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The EU VAT Committee is a organization which performs technical discussions on EU VAT. EU Commission is in charge of The EU VAT Committee. All EU Members are the representatives of the committee. Contrary to decisions or guidelines of the EU VAT Committee, a Regulation is compulsory for Member States and for taxable persons.

If member states want to introduce national legislation, they should require certain provisions of the VAT Directive in consultation with VAT Committee. The committee has the responsibility for the transparency and legal certainty of the legislation for doing business in a particular area.

 The VAT Committee provides a uniform application and common practices regarding Community VAT provisions. Therefore the committee generally adopted some guidelines which are not subject matter to any legislative discussion.
 
The committee functions by agreement (with no voting), and may issue guidelines which do not comprise an official explanation of Community law and are simply views of a consultative committee.

The VAT committee is set up to act in a consultative capacity for clarifying questions of explanation of VAT legislation. HM Customs and Excise explained: "The [Sixth VAT] Directive sets out a framework, and detailed national law applies it, so there are occasional inconsistencies in application that either the Commission or a Member State can bring to the committee for discussion". The committee operates by agreement (with no voting), and may issue guidelines reflecting agreed opinions; these guidelines are not binding on Member States.

Some amendments are raised on the functionality of the committee. A proposal [127] would transform the committee into a regulatory committee, with the authority to take obligatory decisions by qualified majority voting[128]. If the committee does not accept a proposal submitted by the Commission, then the proposal will be submitted by qualified majority voting to the Council of Ministers for acceptance. At the same time the proposal would be approved automatically if the Council failed to make a decision within three months.

Austrian Presidency had put forwarded an "amended approach based on giving the committee decision-making powers but only on a more tightly selected set of provisions" and including "a 'safety stage' permitting a Member State to keep out from qualified majority voting any measures it considers might have serious budgetary implications". Though the majority of the member’s state agreed on the qualified majority voting, the Government has opposed the proposal again and again on the basis that it can involve necessary accompaniment or consequence to decisions affecting the United Kingdom revenues or interests being taken by qualified majority voting.

However, the Government sustains the endeavor for making the VAT committee a more effective body and trying to put some administrative modifications in the committee's functioning process.

The European Commission is in a position to implement some proposals which may synchronize Community rules regarding value-added tax (VAT) grouping schemes and make a concentrated effort further on tax evasion.

Current European Union VAT legislation provides organizational overview for member states, to consider as one single taxable person those who, while lawfully independent, are intimately bound to one another by financial, economic and organizational links. The communication adopted by the EC on July 2 consists of the guidelines that ensure a "correct, rational and standardized" application of the VAT grouping option.

László Kovács, EU Tax Commissioner responsible said: "The practice has shown that the VAT grouping scheme, although being a simplification measure for operators, could lead to tax evasion. For that reason the Commission proposes clear guidelines on how to apply in practice this scheme."

Since 1970s the VAT grouping option are accessible to member states and 16 member states have commenced VAT grouping schemes into their national legislation. However, there are lots of deviations among the schemes put into practice by member states, and the EC’s proposals will make an endeavor to synchronize the system a little.

As per view of the commission, the proposals make an effort to revise Article 11 of the EU VAT Directive at the same time as respecting the basic principles of the Community VAT system and ensuring that the outcomes of using the option scheme remain restricted to the member state applying it.

 

The communication contains the following features:

  • Only taxable persons may be able to join a one VAT group at a time.
  • The group is itself a taxable person focused to the same rights and obligations as any other taxable person and all the provisions of the VAT Directive as well as the rulings by the European Court of Justice apply to it.
  • The group, as a single taxable person, will be recognized for VAT use by a single number.
  • Only companies or permanent organizations actually present in the member state that has set up the VAT grouping scheme may be members of a VAT group. A VAT grouping scheme should be released to all segments of economic activity in the member state which introduces such a scheme.
  • The financial, economic and organizational links must be present all together.
  • The VAT group's right to subtract input VAT will be settled by reason of the transactions of the group as such with third parties.
  • One of the most important outcomes for formation of a VAT group is the "disappearance" from a VAT perspective of transactions between the members of the group, i.e. transactions for consideration between the individual members of the group. These transactions are considered non-existent for VAT purposes.
Member states must take all necessary measures to prevent tax evasion or avoidance, as well as abusive practices, through the use of their national VAT grouping schemes. No "unjustified advantage or unjustified harm" should arise from the implementation of the VAT grouping option.
 
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