The European Commission proposed amendments to the rules on combating VAT fraud on Friday. It is proposed to end the 25-year ‘transition’ regime for VAT in the EU.

Value added tax frauds are estimated at €50 billion per year.

In the current VAT system, trade in goods between companies is divided into two transactions: exempt from VAT in the EU country of origin and taxed acquisition in the EU country of destination. Today’s proposal puts an end to this division of each individual commercial transaction. Cross-border trade in goods is envisaged to be defined as “one taxable supply” so that goods can be taxed in the country where the delivery ends, complements the European Commission.

The changes strengthen the self-regulation of VAT and it is expected to reduce the administrative steps to be taken by companies when selling to other companies in the other countries in the EU.

Special reporting obligations relating to the transitional VAT regime will not be necessary more for trade in goods. Additional billing in relation to intra-EU trade will be governed by the rules of the seller’s country.

Today’s changes make it clear that the seller must charge the VAT due when selling the goods to his customer in another EU country, using the rate of the country of destination. The acquirer will be responsible for the payment of VAT only when it is a reliable taxpayer recognised by the tax administration.

VAT is a major and increasingly significant source of revenue for EU countries, with over a trillion euro in 2015, accounting for 7% of Community GDP. One of the EU’s own resources is also based on VAT. As a consumption tax, it is one of the types of taxation in support of the growth of the economy, the European Commission said.