ViDA harmonises Article 194 for non-established suppliers, reducing the need for foreign VAT registrations across the EU
Currently member states have option to implement as ‘may’ provision – Article 194
From 1 July 2028, Article 194 of the EU VAT Directive will be harmonised across all Member States, introducing a mandatory domestic reverse charge in defined circumstances.
The reform forms part of ViDA’s wider Single VAT Registration (SVR) package, alongside the expansion of the One Stop Shop (OSS) and the new Transfer of Own Goods (TOOG) scheme.
A major reduction in foreign VAT registrations
Today, Article 194 is optional.
Some Member States apply a domestic reverse charge where a non-resident business makes a local B2B supply. Others impose additional conditions, or require the foreign supplier to obtain a local VAT registration instead.
That inconsistency has long frustrated businesses operating across multiple Member States.
ViDA introduces a common rule.
Where a supplier:
- is not established in the Member State where VAT is due;
- does not hold an individual VAT registration in that Member State; and
- supplies a customer already VAT registered there,
the customer becomes liable for the VAT under the domestic reverse charge.
For many businesses, this removes another reason to obtain a local VAT registration.
Not a universal reverse charge – RC variations remain elsewhere
The reform is significant, but it is not unlimited.
It only applies where the customer is already VAT registered in the Member State of supply.
If the supplier already holds an individual VAT registration in that country, the mandatory rule does not apply.
Member States also retain discretion to extend the reverse charge more widely to other supplies by non-established businesses if they wish.
Part of the wider Single VAT Registration strategy
The domestic reverse charge should not be viewed in isolation.
ViDA reduces VAT registrations through several complementary measures:
- expansion of Union OSS for additional domestic B2C transactions;
- the new Transfer of Own Goods (TOOG) special scheme;
- mandatory domestic reverse charge for qualifying B2B supplies.
Together, these measures aim to allow businesses to serve multiple Member States while maintaining significantly fewer foreign VAT registrations.
Some transactions remain outside the new rules
The final Directive excludes certain transactions from the mandatory Article 194 mechanism, including supplies made under the margin scheme.
The legislation also introduces related invoicing changes, requiring invoices for Article 194 transactions to be issued by the fifteenth day of the month following the chargeable event.
What this means for VAT systems
The practical challenge now shifts to tax determination.
ERP systems and tax engines must correctly identify when:
- the supplier is not established;
- the supplier does not hold a local VAT registration;
- the customer is VAT registered in the Member State of supply; and
- Article 194 therefore applies automatically.
For businesses trading across Europe, this becomes another determination rule that cannot reliably be managed through manual configuration alone.
VATCalc gets the reverse charge rules right across the EU and beyond.
One of the unique features of VATCalc’s tax engine, VAT Calcualtor, is that it automatically adjusts to the pan-EU rules on the reverse charge automatically for you. There is no requirement for reconfiguration with expensive consultants or calling on your ERP team for help. And of course this means your VAT transactions are correctly reported in the return which are produced on the same, single app via VAT Filer.
Contact us to learn how VATCalc’s breakthrough determination and reporting app can help you stay compliant in a digital world.
EU VAT in the Digital Age reforms
| EU VAT in the Digital Age | |
| 3 pillars to improve efficiency of VAT for all and reduce fraud | |
| 1. Digital Reporting Requirements; e-invoicing | Jul 2030-35: Mandatory digital reporting of intra-community transactions; obligation to be able to issue and receive intra-community e-invoices; member states free to impose own e-invoicing or real-time reporting but most conform to EU e-invoice standard EN 16931 |
| Read more about EU Digital Reporting Requirements (DRR) | |
| Structured e-invoices mandated for intra-community supplies | |
| EC Sales lists replaced by Digital Reporting Requirements | |
| 10-day e-invoicing deadline for intra-community sales | |
| 5-day e-reporting time limit intra-community purchases | |
| Withdrawal of EU permission requirements for e-invoicing | |
| Central VIES database launch | |
| 2 Platform economy | Jul 2028 / Jan 2030: Travel & accommodation sharing platforms to become deemed supplier / liable to users' VAT. New definitions of the roles of providers, users and platforms to avoid double and no-taxation (voluntary Jul 2028) |
| Read more - Travel & accommodation platforms deemed suppliers for EU VAT | |
| 3 Single VAT Registration; extension of OSS | July 2028: Following the 1 July 2021 introduction of the One Stop-Shop (OSS), extended to cover movement of own stocks prior to cross-border B2C to reduce the foreign, non-resident VAT registrations & returns. Plus to movements of own stock with ending of 'call-off' stock burden |
| January 2027 initial changes | |
| Transfer of own goods OSS extension | |
| Call-off stock VAT simplification ends | |
| Harmonisation of B2B Reverse Charge rules | |
| Creation of Single VAT Registration identiy | |
| Securing IOSS (Mar 2028) | |
