VAT in the Digital Age | Tax | Deloitte Netherlands

Article

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 (ViDA) proposal, defining the core areas where VAT in the European Union will be modernized in the coming years. Particularly, the introduction of the Digital Reporting Requirements in the European Union (EU) will have a significant impact on the intra-EU B2B trade of businesses. What can we expect between 2025 and 2035?

On this overview page we will keep you updated about all developments regarding the VAT in the Digital Age (ViDA) proposal. We will guide you through the proposed rules that will enter into force between 2025 and 2035.

Key highlights

On 8 December 2022, the European Commission published its proposals in the context of the VAT in the Digital Age (ViDA) project. The package consists of proposals for changes to the VAT Directive, the Regulation on VAT administrative cooperation and the VAT Implementing Regulation. 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 2025 till 1 January 2035.

Key highlights of the proposals are:

  1. Pillar one: Digital reporting. The digital reporting requirements for intra-EU supplies of goods and services, with transactional and near real time data transmission from structured electronic invoices;
  2. Pillar two: Updated rules for the platform economy. 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);
  3. Pillar three: Single VAT registration. The creation of new and extended possibilities for business trading across borders to report their transactions through a single VAT registration in the EU.

State of play

Unfortunately, the EU Member States were not able to reach political agreement on the ViDA proposal yet due to objections from Estonia. The June 2024 version of the proposal included slight changes intended to accommodate Estonia in its objections, though, the deemed supplier model for platforms in the platform economy pillar remains a divisive issue. It is now up to the incoming Hungarian presidency of the EU Council to reach a consensus during the second half of 2024.

Since the EU Member States agree on most parts of the proposal we only expect limited changes. For your convenience, we address each of the pillars of the proposal, focusing on the updated timeline and changes since the original proposal based on the compromise texts of the ViDA proposal of 19 June 2024.
 

What is the envisaged timeline?

The key dates are as follows:

  • 20 days after publication of the Directive: EU Member States may require e-invoices for domestic supplies.
  • 1 July 2027: updated platform rules for short-term accommodation (maximum 30 days) and passenger transport. Extended scope reverse charge rule and related reporting. Extended scope of OSS (supplies without transport, installation supplies, transfer of own goods).
  • 1 July 2030: intra-EU e-invoice and DRR requirements, start of harmonization of Domestic DRR.

ViDA package - proposed timelines

Pillar 1 – Digital reporting

What is it?

The digital reporting requirements (“DRR”) pillar includes new rules for near real-time digital reporting based on structured e invoices. Key purpose of this pillar is giving EU Member States valuable information in the fight against VAT fraud and bringing down the administrative and compliance costs for EU traders. This pillar includes the following measures:

  • Domestic DRR: EU Member States will have the option to introduce mandatory business-to-business (B2B) and business-to-consumer (B2C) e-invoicing for domestic (not cross-border) transactions. The compromise contains a minimal regulatory framework on the e-invoicing models and formats to be applied. Per July 2030 (2035 for EU Member States with legislation prior to 1 January 2024), harmonization in terms of models and formats for Domestic DRR will become effective (though it will still not be required based on EU legislation). Member States having implemented Domestic DRR may make VAT recovery subject to having an e-invoice.
  • Intra-EU DRR: E-invoicing for intra-EU will become mandatory for intra-EU supplies (VAT exempt cross-border supplies of goods within the EU and the corresponding acquisitions, most activities subject to reverse charged VAT including cross-border services within the EU). The e-invoice should be issued within 10 days of the chargeable event.

At the moment the e-invoice is issued, a subset of the data should be reported to the tax authorities by the supplier (near real-time digital reporting). The recipient should report the transaction within 5 days to the tax authorities (though Member States can opt out of they have alternative controls in place). The EU Sales Listing (recapitulative statement) will be replaced by the aforementioned digital reporting.

  • A revised version of the EN16931 e-invoice standard, together with the Directive 2014/55/EU (Electronic invoicing in public procurement) will govern the standards for the e-invoices and should be allowed by Member States. This allows hybrid e-invoices (e.g., structured data and human readable PDF). For Domestic DRR other standards may be allowed (though the EU standard should be allowed as well).
  • The issuance of an e-invoice complying with EN 16931 will not be subject to acceptance by the recipient (although there are exceptions).
When will it be effective?

The changes will be effective per 1 July 2030, though the change effective 20 days after publication may have a disruptive effect. The detailed timeline includes the following:

  • 20 days after publication of the Directive: EU Member States may require e-invoices for local supplies and if they have done so they may waive the currently required consent to accept e-invoices by the recipient.
  • 1 January 2026: new mandatory invoice reference for cash accounting invoices.
  • 1 July 2030: intra-EU e-invoice and DRR requirements, start of harmonization of Domestic DRR.
  • 1 January 2035: harmonization of Domestic DRR for EU Member States with Domestic DRR regulations per 1 January 2024.
What are the key changes since the December 2022 proposal?
  • Summary invoices remain possible (though with more strict conditions).
  • Deadlines have been changed (it was 2 working days to issue the e-invoice and 2 working days to report, which is now 10 days to issue and immediately report).
  • The link between the VAT recovery and e-invoice was not included in the earlier proposal.
What else should I know?

The specific EU wide definition of an e-invoice will only come into effect as from 1 July 2030 and abolition of customer consent as provided in article 232 of the VAT Directive is not completely removed (only partly when a local mandate is in place). The question is however how such local mandates will impact companies that are not established but conduct transactions in these jurisdictions. It seems to us that many companies operating in the EU may still need to take measures to be able to issue and process invoices in a structured way in advance of 2030.

The EU standard EN 16931 for e-invoices will enter into force on 1 July 2030 and should be seen as a minimum standard. The question for companies that are looking to implement software solutions and should take care of domestic standards which may be wider is therefore whether they should not still cater for these local variances.

Pillar 2 – Platform economy

What is it?

The platform economy pillar seeks to shift the VAT liability to platforms and to increase the level playing field between the online and traditional business models. This includes the following measures:

  • Deemed supplier model hotel and transport: platforms in the short-term accommodation (maximum 30 days) and passenger transport by road sectors will be regarded as a deemed supplier if (in summary) no VAT is to be charged on the underlying supply by the supplier. The platform will be required to charge and collect the VAT from the customer. The deemed supply from the supplier to the platform will be VAT exempt without a VAT recovery entitlement. There is however room for individual EU Member States to provide exceptions to this rule (e.g., for SMEs). In the June 2024 proposal the threshold for Member States to apply the exception is further limited compared to the May 2024 version as Member States are no longer required to provide means for the suppliers to inform the platforms.
  • The facilitation service provided by the platform to a non-taxable person will be VAT taxable at the place of the underlying service. The VAT on this service will not be recoverable by the non-VAT taxable person.
  • The special scheme for tour operators (“TOMS”) cannot be applied if a platform is a deemed supplier. On the other hand, if a taxable person qualifies as a travel agent under the TOMS, it will not be subject to the deemed supplier rules.
  • Platforms that are not covered by the deemed supplier model but do facilitate short-term rental of accommodation, will be obliged to keep records of B2B and B2C services.
  • Deemed supplier model for supply of goods by taxable persons established outside the EU is only changed slightly to include supplies to taxable persons whose intra-Community acquisitions are not subject to VAT.

As mentioned, there is no consensus on this part of the ViDA proposal. Estonia expresses concerns for price increases for consumers and SMEs using the platforms. 

When will it be effective?

The changes will be effective per 1 July 2027. Only exception is the minor change in the deemed supplier rule for supplies of goods by taxable persons established outside the EU.

What are the key changes since the December 2022 proposal?
  • The IOSS (“IOSS”) was mandatory for supplies via platforms in the December 2022 proposal, it however remains optional.
  • The deemed supplier rules were envisaged to also cover supplies by EU established businesses. This has been excluded from the updated proposal.
  • Passenger transport is limited to passenger transport by road.
  • The December 2022 proposal also included deemed supplier rules from transfers of own goods via platforms. This has been excluded. Platforms should instead inform the owner in case of such transfers. The owner should report the transfers (though can do so via the TOOG OSS as addressed hereinafter).
  • It is clarified that VAT exempt supplies to platforms are to be included in the small and medium-sized enterprises (SME) threshold.
What else should I know?
  • This pillar is still being discussed as there was no consensus in ECOFIN. Key discussion appears whether there should be an opt-in or opt-out for Member States to apply the rules on SMEs.
  • The updated rules will have significant commercial impact on businesses (this is also background of the pending discussions).
  • The VAT liability and administrative burden of platforms and suppliers in the short-term accommodation and passenger transport sectors will be increased. Business models may have to be re-assessed.

Pillar 3 – Single VAT Registration

What is it?

The Single VAT Registration (“SVR”) pillar envisages to decrease the administrative burden for taxpayers by reducing the need for foreign VAT registrations. Please keep in mind that it is not a new type of registration. The SVR is a reference to the following measures minimizing the need for foreign VAT registrations:

  • Extending the One-Stop Shop (“OSS”) scheme, including domestic supplies.
  • A new OSS scheme for transfer of own goods (“TOOG OSS”).
  • Continued use of the IOSS.
  • Extending the scope of the local reverse charge rules to all supplies by taxpayers not established and non-registered in that country to locally VAT registered taxable persons (“local reverse charge”). Local reverse charge supplies are to be reported in the European Sales Listing (up to the introduction of DRR requirements in July 2030).
When will it be effective?

The most significant changes will be effective per 1 July 2027. The detailed timeline includes the following:

  • 20 days after publication of the Directive: anti evasion rule on IOSS to link consignment number to VAT identification number.
  • 1 January 2026: minor changes in IOSS, transition rules for consignment stock to TOOG OSS (up to 1 July 2028) and updated time of supply rules for OSS supplies.
  • 1 July 2027: extended scope reverse charge and related reporting. Extended scope of OSS (supplies without transport, installation supplies). TOOG OSS.
  • 1 July 2030: invoice for the second supply of a simplified triangulation should refer to “triangular transaction”.
What are the key changes since the December 2022 proposal?
  • The local reverse charge rule is not optional for taxpayers, it is dependent on the non-registration of the supplier.
  • No updated rules for supplies of second-hand goods (and other margin supplies).
  • Clarifications for the TOOG OSS (no requirement to be VAT registered in the country of destination), and further specifications for the other OSS (entitlement to VAT recovery, sharing website address).
  • Supply of gas and electricity (EV charging) to non-taxable persons (and taxable persons whose intra-Community acquisitions are not subject to VAT) in a country where the supplier is not established is deemed to be an intra-Community distance sale and can hence be reported via the OSS until 1 July 2027.
What else should I know?
  • .These rules will reduce the administrative burden for many businesses, though the additional reporting requirement for local reverse charge supplies will increase this burden in countries where such reverse charge rule is already in place.
  • As the deemed supplier rules (see platform economy section) for supplies of goods via electronic interfaces is not extended to EU established businesses, these businesses will in more case require local VAT registrations or an OSS registration.
  • The SVR pillar does not exclude the requirement for a local VAT registration in all cases. Intra-Community supplies or intra-Community acquisitions, or stock transfers of capital goods still trigger local registration requirements.
  • It will still not be possible to deduct input VAT via OSS. Without a local VAT registration, such VAT should be reclaimed via the EU VAT refund portal (for EU businesses) or a 13th VAT Directive refund request (for non-EU businesses). This can have a negative impact on the cash flow (compared to local VAT registrations).

Plan for the future

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. 

You can register for our Tax newsletter here or directly get in touch with our experts:

Did you find this useful?