EU VAT in the Digital Age (ViDA) package latest developments

5 June 2024| CATEGORIES: Digital Reporting Requirements, e-invoicing, EU VAT, Intra-EU trade, VIDA| TAGS: digital reporting requirements, e-invoicing, EU, platform economy, single VAT registration, VAT in the Digital Age, VIDA

Current status of the proposals

After more than a year of deliberations, a compromise VAT in the Digital Age (ViDA) proposal was drawn up under the current Belgian Council Presidency and published on 8 May 2024. The revised proposals were presented at an ECOFIN meeting on 14 May 2024.  EU Member States tried to reach a political agreement on the revised ViDA package, however, Estonia used its veto to oppose aspects of Pillar 2.  Estonia is concerned about the impact on SMEs and proposed making the new deemed supplier rules optional (an opt-in), allowing Member States to choose whether to implement them in their national VAT legislation.

A further attempt at obtaining agreement on the overall (general) approach of the revised directive proposals and political agreement on the content of the draft regulations will take place at the next ECOFIN meeting on 21 June 2024.

Background

On 8 December 2022, the European Commission published its proposals on the (ViDA) package.  The ViDA Package aims to support the digital transition of the EU, enhance cross-border trade and combat VAT fraud.

The proposals are structured around three pillars:

• Pillar 1: Digital Reporting Requirements (DRR);
• Pillar 2: VAT treatment of the platform economy;
• Pillar 3: Single place of VAT registration in the EU.

See our earlier blog articles here and here for further information.

The ViDA proposals will bring enormous changes as they affect various aspects of the management of VAT such as invoicing and reporting, the taxation of the platform economy and the single place of VAT registration.

Revised proposals

Whilst the spirit of the proposals has been maintained, significant modifications to the December 2022 proposals have been introduced under the revised proposals.  A delay of two and a half years is planned for most of the changes.  This is intended to give tax administrations and businesses more time to plan and implement the necessary system changes.

Digital Reporting Requirements (Pillar 1)

From 1 July 2030 (originally 1 January 2028), e-invoicing and digital reporting will be mandatory for:

• intra-EU sales of goods,
• intra-EU acquisition of goods (except transfers of own goods); and
• taxable sales/purchases of goods and services for which the customer is liable under the reverse charge mechanism.

E-invoices must comply with the EU standard and be issued within 10 days (originally 2 days) of the time of supply.

The deadlines to submit the information under the digital reporting obligations are:

• Real-time for supplier: at the time the invoice is issued or should have been issued;
• Near-real time in case of self-billing: no later than five days from the date the invoice is issued or should have been issued; and
• Near-real time for the recipient: no later than five days as from the date the invoice is received.

As a general rule, both the issuer and the recipient of the invoice would need to report the invoice data to their respective national tax authority. Although under the revised proposal the reporting of transaction data by the customer will be optional for Member States instead of being mandatory (i.e. an opt-out).  An assessment of this optionality will be reported on by 31 March 2033.

The ability to issue summary invoices will remain, despite the original proposal not permitting them. These invoices would need to be issued by the 10th day of the month following the period to which the transactions relate, and they can only cover a maximum of one calendar month’s supplies.

Including the due date on e-invoices will no longer be a mandatory requirement.  However, the supplier’s bank details remain a mandatory requirement following considerable debate on this aspect.

In addition, Member States may extend digital reporting in line with EU standards to domestic transactions without having to obtain prior approval from the European Union.

Once DRR is implemented the submission of EC Sales Lists will no longer be required.

VAT treatment of the platform economy – Platforms as Deemed Suppliers (Pillar 2)

From 1 July 2027 (originally January 2025), online platforms facilitating short-term accommodation rental or passenger transport services via an electronic interface are to be treated as deemed suppliers. Uninterrupted rental of accommodation of up to 30 nights (originally 45 nights) will fall within the deemed supplier regime.

In another amendment, the deemed supplier rules will not now apply where the underlying provider has supplied the platform with its VAT registration number and has declared that it will charge any VAT due on supplies.

The revised proposal permits Member States to exclude SMEs using the SME scheme from the deemed supplier rules.

The revised proposal also clarifies that businesses operating TOMS would not be subject to the deemed supplier regime for platform services.

Single VAT Registration (Pillar 3)

This Pillar is designed to improve and extend existing schemes to reduce the VAT registration burden on businesses carrying out transactions in Member States in which they are not established.

From 1 January 2026 a clarification regarding the €10,000 threshold for distance sales and cross-border B2C services will be introduced. Only distance sales from the country of residence of the supplier will count towards the threshold, not distance sales from warehouses in other Member States.

Also from 1 January 2026, the OSS will be extended to cover B2C supplies of gas, electricity, heat or cooling energy, which will include B2C cross-border electrical vehicle charging.

From 1 July 2027 (originally January 2025), the One Stop Shop (OSS) Union Scheme will be extended to other supplies of B2C goods, e.g. supplies after installation and assembly, supplies of goods on board means of transport, supplies of goods at an exhibition.

A new OSS scheme is to be introduced for the transfer of own goods within the EU (including capital goods under the revised proposal) thus eliminating the need for a VAT registration where inventory is stored. As this will include cross-border movements of goods currently covered by call-off stock arrangements, these arrangements will end on 30 June 2027.

For domestic B2B supplies of goods and services (excluding margin scheme supplies) a mandatory reverse charge mechanism will apply in situations where a supplier is not registered or established for VAT purposes in the Member State in which the VAT is due if the recipient of the supply is already registered there.

January 2035 – Harmonisation of domestic and intra-community transaction reporting

The proposal to require existing domestic transaction based real-time reporting regimes to harmonise to the EU standard has been delayed until January 2035. This separation from the main e-invoicing launch date of July 2030 addresses certain Member States’ concerns (e.g. Italy, France and Poland) that tax authorities and taxpayers have already invested significantly in the launched or planned domestic regimes.

Customs related aspects

Certain aspects of the original proposals have been deferred and will instead be linked to planned future customs reforms.  These include:

• the plan to make the Import One Stop Shop (IOSS) mandatory for electronic interfaces; and
• the abolition of the EUR 150 threshold.

The Belgian Presidency of the Council has stated that it is committed to securing an agreement on the ViDa Package before the end of its presidency in June.  We will provide an update following the ECOFIN meeting in June.