The Hungarian Presidency of the EU Council intends to reach an agreement on the VAT in the Digital Age (ViDA) package during the ECOFIN’s meeting on 5 November. The Hungarian EU Presidency announced the agreement in principle on ViDA in a post on X. The agreement clears the way for ECOFIN to formally adopt the measures at a meeting on 5 November.
The EU governments voted on the amended proposal on 21 June 2024, however, the political agreement was not reached because one Member State (MS) did not support the proposed platform supplier rules. However, Member States have reached a consensus on two other pillars of the ViDA.
New compromise text of the ViDA was just published
The last version of the ViDA published on 30 October 2024 contains an extension of several important deadlines. Compared to the previous compromise of June, the main difference concerns the VAT treatment of sales made via accommodation and mobility platforms. To reach a consensus over ViDA, EU countries are given more time to implement rules for accommodation and mobility platforms. The so-called deemed supplier rule for platforms is postponed. EU countries must start applying the deemed supplier rule from 1 July 2030, but can voluntarily implement it from 1 July 2028. The deadline for the extension of the OSS is also postponed.
If proposed measures are adopted, it will mean a major overhaul of the EU VAT system in the coming years.
This article provides an overview of the amended EU “VAT in the Digital Age” (ViDA) proposal published on 30 October 2024.
Background
Major changes in the EU VAT were proposed at the end of 2022, for more information see our article "The European Commission proposes ambitious VAT reforms”. This proposal includes new EU VAT rules for EU digital reporting requirements (DRR) based on e-invoicing; new VAT measures for short-term accommodation and passenger transport platforms, and an extension of the VAT One-Stop Shop (OSS). This article gives an overview of the last version of the proposal that was made public in on 30 October 2024.
What’s new in the compromise?
All three pillars of the proposal have been postponed to allow governments and taxpayers more time to prepare:
- DRR based on e-invoicing – delayed to 1 July 2030
- Extension of the OSS – delayed to 1 July 2028 (to 2027 for electricity, gas, and heat)
- Extended VAT obligations for platforms – delayed to 1 July 2030 (optional from 1 July 2028)
The most important proposed changes are summarized below. Businesses are recommended to prepare for proposed changes that are expected to be adopted in the near future.
DRR based on e-Invoicing
No derogation is required for domestic e-invoicing requirements (DRR)
Member States (MSs) are not required to ask for an agreement from the European Commission to implement e-invoicing requirements for domestic transactions after the ViDA is adopted (provided it applies only to established taxpayers). MSs consequently have the option to introduce mandatory e-invoicing for domestic B2B and B2C transactions (for established businesses) without the need for a derogation from the European Commission immediately after the ViDA is adopted (expected in the beginning of 2025). This could leave businesses with minimal time to prepare.
From 1 July 2030 common DRR/e-invoicing for intra-EU transactions
Effective from 1 July 2030, there will be an obligation to:
- issue structured e-invoices including all required data in standard format within 10 days from a chargeable event; and
- transmit data from these invoices to the relevant national VAT authority’s electronic portal in real time.
This obligation will cover certain cross-border supplies and acquisitions of goods and services as well as supplies subject to the mandatory domestic reverse charge. While the supplier should report data of the sale when the e-invoice is issued, the recipient should report the transaction within 5 days.
Harmonization of DRR not achieved as initially proposed
The amended proposal allows certain validation requirements, termed ‘accreditation schemes’ (this was initially not included). Pre-clearance systems are not explicitly forbidden. Furthermore, compared to the original proposal, MSs have more flexibility over the DRR format.
Domestic DRR should be harmonized with EU standards by 1 July 2030/1 January 2035
If MSs implement new domestic DRR after 1 January 2024, these should be harmonized with EU standards by 1 July 2030. Domestic DRR already in force or approved by the EU before 1 January 2024 (Italy, France, Poland, Germany, Romania and Belgium) should be harmonized with ViDA rules by 1 January 2035.
Additional domestic VAT reporting requirements are allowed
EU member states may impose additional transaction control requirements not covered by EU DRR (such as SAF-T, cash registers and transaction listings).
Impact for business
The proposed changes mean that not only will sellers be obliged to issue e-invoices, but buyers should be able to receive e-invoices meeting at least EN16931 standards. Sellers and buyers also should be able to issue and/or receive invoices meeting various existing or new domestic e-invoicing/DRR requirements. They also should be able to comply with other transaction control systems of MSs which are allowed under the ViDA rules.
A decrease in fragmentation in the compliance requirements will not be achieved as initially proposed because the amended rules include less harmonization for businesses operating cross-border in the EU. Since the amended ViDA includes less harmonized DRR and domestic e-invoicing rules and allows various other domestic transaction control systems, businesses will still face differing requirements in MSs for domestic and intra-EU transactions and need to have various software solutions to be compliant when operating across the EU.
Extension of OSS and other measures to reduce compliance costs for business
These measures generally apply from 1 July 2028 and aim at decreasing the need for multiple VAT registrations by expanding the OSS and domestic reverse charge.
From 1 January 2027, the OSS will be extended to cross-border supplies of natural gas, electricity, heating, and cooling.
Extension of OSS
From 1 July 2028, the OSS will be extended to
- all B2C supplies of goods and services, including domestic supplies of goods; and
- intra-EU stock transfers.
Mandatory domestic reverse charge (MDRC)
From 1 July 2028, the domestic reverse charge will apply for all B2B supplies of goods and services made by non-established and non-VAT-registered businesses if the customer is registered for VAT in the MS where the VAT is due. MSs may opt for applying the MDRC to all supplies by non-established businesses.
Impacts for business
The proposed changes will reduce the VAT compliance costs for businesses, however, their scope remains limited and does not cover all possible (B2B) scenarios. In addition, input VAT still cannot be deducted via the OSS.
Updated VAT Rules for Platform Economy and E-Commerce
The proposed rules enhance the role of online marketplaces in the collection of VAT when they facilitate a supply of passenger transport or short-term accommodation.
Providing services of rental and passenger transport via platforms
From 1 July 2030 (optionally from 1 July 2028), a deemed supplier rule is proposed to be introduced for platforms operating in passenger transport and short-term accommodation sectors. The platforms will be responsible for collecting and remitting VAT when their underlying suppliers will not charge VAT because they are, for example, individuals acting in their private capacity (non-entrepreneurs for VAT purposes) or exempted small businesses, for example, operating under the VAT registration threshold.
The proposed rules increase the administrative burden for certain platforms and the VAT burden for small businesses or individuals who operate via such platforms.
For a more detailed overview of the proposal in each area above, please read our recent article 'The EU amends proposed VAT rules for the digital age'.
What next?
The European Council made up of the representatives of the MSs and the European Parliament, must approve the proposed amendments before they become effective.
The Hungarian presidency of the Council will re-attempt to reach a political agreement on 5 November when the next ECOFIN meeting takes place. New compromise proposal includes changes for the deemed supplier model of certain platforms and an agreement is expected to be achieved this time. Businesses are recommended to analyze the possible impact and prepare for major VAT changes ahead.
More information on ViDA?
Please contact us if you have any questions or if you need more information about the ViDA proposal and its implications for your business.
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