EU VAT in the Digital Age ViDA timetable update

ViDA – major progress needed on Single VAT Registration and Platform Economy reforms in 2023 for 2025 launch. Significant consensus on more complex Digital Reporting Requirements also required for 2028 implementation

On 8th December 2022, the European Commission (EC) published its proposed VAT in the Digital Age (ViDA) reforms in three pillars: Single VAT Registration, Digital Reporting Requirements; and Platform Economy. Below is a summary of how these proposed reforms will rollout between 2023 and 2028:

• 2023 – Member states agreement

  • Three-month public consultation by EC lasting until 19 March 2023.
  • EU Member states are already opening their own public consultations to gather local views.
  • The EU Parliament and states will review, negotiate and approve at the European Council the proposed changes. It seems there is widespread backing for the reforms as they promise additional tax revenues balanced with flexibility to suit national priorities. Not all of the reforms will need to be adopted in 2023 since they do not come into effect for several years.
  • However, 2024 is EU Parliament elections year meaning limited political bandwidth for major reform debate. So the 2025 reforms (Single VAT Registration and Platform Economy pillars) will realistically have to be agreed by the Council by end of 2023 to meet the implementation target.

• 2024

  • Member states free to impose national e-invoicing without prior approval of the EC.
  • 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.
  • A revised definition of ‘structured e-invoices‘ is added to the VAT Directive. This will, for example, clarify that PDF’s do not qualify as e-invoices.

• 2025 – Single VAT Registration & Platform Economy pillars

  • The extension of the OSS return to e-commerce and own stock movements across EU borders.
  • Call-off stock withdrawal as traders will be able to use OSS (see above)
  • Marketplaces become deemed suppliers for their EU sellers’ B2C goods sales across EU borders. They already carry this responsibility for non-EU sellers.
  • The IOSS to become mandatory for marketplaces which have facilitated their sellers’ imported goods sales. Deemed supplier marketplaces will therefore no longer be able to use the special arrangements VAT collections option introduced as part of the 2021 e-commerce VAT package.
  • Harmonisation of reverse charge B2B goods when the customer or supplier is non-resident, and change to ‘may’ provision.
  • Accommodation and ride sharing platforms become liable for users’ VAT collections and reporting.

• 2028 – 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 2018.
  • 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.

3 Pillars of ViDA

The EC believes these measures will save €1 billion in compliance costs for e-commerce sellers, and curb €11 billion of the €50 billion lost in missing trader (carousel) fraud. Shifting VAT collection obligations to travel and accommodation platforms will raise a further €6.5 billion. There will be significant implementation costs for DDR: businesses €11.3bn and tax authorities €2.2bn.

Benefits include: cutting the latest EU VAT Gap of €93 billion in lost revenues each year by over €4bn;  raise €6bn per year in new revenues from platforms; and save e-commerce sellers €1bn per year on compliance costs.