Political agreement on the draft VAT Directive “VAT in the digital age” (ViDA)

At the ECOFIN Council meeting on 5 November 2024, EU Member States finally reached political agreement on the draft Directive ViDA .
The draft is only marginally modified from the version presented at the ECOFIN meeting of 14 May 2024, to which Estonia had refused to give its agreement. Estonia was opposed to the mechanism for making platforms liable to pay VAT when they connect a service provider and his customer for the supply of accommodation or road transport services.
With the exception of the digital transaction reporting mechanism, the implementation of the changes provided for in the draft has once again been postponed for a year.
Here is a brief summary of the measures contained in the draft that businesses will need to prepare for, as the principle of adoption has now been established.

I. Introduction of [almost] instantaneous digital transaction reporting

For intra-Community BtoB transactions, electronic invoicing will be mandatory from 1^rst July 2030.
The timetable remains unchanged, confirming the EU's determination to rapidly implement a system designed to facilitate the fight against fraud.
The obligation to use electronic invoicing for cross-border transactions will be accompanied on the same date by an obligation to transmit data for each invoice to the tax authorities with a view to sharing them with other member states (digital reporting requirements “DRR”).

In principle, data reporting will be required of both the vendor/service provider issuing and the recipient of the invoice, but member states may exempt businesses established on their territory from this obligation in respect of the receipt of an invoice. In all member states, companies will be able to use a third party to fulfill their obligations, or even a public platform in those member states that decide to do so.
As a reminder, France is now planning to make it compulsory to use a third party (partner dematerialization service provider) to transmit data to a public platform.

With the introduction of the “DRR”, the current obligation to report transactions through recapitulative statements for cross-border “BtoB” transactions will disappear.

Compared with the initial version, the draft on which the Member States have reached agreement contains a number of changes which essentially respond to the concerns expressed by companies and relayed by many Member States, including France.

For example, the deadline for issuing invoices subject to the DRR will be set at 10 days from the taxable event (instead of the two days initially envisaged). Data must be transmitted as soon as the invoice is issued by the seller/supplier (but within 5 days of issue in the case of self-billing). The reporting deadline for customers (if applicable in their member state) will be 5 days from receipt of the invoice issued by the supplier.

It will still be possible to use the recapitulative invoice, which was originally planned to be abolished. In this case, the invoice must be issued within ten days of the end of the calendar month concerned.

For invoices other than those covered by the DRR, i.e. mainly those relating to domestic transactions, Member States wishing to do so will be able to impose the use of electronic invoicing from the entry into force of the new directive, whereas this possibility is currently subject to a derogation decision to this effect by the EU Council.

However, they may accept electronic formats other than those complying with European standards, and/or a paper format, for these transactions.
They may also introduce a data reporting obligation. Member states that had such a system in place by January 1, 2024 will have a further period (until 1^rst January 2035) to bring it into line with the European standard.

In all cases where electronic invoicing will be compulsory (from the entry into force of the directive for those Member States which already impose it on the basis of a derogation granted for this purpose by the EU Council, or those which will impose it before 2030 for domestic transactions), the issue of these invoices will no longer be conditional on their acceptance by the recipient.

II. Other measures set out in the draft directive

The draft directive also includes a number of measures designed to simplify business obligations and combat fraud. The forthcoming changes, most of which will take effect on 1^rst July 2028, are less ambitious than those envisaged in the initial draft.

Here is a brief (and non-exhaustive) presentation:

- Extension of the mechanism whereby a platform is deemed to carry out itself the transaction it facilitates 

With regard to cross-border supplies of goods facilitated by an e-commerce platform , the “deemed reseller" mechanism will remain reserved for sales made by a seller not established in the EU, but will be extended (from 1rst January 2027) to all such sales, whether the buyer is a final consumer ("BtoC") or a taxable person (“BtoB”). The directive stipulates that any further extension can only be considered following a report to be published by the European Commission before 1^rst July, 2027.

From 1^rst July 2028, e-commerce platforms will also be deemed to buy for resale certain short-term accommodation and transport rental services.
The text agreed by the Member States includes two significant changes to the initial draft.

Only road transport hire services would be concerned.

The accommodation services concerned will be those limited to a maximum of 30 uninterrupted nights per person, and Member States will be able to decide whether or not these services must be accompanied by ancillary services. 
In addition, the platform will only be liable for tax on the service it has facilitated if the service provider does not carry out this activity as a taxable person. And even if the service provider is a private individual, the service could also escape this mechanism - if the Member State concerned so decides - if the private individual is subject to the small business regime (basic exemption in France).

- Modernization of stock transfer arrangements

The current consignment stock system would be gradually phased out and replaced by a “one-stop shop” (OSS) system, with declarations only.
- Generalization of the VAT reverse charge rule for BtoB transactions where the seller/supplier is not established or identified in the country in which the transaction is taxed.
Currently optional for Member States, this rule would become mandatory. 

- Extension of the scope of the EU OSS

The option for businesses to declare and pay VAT via a one-stop shop for cross-border transactions (OSS UE) would cover new transactions (sales without delivery or transport and regardless of the customer's status, sales with assembly, etc.).

- Sales of imported goods up to a value of 150 euros

The initial plan to make use of the non-EU one-stop shop (IOSS) compulsory has been postponed to an unspecified date. On the other hand, the rules for designating the person liable to pay import VAT would be consolidated to remedy certain shortcomings in the system resulting from the VAT reform for e-commerce that came into force on 1trst July, 2021.

Taxation: Council agrees on VAT in the digital age package

For further information, please do not hesitate to contact us.