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EU VAT reforms June 2021 update

The European group of finance ministers, Economic and Financial Affairs Council (ECOFIN), reported to the European Council on progress of various EU VAT reforms. This came on 3 June 2021.

Follow all the European Union’s completed and planned reforms via VAT Calc’s EU VAT reform tracker. The EU’s VAT in the Digital Age proposals for 2022 release will look to reform: transaction-based reporting(including e-invoices); VAT treatment of platform economy; and single VAT return which covers extension of OSS and IOSS to all B2C transactions and to B2B for the first time. The EC plans to launch a VAT Gap Initiative in the third quarter of 2022 to share best practises on VAT administration and collections.

Below is a summary of the progress of the various Value Added Tax reforms aimed at making the indirect tax system easier to operate, simpler for businesses and better at detecting or preventing tax fraud. The EU’s VAT Gap, an estimate of missing VAT revenues amongst the 27 member states, is estimated to expand to €167billion in the next two years.

Many of these reforms originated from the EU’s VAT Action Plan from 2016, including the e-commerce VAT package coming into force on 1 July 2021

Definitive VAT system – bogged down

This proposal seeks to switch all cross-border goods B2B transactions from the origin to the destination principle. This was a plan to move from the ‘temporary’ origin principle in 2022. The 2020 Quick Fixes passed as a set of four reforms in the run-in to the Definitive VAT system.

In 2020, many states raised misgivings about the EC’s proposed solution – VAT becoming cash chargeable on cross-border transactions via an extension of the OSS or MOSS single returns. The latest update is looking at shared liabilities, so restricted the customer’s right to deduct if the supplier does not pay the VAT charged.

To limit the risks for the customer, a split payments system could be introduced with live transaction reporting on the payments

In short, limited progress, and more analysis needed by member states for this to progress.

Increased VAT rate setting freedoms – 18th June discussions

Also originally set for 2022, was the right for member states to take more control on reduced rate setting. The current Portuguese presidency has proposed a review of a three-stage introduction of this to be discussed by ECOFIN on 18 June 2021.

VAT Committee increased powers – blocked

In December 2020, the EC proposed granting more compliance rule setting powers for its VAT Committee. It was part of the EU Tax Package announced in 2020. This would enable better and more consistent interpretation of the VAT Directive. However, member states have so far been reluctant to accept this proposal. They have concerns on shifting powers from the European Council to the European Commission.

EU VAT reforms

Reform (click for details) Update
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2035 Harmonisation of EU e-invoicing and domestic regimes Jan 2035
2030 Digital Reporting Requirements and e-invoicing harmonisation July 2030
Structured e-invoices supercede paper invoices July 2030
EC Sales lists replaced by Digital Reporting Requirements July 2030
2028 EU Customs reforms Published May 2023
€150 import consignment threshold removed Published May 2023
2027 Single VAT Registration in the EU - extension of OSS July 2027
Call-off stock VAT simplification ends July 2027
Harmonisation of B2B Reverse Charge rules July 2027
Proposal for VAT treatment of the platform economy July 2027
2026 DAC8 harmonised crypto asset reporting Approved May 2023
2025 VAT registration thresholds equivalence foreign businesses 1 Jan 2025
Virtual events VAT rule changes 1 Jan 2025
Financial Services VAT exemption reform proposals Consultation complete; proposal awaited
Tour operator margin scheme VAT reforms EC undertaking fresh review
2024 Payment providers' seller transaction reporting and bookkeeping obligations In effect since 1 Jan 2024
2023 DAC 7 - marketplace reporting harmonisation In effect since 1 Jan 2024
2022 IOSS reforms to prevent double taxation On hold
EU reduced VAT rate freedoms Entered into force 6 April 2022
VAT in the Digital Age proposals Published Dec 2022
EU DAC8 cryptocurrency tax reporting proposals Published Dec 2022
VAT Gap Initiative Q3 2022
EU Definitive VAT System On hold
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


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