Political agreement reached on the EU’s VAT in the Digital Age Proposal

On 5 November 2024, the 27 EU Member States reached unanimous political agreement on the VAT in the Digital Age (“ViDA”) proposal. This will result in very significant changes to how VAT operates across the EU. In what follows, we provide you with a bullet point summary of the key measures under each of the three pillars of ViDA.

Within 20 days of formal adoption of ViDA (likely early 2025):

• Member States will no longer require a derogation from EU Council to make issuing e-invoices mandatory for domestic transactions. Member States may also stipulate that a customer is obliged to accept e-invoices.

From 1 July 2030:

• Supplier must issue an e-invoice for B2B and B2G cross-border supplies in the EU within 10 days of the date of supply (or date of prepayment, if earlier).
• Supplier must digitally report certain transaction data from the e-invoice for the above-mentioned supplies at the same time as issuing the e-invoice (or within 5 days of the e-invoice where the customer issues the e-invoice under self-billing arrangement).
• Customer must digitally report intra-Community acquisitions of goods and purchases of reverse charge services within 5 days of the date the e-invoice for those acquisition/purchase being issued or being required to be issued, but Member States have the option to waive this requirement where certain conditions are met.
• E-invoicing and digital reporting for domestic supplies to remain optional for Member States but, where introduced, must conform to the EU standard by 1 July 2030. However, EU Member States which, on 1 January 2024, already had a domestic digital reporting system or had been authorised to have one, have until 1 January 2035 to conform to EU standards.
• Summary invoices to be allowed for supplies occurring in the same calendar month under certain conditions, to be issued within 10 days of calendar month end. Potential exclusion for “fraud sensitive sectors”.

From 1 July 2028 (with Member States having option to delay to 1 January 2030 for some aspects – see below):

• Platform operator to become deemed supplier (i.e. liable to account for VAT) when facilitating supplies of passenger transport by road and short-term accommodation rental. However, VAT obligation removed from platform operator where underlying supplier provides platform operator with its VAT number in Member State where VAT is due and confirmation that it will charge any VAT due on those supplies.
• Member States can opt-out of making the platform a deemed supplier where the underlying supplier is a small or medium enterprise (SME) for VAT purposes, subject to certain conditions.
• Member States can postpone introduction of this deemed supplier rule until 1 January 2030 at the latest.
• Short-term accommodation rental defined as uninterrupted rental of accommodation to the same person for a maximum of 30 nights. Such rentals are excluded from VAT exemption, but subject to criteria, conditions and limitation laid down by Member States.
• Place of supply of a platform’s “facilitation service” to non-business (B2C) customers will be where the underlying service takes place.
• Platforms facilitating supplies of goods obliged to inform owners of those goods of any EU cross-border movements of goods (e.g. between different warehouses).
• No extension of the deemed supplier rules for platforms facilitating B2C supplies of goods beyond those introduced on 1 July 2021.
• Import One Stop Shop (IOSS) to remain optional for online platforms and vendors and €150 maximum consignment value threshold for use of IOSS to remain in place.  Extension of IOSS and removal of threshold to be considered as part of EU Customs reforms.

From 1 July 2028 (unless otherwise indicated):

• Existing One Stop Shop (“OSS”) regime for certain B2C supplies of goods and services to be extended to other B2C supplies, including supplies of electricity and natural gas, supply and install contracts, and certain domestic supplies of goods and services. Extension of OSS to B2C supplies of electricity, natural gas and other energy-related supplies effective from 1 January 2027.
• New OSS for businesses to report own movements of goods between EU Member States where business entitled to full VAT recovery in respect of those goods. Not permissible where the owner is not entitled to fully deduct input VAT on those goods. Permissible for “capital goods” where the owner has a right to full VAT recovery but potential later claw back if capital good used for exempt, private or free of charge supply.
• Current VAT call-off stock simplification (introduced as part of the Quick Fixes in January 2020) will become redundant as a result of the new OSS for movement of own goods and will be abolished.
• VAT reverse charge mechanism for B2B transactions will be extended. Member States will be obliged to allow the reverse charge if a non-established supplier is not VAT registered in the country where the VAT is due and B2B customer is. If the supplier is not established and B2B customer is not VAT registered in the Member State where the VAT is due, Member States will have the option to require the customer to operate reverse charge VAT on that supply.

Now that the content of ViDA package is politically agreed and formal adoption is likely to follow, we recommend that you begin assessing the impact for your organization. Almost all businesses will be impacted in some way. In preparation for the new rules, businesses will have to make significant changes to their systems and processes, and in order to be ready to implement these in a timely manner, it is important to consider and prepare for these on time.

In the meantime, it is also important to remember that Member States may not necessarily wait until the prescribed date in ViDA to introduce these changes. For example, several EU Member States have or are proposing to introduce mandatory e-invoicing and/or new reporting obligations including for example Germany, Belgium, Poland, France, and Spain. Therefore, it is important to monitor these requirements in the short term and in preparing for those changes, take account of the wider EU changes coming down the tracks.

If you have any questions with respect to the ViDA measures, or if you would like to know how this will impact you, feel free to reach out to us.