VAT in the Digital Age reforms

Get ready for significant VAT reforms based on new documents released by the EU Council

22 May 2024

7 min read

The EU’s VAT in the Digital Age (ViDA) proposal aims to bring about fundamental changes to the EU’s VAT system across three pillars. They are:

e-invoicing & digital reporting, affecting all businesses which trade B2B cross border within the EU;
online platforms, mainly in the accommodation and passenger transport sectors; and
single VAT registration, affecting businesses currently registered for VAT in EU member states as non-established traders.

However, as with any EU VAT reform, the proposal first requires unanimous political approval from the 27 EU Member States. It had been speculated that agreement might be reached at the EU Council of Finance Minister’s (ECOFIN) meeting held on 14 May 2024. However, this did not transpire, with one Member State, Estonia, objecting to elements of the platform proposal. The delegations will now seek to reach a compromise with a view to getting agreement at the next meeting on 21 June 2024.

Despite no agreement being reached, we now have a clearer picture of the current state of the ViDA proposals based on the documents released by the EU Council before the recent meeting. Businesses can therefore begin to look ahead to what the future of VAT reporting in the EU is likely to be. Of course, this remains subject to the caveat that “nothing is agreed, until everything is agreed”.

To assist you in considering the potential impact of these proposals, David Duffy and our VAT team have summarised below the key features of the text of the current proposals dated 8 May 2024 to those originally published on 8 December 2022 under each of the three pillars.

First pillar: e-invoicing and digital reporting

Original proposal (8 December 2022)	Updated proposal (8 May 2024)
Implementation date of 1 January 2028.	Implementation date of 1 July 2030.
Supplier must issue e-invoice for B2B EU cross-border supplies within 2 days of the date of supply (or prepayment if earlier).	Supplier must issue e-invoice for B2B EU cross-border supplies within 10 days of the date of supply (or prepayment if earlier).
Supplier must digitally report certain transaction data from the e-invoice issued for the above-mentioned supplies within 2 days of the date of issue or obligation to issue the e-invoice.	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 where the customer operates self-billing).
Customer must digitally report intra-EU acquisitions of goods and purchases of reverse charge services within 2 days of the date the e-invoice being issued or being required to be issued.	Customer must digitally report intra-Community acquisitions of goods and purchases of reverse charge services within 5 days of the date the e-invoice being issued or being required to be issued, but Member States have the option to waive this requirement for customers.
EC sales list to be abolished.	Same as original proposal.
E-invoicing and digital reporting systems for domestic supplies to remain optional for Member States but, where introduced, they must conform to the EU standard by 1 January 2028.	E-invoicing and digital reporting for domestic supplies to remain optional for Member States but, where introduced, they 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 abolished.	Summary invoices to be allowed for supplies occurring in the same calendar month under certain conditions. Must be issued within 10 days of calendar month end. Potential exclusion for “fraud sensitive sectors”.
No ‘pre-clearance’ of e-invoices.	Member States allowed to introduce measures to ensure e-invoice complies with technical standards.

Second pillar: Platform transactions

Original proposal (8 December 2022)	Updated proposal (8 May 2024)
Implementation date of 1 January 2025.	Implementation date of 1 July 2027.
Platform to become deemed supplier (i.e. liable to account for VAT) when facilitating supplies of passenger transport and short-term accommodation where underlying supplier is not required to account for VAT on those supplies.	Platforms to become deemed supplier (i.e. liable to account for VAT) when facilitating supplies of passenger transport by road and short-term accommodation, where underlying supplier is not required to account for VAT. However, 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. [Note: this was not agreed agreed at ECOFIN meeting so further reforms may arise].
Uninterrupted rental of accommodation (with or without ancillary services) for a maximum of 45 days excluded from VAT exemption (considered equivalent to hotel accommodation)	Uninterrupted rental of accommodation to the same person for a maximum of 30 nights excluded from VAT exemption, but subject to criteria, conditions and limitation laid down by Member States (which must be communicated to the VAT Committee).
Interaction between platform deemed supplier rules and special scheme for travel agents (TOMS) not specifically addressed.	TOMS supplies specifically excluded from deemed supplier regime and vice versa.
Record keeping obligations for platforms outside of deemed supplier regime.	Similar to original proposal.
Platform facilitating B2C intra-EU sales of goods to become the deemed supplier for all such sales.	No extension of the deemed supplier rules for platforms facilitating B2C sales of goods. Therefore, platforms remain liable for VAT only on B2C intra-EU sales by non-EU suppliers and import distance sales from outside the EU in consignments of less than €150.
Use of IOSS to become mandatory for online platforms.	IOSS to remain optional for online platforms and vendors. Extension of IOSS to instead be considered alongside EU Customs reforms.
Place of supply of facilitation services provided by a platform to B2C customers to be where the underlying service takes place.	Same as original proposal.
Platform to become deemed supplier for intra-EU cross-border movements of goods held on behalf on underlying suppliers.	Platforms obliged to inform underlying suppliers of EU cross-border movements of goods held on behalf on underlying suppliers.

Third pillar: Single VAT Registration

Original proposal (8 December 2022)	Updated proposal (8 May 2024)
Implementation date of 1 January 2025.	Implementation date for most provisions of 1 July 2027, but earlier effective date of 1 January 2026 for B2C supplies of electricity, natural gas, and cooling/heating by non-established suppliers.
OSS (Union Scheme) expanded to include all remaining types of B2C supplies.	Same as original proposal.
New OSS scheme for transfers of own goods, excluding goods in respect of which the owner doesn’t have a right to full VAT recovery and capital goods.	New OSS scheme for transfers of goods in line with original proposal. However, no exclusion for capital goods where owner is entitled to full VAT recovery (but subsequent adjustment required if subsequent self-supply or exempt use of those capital goods). Exclusion from OSS of all goods where owner doesn’t have full VAT recovery (same as original proposal).
Member States shall allow that reverse charge applies to supplies of goods or services by non-established supplier to customer registered for VAT in their jurisdiction.	Similar to original proposal, but additionally, Member States may apply reverse charge to supplies by a non-established supplier to a customer (even if not already VAT registered).
VAT call-off stock simplification to be abolished as no longer required due to new B2B reverse charge provisions (to be phased out over a 12-month period to allow for goods transferred before the new rule come into effect.)	Same as original proposal.

Original proposal (8 December 2022)	Updated proposal (8 May 2024)
Change to place of supply rules for margin scheme goods and works of art (typically shifting to place of destination).	No change to place of supply rules for margin scheme goods and art works.
No rules relating to place of supply of online events.	Rules for supplier to evidence customer location for place of supply of online events coming into effect from 1 January 2025. These evidentiary rules are similar to those already in place for electronically supplied services.

Get in touch

If you would like to discuss the potential impact of these proposals for your business, please contact David Duffy, Glenn Reynolds or your usual KPMG Indirect Tax contact.