Is the EU VAT Area Fit for Its Purpose in the 21st Century?

by Ronan McGivern, Jennifer Mace, and Dan Cassidy

In this article, the authors provide a primer on the operation of the VAT in the European Union, devoting particular attention to the distinction between supplies of goods and supplies of services as well as the role of the place of supply rules in determining if VAT is due, where VAT is due, and which party owes VAT.

“Beyond the everyday world . . . lies the world of VAT, a kind of fiscal theme park in which factual and legal realities are suspended or inverted . . . . a complex universe [in which] relatively uncomplicated solutions are a snare and a delusion.”

– Lord Justice Sedley,
Royal & Sun Alliance v. C&E Commissioners,
(Court of Appeal) 2001

VAT can be a daunting and bewildering area of tax. Even for those within EU member states, VAT is a construct that has a never-ending capacity to confound and confuse. The opening quotation is from a U.K. Court of Appeal decision on a VAT case. While the specific technical VAT issue in the case is not relevant to this article, the quotation will resonate with many who have tried in vain to understand the precise mechanics underpinning VAT in the EU, hoping to find “logic” in the rules. Continue reading.

Ronan McGivern is a fellow of Chartered Accountants Ireland, an AITI chartered tax adviser, and a partner in the tax department of RBK in Dublin. Jennifer Mace and Dan Cassidy are certified public accountants and principals in the tax department of Clark Nuber PS and based in Seattle.