The European Commission has issued a document dealing with introduction of the Digital Single Market, where the planned changes in the field of VAT are described. However, these changes are not expected to be implemented before 2017 with the view to the required legislation procedure.

Internet, e-shop, video streaming or cloud servers are terms particularly associated with the information technology. However in the last several years, the digital technology and products penetrated so much in our everyday life that we cannot imagine our existence without them both in private life and in business.

European authorities are aware of integration of these technologies in the society and therefore they strive to aim their efforts at implementing free movement of electronic services and digital products as it already exists for persons, capital and merchandise. They believe the frontiers in digital economy can be eliminated by implementing the Digital Single Market (DSM). The Digital Single Market's aim is to develop the idea of common internal market without any business and economic impediments between the individual member states. According to the European Commission's studies, elimination of barriers in digital economy could bring up to EUR 415 billion to the EU economy. Therefore the European Commission has appointed a project team for the Digital Single Market, and on this year's May, it issued a document outlining the basic theses of the Digital Single Market and set out three key areas to focus on.

One of these areas is to improve access to digital products. Presently only 15 % of customers buy goods at internet shops from abroad. The reason is the high costs of delivery of the goods on one hand, when the price of "shipping" often exceeds the value of the merchandise, and the higher administrative costs when goods are sold abroad on the other hand. Another limitation consists for example in blocking certain services according to the geographical position, when customers are for example redirected to the local "branch" of the internet shop, which quotes prices different from the international ones. The Digital Single Market should eliminate such barriers and improve cross-border trade.

Other spheres include creating an appropriate environment to develop digital networks and services (improvement of personal data protection, faster implementation of 4G technology, etc.) and create the European digital economy (establishment of standards for new technologies, cloud computing support, etc.).

VAT regime simplification is one of the aspects through which the European Commission is going to improve the cross-border operations of companies. In the document issued by the European Commission, only general theses of the currently prepared changes are specified; the concrete proposals will be submitted in 2016. The aim of the changes is to reduce the administrative load carried by internet retailers, to equalise conditions for retailers from the European Union and from abroad, and to facilitate entering the industry for small and middle-sized companies.

Presently the internet retailers must observe various limits for sending goods to the individual member states, and once these limits are exceeded, the retailers must make registration in the respective states and levy VAT on sales. Their accounting and tax advisors are not able to manage consulting also for other states due to different regulations, and the retailers mostly outsource different advisors for the individual countries. According to the European Commission's study, the costs of such advisors amount to EUR 5,000 per country per year. One of the suggested changes is to expand the Mini One Stop Shop model so that it will also apply to physical goods sold via internet shops. Thereby, the retailer's obligation to register for VAT abroad to be able to provide certain services would be eliminated, and the retailers could settle their tax on sale of merchandise abroad through the Czech tax administrator.

Furthermore, allowing a VAT exemption is being considered for shipments with the value under EUR 22 (so-called "small consignments"), which would be an advantage for foreign retailers. Thereby the position of the European retailers and foreign internet retailers will equalise. Implementation of a "simplified" VAT model is considered for the start-up small and middle-sized companies, which should help them reduce their costs of consulting in the field of VAT. The last point of the European Commission's agenda is to allow states to control cross-border trade.

The aforementioned changes are still in the stage of the initial general conception. The propositions for concrete changes in the European regulations will be elaborated and submitted as late as during the next year. We are going to monitor development of these changes, and you can read about them in one of our future issues.