Businesses are currently facing sweeping changes in the VAT framework, largely involving enhanced VAT digitalisation. This new dimension of EU VAT was proposed by the European Commission on 8 December 2022 as a series of measures under the umbrella term “VAT in the Digital Age” (ViDA).
ViDA has four key objectives:
- Adjust EU-level reporting to meet the challenges of the digital era.
VAT reporting and record keeping obligations will be based on an electronic format to standardise the information submitted to tax authorities. The plans are to introduce:
- electronic invoices as a standard for each transaction, initially for B2B intra-Community transactions (a European e-invoice schema will be published), and
- real-time digital reporting of intra-Community transactions to replace the current system of national intra-Community transaction statements.
2. Create a central VAT Information Exchange System
The new central register will be directly connected to systems in the Member States and will contain mainly digital reporting information and taxable person particulars, including VAT identification numbers. Data in the register will be available for 5 years from the end of the year during which they were submitted to it.
3. Introduce the deemed supplier model for the platform economy
To ensure equal treatment of transactions on digital platforms, some additional duties will be imposed on the platforms themselves, including through assigning them the role of deemed supplier in transactions carried out in the short-term accommodation rental sector or the passenger transport sector by providers that are not liable to VAT on such transactions.
4. Limit VAT registration requirements
The current OSS (One-Stop Shop) and IOSS (Import One-Stop Shop) schemes as well as the reverse charge scheme will be modified to better suit taxable persons (e.g. a clearer threshold for OSS) and extended to include new transaction types, e.g. transfer of own goods. This will simplify VAT compliance and abolish the duty to register in countries where only single transactions occur. The call-off stock procedure will be removed due to the extension of OSS to intra-Community movements.
The proposed changes are intended to simplify the VAT framework by reducing the time and cost of compliance and to give tax authorities more effective verification tools for combating VAT fraud and abuse.
The proposal is currently undergoing public consultations scheduled to continue until 4 April 2023. As a next step, the Commission will issue a report summarising the responses received and will lay down the report before the European Parliament and the Council as input for a legislative debate. The changes are proposed to enter into force over the years 2024 to 2028.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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