OUR INSIGHTS AT A GLANCE

  • On 8 December 2022, the European Commission presented the legislative package "VAT in the Digital Age" or "ViDa"
  • Amongst the proposed measures, the following may be highlighted:
    • the option for EU Member States to impose e-invoicing as of 1 January 2024, which will become the default system for issuing invoices as of 1 January 2028;
    • the obligation for VAT taxable persons to report transactional data for business to business intra-EU sales of goods and services within two working days, applicable as of 1 January 2028 (e-reporting);
    • a new VAT liability for digital platforms generally facilitating B2B and business to consumer sales of goods and short-term accommodation rental and passenger transport, which will be required to collect and remit VAT to the State as of 1 January 2025;
    • the review of the scope of the current reverse-charge mechanism and One Stop Shop to cover more transactions and, therefore, reduce the obligation of businesses carrying out intra-EU trade of VAT registering in Member States other than the one of establishment as of 1 January 2025 (single VAT registration within the EU).
  • Being approved, the proposed package will affect all businesses carrying out their activities within the EU. Businesses involved in intra-EU trade and digital platforms will certainly be the most affected and shall, therefore, review their internal processes to ensure compliance with the new obligations to be implemented.

THE PROPOSAL

On 8 December 2022, the European Commission presented the legislative package ViDa1 , 1 aiming to (i) modernise businesses' VAT reporting obligations, (ii) address the challenges of the platform economy and (iii) lead the way towards a single VAT registration system. This package proposes measures to modernise and simplify the EU VAT system and to minimise VAT fraud around the EU, by means of adapting it to the digital age.

We set out below the main measures of this package, split in three pillars:

  • Modernisation of VAT reporting obligations through e-invoicing and e-reporting

E-invoicing

ViDA package foresees that, as of 1 January 2024, EU Member States may impose an obligation for VAT taxable persons to issue e-invoices (which should be issued in a structured electronic format and comply with the European standard on electronic invoicing).

Afterwards, as of 1 January 2028, e-invoicing shall be the default for business-to-business ("B2B") intra-community supplies of goods and services.

Real time reporting of transactional data

It is also proposed that, as of 1 January 2028, transactional data for B2B intra-community supplies of goods and services shall be reported to the Tax Authorities within two working days after the invoice is issued.

  • Address the challenges of the platform economy

With effect as of 1 January 2025, platforms facilitating sales of goods (B2B and business-to-consumer ("B2C")) will generally need to collect and remit VAT to the State.

The above-mentioned requirement will also be extended to short-term accommodation rental and passenger transport platforms as of the same date. These platforms will also be required to collect and remit VAT to the State when the underlying provider is not required to do so (e.g. in situations where the provider is a not a VAT taxable person).

  • Lead the way towards a single VAT registration

Businesses carrying out transactions taxed in other Member States still face considerable VAT compliance burdens and costs (VAT registration and VAT compliance obligations). The third part of the European Commission's proposal is to allow businesses operating in the European market to avoid having to do multiple VAT registrations in several EU Member States when carrying out their cross-border activities. In order to overcome this obstacle to the single market, the European Commission proposes to introduce a single VAT registration system.

As of 1 January 2025, the VAT reverse charge mechanism will be applicable to all B2B supplies of goods and services (mandatory) where (i) the supplier is not established in the Member State in which VAT is due and (ii) the customer is VAT registered there.

Furthermore, as of 1 January 2025, the scope of the One Stop Shop ("OSS")2 is proposed to be extended in order to cover new transactions:

  • B2C domestic sales of goods in Member States where the seller is not VAT registered.
  • Intra-EU movements of own goods (currently covered by the call-off stock arrangement).

OUR INSIGHTS

This legislative proposal will require the unanimous approval of all the EU Member States. The scope of the proposed changes is broad and will certainly impact most businesses operating within the EU. This proposal shows a big step towards the generalised adoption of e-invoicing and realtime reporting obligations. Although these changes will be optional in a first moment, businesses will have to adjust their internal processes in the upcoming years.

Footnotes

1 This legislative package (available here) proposes to amend: (i) the Directive 2006/112/EC on the common system of value added tax ("VAT Directive"), (ii) the Council Regulation (EU) 904/2010 on administrative cooperation and combating fraud in the field of value added tax and (iii) the Council Implementing Regulation (EU) 282/2011 laying down implementing measures for Directive 2006/112/EC ("VAT Regulation").

2 The OSS is an optative scheme in force since 1 July 2021, according to which businesses may opt in and submit a single VAT return to declare B2C sales in other Member States, avoiding the need of a VAT registration in Member States other than the Member State of establishment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.