national administrations, co-operation in investigations, training seminars for customs and tax officials and experts and the exchanges of officials between national administrations.
The Fiscalis 2007 Communication and proposal
The text of the Press Release when the proposal was made
The "Common position" of the Parliament and Council was agreed on 24 October 2002. For more details see the press release issued at the time.