EU Directive on VAT in the Digital Age (ViDA)

The European Commission has published its proposal for reform of the EU’s VAT system. Baptised “VAT in the Digital Age” (ViDA for short), this reform is designed to reflect our modern economy and the development of digital technologies.

The various measures involved are scheduled to enter into effect in stages, between 1 January 2024 and 1 January 2028.

As had been expected, this is an ambitious reform proposal, in timing as well as in scope: with the first measures due to enter into effect as from 1 January 2024, the Council of the European Union will have just a few months in which to complete the adoption procedures.

Some of the measures proposed are designed to apply to all businesses, whereas others are specific to a given sector.

The main thrust of the reform can be divided into two parts:

1. Modernising reporting obligations (VAT reporting and digital reporting requirements)

The draft Directive aims to make e-invoicing much more widespread and imposes real-time reporting of data on intra-Community transactions so as to clamp down on fraud.

E-invoicing (in accordance with the rules set out in Directive 2014/55/EU and Implementing Decision (EU) 2017/1870) would become the norm as from 1 January 2024; the recipient’s prior agreement would not be a prerequisite. Member States could exempt certain specific types of transaction from the e-invoicing requirement, should they so wish.

The new reporting obligations for intra-Community transactions (known as the DRR, for digital reporting requirements) are set to enter into effect as from 1 January 2028.

Under the new rules, all invoices for transactions covered by the DRR would have to be sent in an electronic format that satisfies the requirements of Directive 2014/55/EU.

Invoices for all intra-Community supplies of goods or services would have to be issued within two days of the taxable event, harmonising practices across the EU.

The list of mandatory information that must appear on invoices would be extended to include, among other things, additional data on payment terms (bank account details and payment date(s).

The new requirement for real-time reporting of intra-Community transaction data (within two days of issuing the corresponding invoice) would effectively cover the same transactions and data as the existing recapitulative statements. Under the new rules, however, data would have to be reported on each transaction, rather than aggregated over a given period.

The recapitulative statements would accordingly be abolished.

The VAT exemption for intra-Community supplies of goods or services would be made conditional on compliance with the DRR.

2. Other measures: introducing single VAT registration, harmonising e-commerce rules and extending them to certain transactions covered by the margin scheme

The measures set out below are designed to reduce red tape for businesses by avoiding multiple VAT registrations in different Member States, and to bring various new types of transaction effected via online platforms under the umbrella of the VAT rules for e-commerce transactions. Most of these measures are slated for entry into effect as from 1 January 2025.

For B2B transactions, the reverse charge mechanism (whereby the customer pays VAT in their own Member State when the supplier is established in a different Member State – Art. 194 of the Directive) would become the norm.

For e-commerce, the regime applicable to distance sales (together with the Union one-stop shop) would be opened up to sales of second-hand goods, as well as works of art, antiques and collectors’ items subject to the margin scheme. The territoriality rules in such cases would be adjusted accordingly.

E-commerce platforms would automatically be treated as “deemed resellers” for all sales of goods, regardless of where the seller is established and who they are selling to. The same would apply to stock transfers performed via a platform, with the specific regime for consignment sales being amended accordingly.

The “deemed reseller” regime would also apply to online platforms offering short-term accommodation and transport services when the service provider is either not EU-resident or not a VAT taxable person (i.e. private individuals or entities that are either exempt or whose revenues remain below the VAT threshold).

The provision of short-term accommodation (no more than 45 days) would automatically become subject to VAT, regardless of whether associated services are provided.

And lastly, the draft Directive sets out significant changes to the various one-stop shop schemes (Union OSS, non-Union OSS and IOSS). In particular, the import one-stop shop (IOSS) would become mandatory for platforms offering distance sales of imported goods.

For more information, see: VAT in the Digital Age.