On 5 November 2024, the Council adopted new measures aimed at modernising the value added tax (VAT) rules for the digital transition. The legislative package, which includes a directive, a regulation, and an implementing regulation, will make significant changes to three key areas of the VAT system.
Digital VAT reporting and e-invoicing
The Council has agreed that taxpayers will be required to issue e-invoices for cross-border business to business (B2B) transactions and automatically transmit this data to their tax authorities for the purpose of the EU Sales Listing. This will enable national tax administrations to share the information through a new IT system designed to quickly detect unreported VAT revenue, facilitating swifter and more effective oversight of potential fraud within the EU. This real-time digital reporting system will be implemented by 2030, with interoperability between national systems expected by 2035.
VAT for the platform economy
Under new rules, online platforms will be liable for collecting and remitting VAT on short-term accommodation and passenger transport services when the individual service providers are not VAT-registered. The platform will be considered a "deemed supplier" as it will be deemed to make the supply to the customer (when the service providers do not pay VAT themselves). Under this new model, the platform will charge VAT directly to the customer and remit it to the tax authorities.
This approach is expected to improve VAT collection and level the playing field between traditional services and platform-based providers. Member States may choose to exempt small and medium-sized enterprises from these new VAT collection requirements.
Single VAT registration through OSS
Under the current system, taxable persons selling goods to consumers (B2C) within a different Member State from where the taxable person is established may be required to register for VAT in both their country of business establishment and the consumer's country of residence. This contrasts with the new rules, under which the VAT One-Stop Shop will be expanded to include the sale of goods to consumers within a Member State other than where the business is established.
Additionally, the Council has agreed to a mandatory reverse charge mechanism for all B2B transactions where the supplier is not established in the Member State where VAT is due.
These new measures are designed to reduce the VAT administrative burden, simplify tax obligations for businesses operating across multiple EU countries, and harmonise the VAT system within the EU.
Next steps
The Council has introduced significant amendments to the texts compared to the opinion provided by the EU Parliament on 22 November 2023. As a result, the EU Parliament will be consulted on the revised versions, after which the Council will need to formally adopt the legislative package.
Once the legislation has been published in the Official Journal of the EU, attention will turn to the practical effects of these changes on businesses and VAT compliance across Member States. To inform you about the latest developments in more detail, we will be publishing specific newsflashes on each of the new measures described above.
Click here to read the Council's press release
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.
