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EU VAT Expert Group reviews VAT in the Digital Age reforms

European Commission group debates question on: Single VAT registration in EU; Digital Reporting Requirements and e-invoices; and Platform Economy and VAT

The European Commission’s VAT Expert Group (‘VEG’) reviewed this month a range of questions arising from the proposed VAT in the Digital Age reforms. Following the debate around these issues, a draft conclusion will be produced by the Commission and impact assessment completed. Draft VAT Directive amendments should be public 16th November.

Key points discussed at the VEG meeting included:

Single VAT Registration in the EU (extension of OSS)

  • For the transfer of own goods across EU country borders for B2C transactions with a digital platform involved to be included in the One Stop-Shop VAT return, member states wish to retain it as a taxable event to track for fraud. A model is being considered which would be based on an extension of the marketplace deemed supplier provision for transfers of goods of underlying suppliers (both outside and inside the EU) and for subsequent supplies, in combination with a new module in the One Stop-Shop (OSS) for transfers, including for transfers whereby no use would be made of a platform.
  • This raises questions about having to declare the taxable amounts of the transfers. Also, how would this work with call-off stock.

E-invoicing interoperability and harmonisation

  • Members of the VEG were largely against a Continuous Transaction Control model whereby invoices are first pre-cleared with the government in real time. This was largely because data protection concerns.
  • There were also concerns on mandating any e-invoicing system because it would put disproportionate costs on to small and medium sized-businesses
  • Members of the VEG were anxious to adopt a single e-invoicing standard to avoid a proliferation. The existing EU CEN 16931 standard was suggested.
  • Again for confidentiality reasons, there was opposition to a single network being mandated; the preference was for a mix of public and private.
  • Many members of the VEG raised questions about compatibility with the already deployed systems, including Italian SdI. The EC services clarified that the implementation of a harmonised system will take into account these issues and will give enough time to carry out the adaptation.

VAT and the Platform Economy

  • The VEG group looked at the complex issues for deemed supplier imposition on the accommodation sector.
  • The question of fiscal neutrality was raised, in particular that a supplier via the deemed supply would not be able to recover any input VAT. However, another member argued against this, saying that the supplier under the deemed supply would have no compliance costs, which would make up for the loss of input tax deduction.
  • On a question about streamlining the data reporting obligations of platforms, the Commission services indicated they will look into which information is to be transmitted to tax administrations and its frequency.

Outstanding questions for three strands of VAT in the Digital Age reforms

Key questions had been split prior to the VEG meeting into the three stands of the reforms which were originally part of the Tax Action Plan from 2020.

  1. Single VAT Registration in the EU – extending the pan-EU OSS return to all B2C cross-border transactions and some B2C transactions. The major issue is capturing the movement of own stocks and OSS. Of the three proposed options, it appears using the OSS return and keeping the transaction departure and intra-community acquisition taxable is the most likely choice. Watch our VAT TV episode on the Single VAT Registration proposals.
  2. Digital Reporting Requirements – what harmonisation model should be adopted by member states around live transaction reporting, including e-invoicing. The EU has proposed a choice between partial and full harmonisation on DDR and the challenges of interoperability between country variations. The former being intra-community transactions being included in an EU-level reporting regime; the latter being intra-community and domestic transactions. There are many options around: separating e-invoicing and e-reporting, including if using Continuous Transaction Controls model; full or partial invoice data sets; which standard to adopt including PEPPOL; how invoices are transmitted; and role of the customer in approving the invoice. Watch our VAT TV episode on Digital Reporting Requirements.
  3. Platform Economy and VAT – exploring how marketplaces for goods, services, gig and sharing economy can assist in monitoring and/or collecting their users VAT. The many issues include: should platforms take on deemed supplier role; new 2025 EU VAT registration threshold rules and if these could undermine deemed supplier; special scheme for travel agents (TOMS); an exemption for house sharing and similar short-term accommodation platforms; what record keeping, including intersection with DAC 7

EU VAT reforms

Reform (click for details) Update
2025 VAT registration thresholds equivalence foreign businesses On track
Virtual events VAT rule changes Agreed
2024 Payment providers' seller transaction reporting and bookkeeping obligations On track
Digital Reporting Requirements including EU e-invoicing harmonisation Implementation of VAT in the Digital Age?
2023 DAC 7 - marketplace reporting harmonisation On track
Financial Services VAT exemption reform proposals Consultation complete; proposal 2023
Tour operator margin scheme VAT reforms EC undertaking fresh review
2022 EU definitive VAT system On hold
EU reduced VAT rate freedoms Enter into force 6 April 2022
IOSS reforms to prevent double taxation Proposals early 2022
VAT in the Digital Age proposals On track for 16 Nov 2022 publication
Single VAT Registration in the EU - extension of OSS On track for 16 Nov 2022 publication
Proposal for VAT treatment of the platform economy On track for 16 Nov 2022 publication
VAT Gap Initiative Q3 2022
2021 One-Stop-Shop (OSS) single EU VAT return In effect since 1 July 2021
Ending €22 import VAT exemption; new IOSS return In effect since 1 July 2021
Marketplace deemed supplier EU VAT reforms In effect since 1 July 2021
2020 EU four Quick Fixes for VAT In effect
Tax authorities anti-VAT fraud cooperation In effect
Tax Action Plan - 25 VAT and other tax reforms roadmap See 'VAT in the Digital Age' and others
2019 Simplification of e-services VAT compliance and thresholds In effect
Single and multi-use vouchers In effect
2018 Lower e-book and publications VAT rates In effect, although not all EU states have adopted the option
EU Generalised Domestic Reverse Charge VAT Mechanism In effect, although no country has adopted this voluntary option
2015 B2C electronic services VAT reforms - MOSS return In effect

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