By introducing an E.U.-wide portal for online VAT payments (the 'One Stop Shop'), VAT compliance expenses will be significantly reduced, saving businesses across the €2.3bn ($2.45bn) a year, the European Commission says.

The new rules will also ensure that VAT is paid in the member state of the final consumer, leading to a fairer distribution of tax revenues amongst E.U. countries. The proposals aim to help member states to recoup the current estimated €5bn ($5.33bn) of lost VAT on online sales every year. Estimated lost revenues are likely to reach €7bn ($7.46bn) by 2020.

The proposal includes:

New rules allowing companies that sell goods online to deal easily with all their E.U. VAT obligations in one place;

To simplify VAT rules for startups and micro-businesses selling online, VAT on cross-border sales under €10,000 ($10,651) will be handled domestically. SMEs will benefit from simpler procedures for cross-border sales of up to €100,000 ($106,512);

Action against VAT fraud from outside the E.U., which the European Commission says can distort the market and create unfair competition;

To enable member states to reduce VAT rates for e-publications such as e-books and online newspapers.

Source: European Commission