VAT in the Digital Age

The most wide-reaching pillar of ViDA is the transition to mandatory EU e-invoicing and digital reporting for VAT. This involves a number of steps.

Shortly after the proposal being fully adopted (likely to be in the first half of 2025), Member States will be allowed to make the issuing of e-invoices mandatory for domestic transactions without having to obtain a derogation (authorisation) from the EU Council. Member States may also stipulate that a customer is obliged to accept e-invoices from this date. This could potentially see more EU Member States adopting mandatory e-invoicing and digital reporting in the near future.

From 1 July 2030 the following changes will apply:

• EU VAT registered businesses will be obliged to issue a structured e-invoice for cross-border business-to-business (“B2B”) and business-to-government (“B2G”) supplies in the EU. The e‑invoice will be based on a standard EU format, but Member States may allow other formats under certain conditions. The e-invoice must be issued within 10 days of the date of the supply (or the date of payment, if earlier). This is a change from the two-day time period included in the original ViDA proposal.
• Certain data from the e-invoice issued for the above-mentioned supplies must be digitally reported to the relevant tax authorities by the supplier directly after the e-invoice has been issued (or within five days if the customer issues the e-invoice under a “self-billing” arrangement). The digital reporting of this data will mean that periodic EC Sales Lists are no longer required.
• It is also intended that the customer will digitally report data from an e-invoice for received for the above mentioned supplies within five days of its receipt from the supplier. However, an important amendment to the original proposal is that Member States may choose to waive the customer’s digital reporting obligation if certain conditions are met. 
• Another important change compared to the original ViDA proposal is that monthly summary e-invoices (instead of transaction-level e-invoices) will be permitted, subject to certain conditions, for a period of up to one calendar month. These summary e-invoices must be issued within 10 days of the end of the relevant month. This is a welcome development as the proposed abolition of summary invoices under the original proposal had been a cause for concern for businesses in certain industries.

While ViDA aims to achieve full harmonisation of e-invoicing across the EU, as a compromise measure, Member States which had existing e-reporting obligations for domestic transactions in effect on 1 January 2024 or were in the process of implementing such obligations on that date, may retain those obligations in their current form until 1 January 2035, by which time they must fully conform to the EU standard. This means that businesses operating in multiple Member States may still have to deal with varying e-invoicing and reporting obligations across the EU for some time to come.

The current proposal also requires some additional data items to be included on an e-invoice with effect from 1 July 2030, including an indication where the triangulation simplification is being used, the bank account number or other account to which payment is to be made, a reference to the number on the original invoice in the case of a corrective invoice, and (from 1 January 2027) an indication whether cash accounting applies.

The transition to e-invoicing and digital reporting will be a very significant change which requires businesses to review and update their current invoicing and VAT reporting procedures. The impact is likely to be felt throughout the business and will require input and support from a wide range of stakeholders.

While 1 July 2030 is some time away, businesses with multinational operations must monitor the e-invoicing and digital reporting obligations around the EU and further afield as many of these will take effect before that date.

In Ireland, the Revenue Commissioners have indicated their intention is to introduce mandatory e-invoicing and digital reporting for domestic B2B and B2G transactions, but no date has been confirmed for this introduction.

The Single VAT Registration (SVR) pillar is intended to reduce the need for non-established traders to register for VAT in an EU Member State in which they are not established. The measures in this proposal are set out below and will mainly take effect from 1 July 2028 (unless otherwise indicated):

• The existing One Stop Shop (“OSS”) regime for B2C distance sales of goods and certain services makes it possible to pay VAT on those supplies across multiple EU countries through a single return. The OSS will 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. This extension will mainly apply from 1 July 2028, however, the extension of OSS to B2C supplies of electricity, natural gas and other energy-related supplies will take effect from 1 January 2027. This is likely to relevant for suppliers supplying electric vehicle (“EV”) charging outside of their Member State of establishment.
• There will be a new OSS module for businesses to report movements of their own goods between EU Member States. Currently, the movement of own goods between Member States, with certain limited exceptions, triggers a VAT reporting and registration obligation in both the country of dispatch and country of arrival of each movement. From 1 July 2028, a business may instead choose to report the intra-EU movement of own goods in the OSS, thereby avoiding the need to report acquisition VAT in the country of arrival. However, this will not be permissible where the owner is not entitled to fully deduct input VAT in respect of those goods. In a change to the original ViDA proposal, the OSS for transfers of own goods may be used for “capital goods” where the owner has a right to full VAT recovery. However, if those goods are subsequently used for non-deductible activities or self-supplied (e.g. diverted to a private use or supplied free of charge) an adjustment to disallow some or all of the VAT recorded in the OSS must be paid.
• The current VAT call-off stock simplification (introduced as part of the Quick Fixes in 2020) will become redundant as a result of the new OSS for movement of own goods and will be abolished.
• The VAT reverse charge mechanism for B2B transactions will also be extended to reduce the circumstances in which a B2B supply of goods or services by a non-established trader requires a VAT registration in the country where the VAT is due. At present, Member States can elect to apply a reverse charge to certain supplies, such as domestic supplies of goods or services related to immovable property. Under the new rules, 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 the customer is. Even if the 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.
• Under the original ViDA proposal, goods sold under the margin scheme were due to become taxable in the Member State of destination if the supplier was directly or indirectly involved in the transport to that Member State. A similar rule would apply to sales of works of art (regardless of who would arrange the transport). The rules on the place of supply for these types of goods have been deleted in the amended proposal and therefore, when the margin scheme applies, remain subject to VAT where the margin scheme applies.
• Rules for evidencing the place of supply of live streaming and virtual admissions to events (B2C) will be introduced with effect from the 20th day after official publication of the ViDA proposal. These rules will largely mirror those for the place of supply of electronically supplied services. This will provide further guidance to support the change to the place of supply of live streaming and virtual admissions to events which is already agreed to take effect from 1 January 2025. 

While the above measures should reduce the circumstances in which businesses have to register for VAT outside of their country of establishment, it will not completely eliminate the need for such registrations.

For example, a non-established supplier will still need to VAT register in an EU Member State from which it makes an intra-Community supply of goods, which will also be subject to the new digital reporting requirement from 1 July 2030. Not registering for VAT in the other Member State may also have negative cash flow implications as the supplier may then have to reclaim input VAT incurred in that Member State through the non-resident refund claim mechanism rather than through a local VAT return.

Businesses will therefore need to consider whether it is preferable to maintain existing foreign VAT registrations (where possible) or maximise the use of the simplifications.