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No EU ViDA agreement until Autumn 2024

VAT in the Digital Age won’t return to ECOFIN for agreement till Oct or Nov 2024

Second failure to win agreement following Estonia’s block on Pillar 2, Platform Economy, means talks on hold with change of presidency of Council of the EU.

Revised timetable: July 2027 Single VAT Registration & Platform Economy; July 2030 Digital Reporting Requirements & e-invoicing

With the change from Belgium to Hungary of the rotating presidency of the Council of the EU, talks on concluding the last outstanding Pillar of VAT in the Digital Age (ViDA) will not return to ECOFIN (EU Finance Ministers forum) until October or November 2024.

A last minute compromise in June 2024 failed to unlock the Estonian veto on Pillar 2 Platform Economy full approval. This is third of EU’s ViDA reforms. Pillars 1 (Digital Reporting & e-invoicing) and 3 (Single VAT Registration) had already been agreed at the May ECOFIN meeting, and will go ahead. There has already been a Fiscalis workshop on the SVR reforms. 

Once agreed, the proposals will return to the EU Parliament to approve the compromises – which should be a formality given the extended timetable.  It then moves to acceptance by the Council.

Estonia holds out on Pillar 2, Platform Economy

On Pillar 3, ride and accommodation digital platforms, Estonia remains concerned that the mandatory requirement for platforms to account for VAT of their 3rd party traders would undermine neutrality and adversely affect smaller traders that were below the VAT registration threshold. The compromise changed this deemed supplier obligation to allow member states to opt out SME businesses – including provision of a database for platforms to manage eligible traders based on the 2025 Special SME Scheme. The latest draft of the proposals has removed the admin conditions for member states to use the SME sheme option. But this has not convinced Estonia to remove its veto and allow agreement on Pillar 2. Estonia also highlighted the role of the new DAC7 reporting requirements on digital marketplaces as an alternative remedy for non-compliance. Estonia drew supporting comments from: France Czechia; Poland; and Denmark. But others said the Belgian compromise was sufficient: Slovakia; Latvia; Spain; Greece; and Germany.

Below are the likely revised proposals and delayed timetable from the original Dec 2022 ViDA plans.

2024 – upon ViDA agreement and gazetting VAT Directive changes

  • Member states are free to impose domestic transaction e-invoicing schemes without prior Directive derogation approval of the EC. This may only be for established businesses on domestic transactions (non ECL).
  • Issuance of e-invoices will no longer be subject to the agreement of the customer, and therefore businesses must be prepared to accept e-invoices if a domestic regime is introduced by a member state.
  • Separate proposals ‘quick fixes’ to the existing e-commerce VAT rules and processes have been moved back or into the 2028 EU Customs reforms.
  • The EC will adopt special measures to prevent VAT fraud around IOSS identification numbers. Including linking an IOSS ID to the import consignment number.

January 2026 – minor modifications to the 2021 e-commerce package

  • Modification to the €10,000 B2C distance selling goods and TBE services threshold – it will only apply from the country of establishment of the seller.
  • Update to the tax point rules.
  • Supplies of natural gas, heating and cooling energy cross-border are deemed distance sales as so may be reported in the One-Stop Shop (OSS) VAT return.

July 2027 – Single VAT Registration & Platform Economy pillars

Pillars 2 and 3 are now delayed until July 2027 – the original plan was for Jan 2025. This will allow governments and taxpayers more time to prepare IT system, plus shifts the changes away from the busy year end when many other regular updates or reforms are typically scheduled.

Pillar 2: Platform Economy ride & accommodation sharing

  • Short-term accommodation rental and road ride sharing platforms will become the deemed supplier for VAT purposes of their underlying suppliers’ transactions. This means they will have to charge and collect VAT on behalf of the supplier.
  • However, exceptions have now been negotiated following concerns and member states may opt to exclude the following two groups of underlying suppliers: 
    • Those who provide their platforms with an identification number for VAT purposes. This enables them to continue to recover input VAT costs against their output VAT; and
    • Those who are using of the new 2025 SME VAT registration special scheme for small enterprises
  • In a change from the original proposals, and to keep some consistency between member states, the definition of short-term has been changed from 45 days to 30 days. Member states may also add further conditions in their local laws to qualify the definition of short-term.
  • The EC will report on the effectiveness of these measures exceptions by 1 July 2032.
  • In a further change, travel agents are to be excluded from the deemed supplier. And, likewise, platform supplies are excluded from TOMS (Travel Operators Margin Scheme.
  • The digital platform record keeping requirements remain as per the initial proposal.

Pillar 3: Single VAT Registration

  • The extension of the OSS return to e-commerce and own stock movements across EU borders. This will enable hundreds of thousands of e-commerce sellers and B2B businesses to significantly cut their foreign VAT registrations and associated costs.
  • For non-EU established businesses, the member state of identification for OSS registration will be the country of dispatch of goods.
  • The original proposal to exclude capital goods from the OSS extension has been dropped provided the owner is entitled to full VAT recovery
  • OSS will be extended to: supply and install; goods sold aboard ships, trains and aircraft, and energy through systems.
  • The proposal to make mandatory the use of the Import One-Stop Shop IOSS single return for B2C imported sales has been dropped from ViDA.
  • Call-off stock withdrawal as traders will be able to use OSS. No new call off stock arrangements may be used from 1 July 2027. Goods already transferred prior to this date, and still not released, conditions will cease to apply on 30 June 2028.
  • However, the proposed extension of marketplace ‘deemed supplier’ to include EU merchants’ sales will not happen. Marketplaces already carry this responsibility for non-EU sellers. This followed canvassing from platforms that the administrative burden would hinder new or existing small marketplaces developing. Also, enforcement would become more difficult when switching collections from EU established merchants to non-EU established marketplaces. The European Commission is to perform an evaluation of the deemed supplier by July 2027 an evaluation of the deemed supplier rules with a view to its full extension. In particular, monitor the use by non-EU established merchant of sham fixed establishments (shell EU companies) to sidestep the existing deemed supplier rules.
  • The proposed harmonisation of the non-resident B2B domestic reverse charge (Article 194) rules will go ahead, but it has been modified to give member states some flexibility. Member states will be required ‘shall’ apply the reverse charge when a non-resident supplier supplies a customer that is VAT registered in the country. But Member States are given flexibility if they wish to adopt different rules to apply the reverse charge. For instance, applying the reverse charge only when the customer is established in the Member State that the VAT is due. Margin scheme supplies and works of art are excluded. Such transactions must be disclosed on the ESL.

July 2030 Digital Reporting Requirements pillar

Digital Reporting of intra-community transactions to tax authorities

  • Introduction of Digital Reporting Requirements (DRR) for suppliers and their customers of header-level data of:
    • intra-community: supplies; acquisitions; B2B services;
    • reverse charge when the supplier is not established; 
    • supplies of energy to a taxable dealer; and
    • triangulation.
  • Each member state will be free to develop their own reporting protocols and technical specifications.
  • There have been a number of compromises to this proposal to reflect practical burdens:
    • The reporting deadline has been extended to ’10 days’ from ‘2 working days’ from issuance of the e-invoice. 
    • Member states may exempt customers of goods or services from also reporting the transaction if they can obtain assurances by other means. 
    • In addition to the existing information required of recapitulative statement, additional information will be required including bank details to enable tax authorities to track payments. But there is no longer a requirement to note the payment date which was included in the original proposal.
  • Withdrawal of ESL recapitulative reporting since is now supplanted by the new DRR regime, above.
  • Domestic transaction reporting schemes will remain an option. Existing schemes, such as SAF-T on domestic reporting, may remain in place. 
  • The EC will report back to the Council by March 2033 an evaluation of the functioning of the DRR (including e-invoicing, below) regime.

Mandatory structured e-invoicing for DRR transactions

  • Structured e-invoices based on Directive 2014/55/EU (Electronic invoicing in public procurement) will become mandatory for any DRR transaction (see list above). Other formats, including paper, may continue for other transactions e.g. domestic supplies. Hybrid formats such as Germany’s ZUGFeRD will be valid if they include the required data structure.
  • This will include a new definition of the EN16931 e-invoice standard.
  • There is now inclusion of basic validation or technical requirements of e-invoices, termed ‘accreditation schemes’, where the tax authorities may check data structures via a platform.
  • Such e-invoices must be issued by at least the 10th day after the chargeable event (2 days in the original proposal; today the deadline is 15 days after the reporting period end), and there must be no requirement for acceptance by the customer. In the case of payment on account, and e-invoice must be issued within 10 days of receipt of the payment. Self-billing has a deadline of 5 days after the supply. These requirement does not apply to any member states’ reporting regimes on domestic supplies.
  • In a change to the original proposals, holding an e-invoice for eligible transactions will become a substantive condition to VAT deduction or reclaims.
  • In a compromise proposed by France, taxpayers may engage with third-party e-invoicing service providers
  •  E-invoices supplant paper invoices for legal purposes except in limited circumstances. 
  • The proposal to prohibit the use of summary invoices has been dropped under pressure from businesses. Instead, they may be used issued with the criteria:
    • that the VAT on the invoice is chargeable in the same month; and
    • the summary invoice must be issued by the 10th of the following month;
    • a fraud-sensitive supply and the member state has exercised its option to prohibit their use.

January 2035 Harmonisation of domestic and intra-community transaction reporting

  • The proposal to require existing domestic e-invoice reporting regimes to harmonise to the EU standard has been changed to January 2035 (originally 2027). This separation from the main e-invoicing launch date of July 2030 reflects member states (e.g. Italy, France and Poland) concerns that tax authorities and taxpayers had invested extensively in the already launch/planned domestic regimes.


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 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
Withdrawal of EU permission requirements for e-invoicing
2 Platform economy July 2027: 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
Read more - Travel & accommodation platforms deemed suppliers for EU VAT
3 Single VAT Registration; extension of OSS July 2027: 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
More details on Single VAT Registration in the EU
Call-off stock VAT simplification ends
Harmonisation of B2B Reverse Charge rules

The EU Parliament’s ECON had voted on 23 October 2023 for a one-year delay to all 3 ViDA pillars. However, this is non-binding but certainly reflects concerns that businesses and tax authorities will not be ready by 2025 for pillars 2 and 3.

VAT in the Digital Age old timetable – now delayed

  • 2028 (now July 2030) – Digital Reporting Requirements pillar

    • Introduction of Digital Reporting Requirements for header-level data of intracommunity supplies within two days of the supply.
    • E-invoices supplant paper invoices for legal purposes except in limited circumstances. Member states have the option to impose e-invoices for domestic transactions but all national regimes must converge with the EU e-invoicing standard, EN 16931.
    • No new pre-clearance e-invoice regimes may be introduced by member states. Those already in place, Italy SdI and Poland’s 2024 planned e-invoicing, may continue until January 2028.
    • Ending of summary invoices
    • Mandatory structured e-invoicing for intra-community supplies of goods based on EN 16931 standard. These will include new data fields (e.g. settlement details)
    • Withdrawal of ESL reporting since supplanted by the new DRR regime, above.

 

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