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EU VAT Treatment of Platform Economy update – VAT in the Digital Age

VAT reforms – platforms; gig and sharing economies; full deemed supplier liablity?

As part of the VAT in the Digital Age review of the impact and best policies for indirect tax reforms, the European Commission is reviewing ‘VAT Treatment of the Platform Economy’. This includes the VAT effects for the gig and sharing economies and to a lesser extent issues around goods and e-commerce not already by EU VAT e-commerce package July 2021 and other reforms. A public consultation was launched in January until May 2022, with draft reforms to the EU VAT Directive expected by 16 November 2022.

The work is being coordinated with the OECD – see end. Follow all the European Union’s completed and planned reforms via VAT Calc’s EU VAT reform tracker.

Below is a summary of: 1) VAT Challenges; 2) Policy Options – including full deemed supplier VAT liablity as with E-commerce package for goods July 2021 reforms. This work also ties to the OECD platform work (see end of this blog).

1) VAT challenges to be reviewed for the platform economy

  • Lack of consistency or harmony on country-by-country rules and reporting obligations for platforms. See also the DAC 7 platform transaction reporting obligations coming into effect on 1 January 2023.
  • Challenges for compliance, particualry in the gig & share
  • Definitions of the players
    • Provider – of goods are services, including ride or accommodation sharing
    • User – the customer and consumer of the service being offered
    • Electronic Interface (EI) – the platform or marketplace introducing and facilitating the supply

Through the review, the EC is seeking to:

  • Provide certainty on the tax liabilities for this new sector for providers, users and electronic interfaces (platforms and marketplaces) to prevent double taxation;
  • Keep compliance efficient and light to reduce the burden and costs for taxpayers and tax authorities alike;
  • level the playing field for the traditional economy; and
  • protect member states’ tax bases- non-taxation.

2) Policy Options

The current range of options for the above are:

  • A. Status Quo

    • No legislative amendments to the VAT Directive;
    • Instead non-binding guidance;
  • B. Clarification of the VAT rules, book-keeping and reporting obligations of platforms:

    • B1- legal certainty around the nature of the services provider – whether electronically supplied services (ESS) or the supply of intermediary services (IS). This would drive who held the VAT obligations – the provider or platform;
    • B2 – a rebuttable presumption on the status of platform providers – i.e. that the provider is considered to be not a taxable person where they do not provide their VAT number
    • B3 – clarification of record-keeping requirements for platforms
  • C to E Deemed Supplier VAT liabilities

    • C for certain accommodation and transport services
    • D all accommodation and transport provided for money
    • E for any service provided for money

The other issues still to be considered:

  • How to accurately define the taxable status of the provider (in particular issues with the Group of Four), and the services provided;
  • Whether a definition of a platform is required, and if so, how should it be worded to include possible future business models;
  • The deemed supplier model and its interaction with the travel agent scheme;
  • The deemed supplier model and its interaction with the Group of Four and more specifically with the SME scheme;
  • How to deal with the right to deduct of non-registered platform suppliers under the deemed supplier regime;
  • How to deal with platforms where the underlying transactions are exempt; Reporting obligations by platforms.

Overlap with OECD gig and sharing economy

The OECD has performed extensive work on VAT issues for the gig and sharing economies. The EU’s focus should be broader, although the OECD has now extended to goods and ride sharing. HMRC’s UK gig & sharing economy VAT consultation started in 2021.

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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