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…1 ETNO – GSMA joint feedback to the European Commission’s proposal for a Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age March 2023 About ETNO ETNO has been the voice of Europe’s telecommunication network operators since 1992 and has become the principal policy group for European electronic communications network operators. Its 40 members and observers from Europe and beyond are the backbone of Europe’s digital progress. They are the main drivers of broadband and are committed to its continual growth in Europe. ETNO members are pan-European operators that also hold new entrant positions outside their national markets. ETNO brings together the main investors in innovative and high-quality e-communications platforms and services, representing 70.5% of total sector investment.

…in innovative and high-quality e-communications platforms and services, representing 70.5% of total sector investment. About the GSMA The GSMA represents the interests of mobile operators worldwide, uniting more than 750 operators and nearly 400 companies in the broader mobile ecosystem, , as well as organisations in adjacent industry sectors. The GSMA also produces industry-leading Mobile World Congress “MWC” events held annually in Barcelona, Los Angeles and Shanghai, as well as the Mobile 360 Series of regional conferences. With over 5 billion mobile connections, GSMA operators are committed to supporting digital and financial inclusion globally. The telecommunications industry Telecommunications network operators make significant long-term investments in substantial physical and tangible local infrastructure of the countries in which they operate.

…long-term investments in substantial physical and tangible local infrastructure of the countries in which they operate. This highly intensive capitalised investment makes communications cheaper, faster, and more powerful over time thereby creating the critical infrastructure within each market jurisdiction. The networks and associated operational activities form the backbone which enables the widely recognised digital transformation benefits, provide critical services that improve lives by creating an inclusive digital society. Ref. Ares(2023)2239767 - 28/03/2023 2 Opening remarks ETNO and the GSMA welcome the possibility to provide their comments below in response to the European Commission’s (“EC”) proposal for a Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age (“ViDA proposal”).

…for a Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age (“ViDA proposal”). We agree that the European Union (“EU”) needs a modern VAT system that appropriately addresses the developments and challenges of the digital economy, and that makes the best possible use of digital technology. ETNO and GSMA members have operations throughout the EU, and commonly operate both cross- border and through subsidiaries or establishments in multiple EU Member States. Telecommunications businesses also typically transact with a very high volume of customers, and many of our members issue multiple millions of invoices each month. For these reasons, the proposed digital reporting requirements (“DRRs”) are of particular relevance and interest to our members, and we therefore focus our comments within this response on the DRR aspects of the ViDA proposal.

…to our members, and we therefore focus our comments within this response on the DRR aspects of the ViDA proposal. Although we have identified a number of specific points of concern to raise for the EC’s attention, we see clear benefits to be gained, for both business and government authorities, from harmonised digital reporting within the EU, and we support the EC’s aim to implement a common standard for DRRs. We agree that alternative of continued implementation of fragmented country specific DRRs is both worse for business and less able to achieve benefits in VAT gap reduction. ETNO and GSMA are very willing to continue to input on this work, which we are keen to make a success, and are ready to work constructively with the Commission throughout this process.

…which we are keen to make a success, and are ready to work constructively with the Commission throughout this process. Our response below highlights firstly a number of fundamental areas of critical importance, and then addresses some further points arising out of the detail of the proposal. Fundamental and conceptual points Benefits for business A key concern of our members is the additional costs that DRRs will create for businesses, on top of the significant administrative and risk burden that businesses already face in their role as VAT collector. Our members’ experience from Member States that have already introduced digital reporting is that this has led to additional administration. For example in both Czechia and Spain we have seen a significant increase in transactional level queries from the tax authority, e.g.

…both Czechia and Spain we have seen a significant increase in transactional level queries from the tax authority, e.g. relating to purchases that may not have been reported correctly by the supplier. In Italy we have experienced a need for duplication following electronic invoicing introduction - as it is not possible to include all commercially relevant information on the electronic invoices, paper or pdf statements are still sent to the customer. It is our strongly held view that improved electronic invoicing and digital reporting should reduce the other, significant and growing, VAT collection burdens currently placed on business.

…reporting should reduce the other, significant and growing, VAT collection burdens currently placed on business. We proposed that the EC consider the following changes, either as a part of the ViDA proposal or within future measures to modernise the EU VAT system: • A relaxation of the Kittel0F1 ‘knew or should have known’ test in cases of correctly and timely reported transactions. For example, if a transaction has been reported by a business via DRR, the period under which that business can be denied a right under the ‘knew or should have known’ test should be limited to a few months. We consider this approach logical given that authorities 1 CJEU, Axel Kittel, 6 July 2006, C-439/04, ECLI:EU:C:2006:446 3 will have full visibility of a business’s transactions, and should therefore be in a position to flag any concerns to that business over any supply chains involving fraudulent actors.

…therefore be in a position to flag any concerns to that business over any supply chains involving fraudulent actors. • Shorter statutes of limitation for errors in timely reported transactions. Given that tax authorities will be in possession of information on transactions within a few days of them taking place, there should be no need for multi-year limitation periods which have generally been considered necessary due to the time needed to complete paper-based audits. • Improvement of relief for bad debts. Under the proposals, electronic invoices will require inclusion of a new field of the “date on which the payment of the supply of goods or services is due”1F2. This provides tax authorities with the information necessary to require and monitor adjustment of input VAT on unpaid invoices (as provided for under Article 185 of the VAT Directive).

…and monitor adjustment of input VAT on unpaid invoices (as provided for under Article 185 of the VAT Directive). The availability of an enforceable mechanism for customer side adjustments, within a short period of time, offers a proportionate and effective solution to allow Member States to eliminate overly onerous conditions, whilst at the same time protecting the risk of tax loss. Timescales The two-day time limit to issue electronic invoices2F3 is a significant shift from the current system and, in the view of our members, is not practicably realistic.

…is a significant shift from the current system and, in the view of our members, is not practicably realistic. In our experience, there are many circumstances where it is not commercially feasible to issue an invoice within this timescale, some examples of this include: • Where a business is issuing a large volume of invoices (in the case of our members this can be several tens of millions of invoices), and these invoices cover a large range of complex commercial offerings, the billing system unavoidably requires significant elapsed time to complete a billing cycle. Where the chargeable event does not coincide with the invoice date, such as in Germany where the chargeable event for continuous services arises at the end of the billing period, it will be in practice impossible for systems to issue an invoice within two days of the chargeable event.

…period, it will be in practice impossible for systems to issue an invoice within two days of the chargeable event. • For goods deliveries, especially where multiple parties are involved in either delivery or the supply chain, logistics tracking systems often do not update goods delivery information to billing system within such a short timeframe. • Where a customer requires urgent delivery of goods or services, and this may be performed before any contract, or even pricing, is agreed commercially, and before the customer has been set-up within the supplier’s billing system. The two-day time limit may therefore limit businesses commercial flexibility in time urgent scenarios. We encourage the EC to amend the proposal for a two-day time limit on the issue of electronic invoices.

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