2025 EC study on the challenges of VAT beyond ViDA
European Commission launched a study into the challenges of VAT reform after EU VAT in the Digital Age. This complete preliminary review by the end of June. It is not expected that this report will directly lead to any proposals, but rather identify ongoing weaknesses of the EU VAT regime and highlight targeted improvements.
The final report is due by December on three strands:
- Simplifications: VAT exemption application; special schemes and how adopted differently between member states; and derogations from the Directive.
- Digitalisation: options: use of split payments to tackle fraud; allowing input VAT deductions in One-Stop Shop for pan-EU reporting; crypto-assets and their VAT treatment; further e-invoicing refinements; VAT data storage by authorities; and digital reporting regimes.
- Greening of VAT: how can VAT be applied to promote EU environmental objectives, including exemptions and deductions? This includes looking at EU behavioural taxation.
VEG 2024 informal suggestions
Dec 2024: an informal working group of the EU VAT Expert Group (VEG) had presented on 13th December 2024 initial views of the modernisation of VAT, and reforms to develop following last month’s political agreement of ViDA. The heading covered: simplifications; digitalisation; and greening the VAT regime. Any reforms will need to be agreed upon by potentially 2040 for implementation by the targeted 2050.
Major ideas within the subgroup presentation include:
- Broadening the VAT base, and ensuring neutrality
- Improving collections, particularly based on the Digital Reporting Requirements of ViDA, fiscal cash registers and split payments
- Improvements and more consistency in the right to deduct
- Setting pan-EU standards on data collection and security, particularly in the context of ViDA
- Ensuring all parties undertaking economic activities are subject to VAT
- Alignment of rules for goods and services, including moving fully to destination-basis
- Removal of the VAT exemptions on financial services which is currently on pause
- Withdrawal of special, complex schemes, derogations and standstill clauses
- Clear the VAT costs to donations and secondhand goods
- Simplier rule making and adjudication; use of regulations instead of directives
- Creation of a single, EU VAT authority, to mirror the 2028 Customs Authority proposal
- Limiting the use of VAT to promote green policies as they undermine the wider VAT regime and produce distortive effects. But support of the circular economy. Any incentives should be applied via deduction allowances
