VAT in the Digital Age
Learn about the European Commission’s proposals and how they will impact your business
On 8 December 2022, the European Commission published its VAT in the Digital Age proposal, defining the core areas where European VAT will be modernized in the coming years.
The reform is covering the following themes :
- Digital VAT reporting obligations and e-invoicing
- Changes to the VAT treatment of the platform economy
- Single VAT registration in the EU
Key highlights
The Commission released its proposals for changes to the VAT Directive, the Regulation on VAT administrative cooperation and the VAT Implementing Regulation on 8 December 2022.
The proposals contain a large number of detailed changes to the current VAT legislation, which should enter into force at different points in time ranging from 1 January 2024 till 1 January 2028.
Key highlights of the proposals are:
- the digital reporting requirements for intra-EU supplies of goods and services, with transactional and near real time data transmission from structured electronic invoices;
- the new liabilities for VAT collection imposed on platforms facilitating short term accommodation rental and passenger transport as well as on e-commerce marketplaces (extending the 2021 deemed supplier rule to all marketplace goods transactions);
- the creation of new and extended possibilities for business trading across borders to report their transactions through a single VAT registration in the EU.
Analysis and impact
The VAT in the Digital Age proposals are likely to have a big impact for many companies in Belgium and across the European Union.
Read our alerts and/or replay our webinar recording(s) to explore how these proposals may impact your business:
11 December 2022 | EU Commission proposal for digital reporting requirements and e-invoicing | Alert
11 December 2022 | Platform economy and e-commerce changes | Alert
14 December 2022 | VAT in the Digital Age: Key take aways and anticipated impact | Webinar recording
The road that led to this proposal
The work done by the European Commission on VAT in the Digital Age is a key part of its action plan for fair and simple taxation supporting the recovery published in 2020. It explores further digitalization options in the indirect tax space, making tax reporting more transparent and automated and better accommodating VAT for new digital business models.
VAT in the Digital Age is a journey which the European Commission, national tax authorities and the business community are travelling together. The December 2022 proposals are a pivotal moment rather than the starting or the end point. Over the past 2 years, the proposals were prepared through an extensive study on the options for reform and numerous interactions, including a public consultation.
The adoption by the European Commission brings the concrete proposed measures into the public domain and kicks off the formal legislative process for VAT in the Digital Age. To get adopted, the proposal will need to receive unanimous approval by all EU Member States, which may require further changes or additions to the proposed measures. After the adoption by the EU Council, a certain timeline will be allowed to Member States to implement the changes in their national VAT legislation. Changes may therefore only start to apply at least two or more years from now, with measures in the field of digital reporting and e-invoicing most likely subject to a phased introduction.
At Deloitte, we are committed to bring you news and insights as the VAT in the Digital Age reform goes through this process, in order to help you plan and prepare for the future VAT environment.
EU Public Consultation on VAT in the Digital Age
As part of the preparation for its proposal, the European Commission ran a public consultation with results published on 17 June 2022.
At Deloitte, we recognize that both in EU and globally, tax reporting trends are geared towards Continuous Transaction Controls (CTC) and e-invoicing, and we support these developments, as they have the potential to reduce compliance costs and prevent errors and mistakes in managing VAT. EU action in the field of promoting and harmonizing digital reporting for VAT is urgently required and should impose a framework on Member States to achieve (over time) a maximum consistency and harmonization in the way VAT reporting is set up in a digital way.
We also welcome the initiative in the VAT in the Digital Age to reduce the tax compliance burden for internationally active businesses through a single VAT registration. An extension of the One Stop Shop regimes to cover a wider scope of transactions in the trade of goods, would be a major step forward in realizing the Internal Market.
