viDA: Platform economy
viDA: Platform economy
The second pillar of ViDA deals with the sharing economy, in particular the accommodation and passenger transport sector. The proposal consists of two parts: the introduction of a deeming provision and a new place of supply rule for facilitation services. The proposed rules intend to address difficulties in the application of VAT rules and the level playing field between small businesses and other traditional businesses. If adopted these rules will enter into application on 1 July 2027.
Deeming provision
Under a deeming provision a platform is deemed to have purchased and subsequentlly supplied the underlying good or service, making the platform the one responsible for the payment of VAT on the supply to the customer.
The deeming provision proposed covers short term rental of accommodation and passenger transport services by road. Only uninterupted stays of a maximum or 30 nights of the same person are considered short term rental of accommodation (in the original proposal this was 45 days). This short term accommodation rental will be taxed under criteria, conditions and limitations set by Member States. These criteria, conditions and limitations must be communicated to the VAT committee before 1 July 2027. For transport by road it is important to mention that where a platform only provides the means by which the cost of passenger transport services can be shared between the user and the person providing the transport it is not in scope of the deeming provision.
Platforms are only in scope of the provision if they facilitate the underlying supply. This means that they should allow a customer and supplier to enter into contact, which contact results in a supply of services through the platform. Platforms that meet certain conditions are not considered to facilitate a certain supply. Payment service providers, businesses that only provide listings or advertsing or redirect or transfer customers to other electronic interfaces are also out of scope of the deeming provision.
Under the deeming provision the supply of the supplier to the platform is subject to an exemption without a right to deduct VAT. The subsequent supply to the customer is taxed, unless an exemption applies in the Member State where VAT is due. If the supply is exempt this will not affect the platform’s right to VAT deduction.
The deeming provision does not apply if the underlying supplier provides the platform with a VAT identification number of the Member State where VAT is due or OSS identification number if it uses the OSS to report the VAT on those supplies. Member States may require that the platform validates this VAT identification number. The number has to be provided only once (unless there is a change in activity). The underlying supplier must also declare to the platform that he will charge any VAT due on the supply. EU Member States can exclude supplies made within their territory which are made under the special scheme for SMEs from the scope of the deeming provision. The result of this is that those supplies will be exempted.
Platforms under the deeming provision cannot apply the tour operator margin scheme and travel agents under the tour operator margin scheme are not to be included in the deemed supplier rule.
Where a platform has found that it is not in scope of the deeming provision based on false information provided by the supplier, it will not be held liable for VAT if it can prove that it did not and could not reasonably have known that the information was incorrect.
Place of supply of facilitation services
Regardless of whether the deeming provision applies a platform provides facilitation services for VAT if either the supplier or customer on the platform needs to pay the platform for its services. In case of B2B-services the place of supply will be the place where the recipient of the service is established. VAT is reverse charged to the recipient if the service provider is not established in the Member State where VAT is due. For B2C-services however it is unclear if the service qualfies as intermediary or electronically supplied service. Under the proposal a special place of supply rule is proposed for B2C-facilitation services, which will be subject to VAT at the place where the underlying transaction is supplied.
Record keeping
For transactions for which the platform is not a deemed supplier, it is required to keep records of the underlying supplies that is has facilitated. These records must be made available on request to the Member States electronically and must be kept for 10 years from the end of the year during which the transaction was carried out. Member States may also continue to request that these records are provided on a regular and systematic basis untill autmated access to these records is available. It must be noted that record-keeping provisions for platforms already apply since 1 July 2021 for B2C supplies of goods and services which are subject to VAT in the EU. The proposed provision therefore only extends this obligation to B2B-supplies.