ViDA proposals adopted – significant changes in VAT coming
ViDA proposals adopted – significant changes in VAT coming
On 5 November 2024 EU Member States reached the long-awaited agreement on the ViDA proposal. The gradual coming into application of the measures adopted will have significant consequences for companies trading in the EU, in particular for those involved in cross-border trade.
ViDA consists of three pillars: (1) Digital real-time reporting based on e-invoicing, (2) the Platform economy and (3) the Single VAT registration. The text adopted by the EU member states is largely similar to the one made public in May 2024. We will therefore in this article address the main elements of the proposal in brief. For a more in depth explanation of the text adopted we refer to our earlier articles about the compromise text made public in May 2024 (article on e-invoicing and digital reporting, article about the platform economy and our publication about the single VAT registration).
EU Member States can also introduce digital reporting and e-invoicing obligations for domestic transactions, but this is not mandatory. If they do so, it should be possible to use the EU format. Already as of entry into force of the Directive adopted by the Members States Member States can impose the obligation to taxable persons established in their territory to issue electronic invoices for supplies of goods and services other than cross-border supplies. Member States can also determine whether or not the electronic invoices will be subject to acceptance of the recipient of the supply.
The new rules on e-invoicing and digital reporting enter into application as of 1 July 2030. Member States that already have a domestic real-time reporting system in place (or have been authorized to introduce it by the European Commission) on 1 January 2024, have until January 2035 to adapt their system to the EU standard.
The deeming provision entails that the platform is liable for the payment of VAT on the transaction with the ultimate customer. This is because the platform is deemed to purchase the service from the underlying supplier and deemed to provide it to the customer. This provision only applies to short-term rental of accommodation (up to 30 nights) and passenger transport services by road. The supply between the provider of the service and the platform is exempted from VAT without a right to deduct VAT under this deeming provision. By providing his VAT number or One-Stop-Shop registration number to the platform and declaring that he will charge VAT on the service offered, the service provider can escape the application of the deeming provision and its inability to deduct VAT. The consequence is, of course, that he will have to charge and remit VAT on the service himself.
The new place of supply rule applies to B2C platform facilitation services. These services will be taxed for VAT at the place where the underlying service is subject to VAT.
Platforms should keep track of the underlying service they have facilitated and make data about the supplier and the provided service available electronically to Member States upon request in situations where the deeming provision does not apply. These rules will be applicable as of 1 July 2028 (at the earliest) or from 1 January 2030 (at the latest). In the text made public in May 2024 this was 1 July 2027. The rules have therefore been postponed with one year.
The rules under the single VAT registration will come into application on 1 July 2028 (this was 1 July 2027 in the May 2024 compromise text).
The OSS makes it possible for businesses to submit a single VAT return for the VAT due in the EU Member States. This scheme currently already applies to all B2C services and EU distance selling (and for platforms in some cases of domestic B2C supplies). The proposal extends it to all domestic B2C supplies, B2C supplies with installation and assembly, B2C supplies of electricity, gas, heating and cooling (already enter into application as of 1 January 2027) and B2C supplies on board of EU passenger transport.
The mandatory reverse charge rule is extended to all B2B supplies and services where the supplier is not established and VAT registered in the EU Member State where VAT is due and the recipient is identified for VAT in that Member State.
A special system for the transfer of own goods is introduced. Transfers are reported in this optional scheme on a monthly basis. The intra-Community acquisition of goods is subsequently exempted in the Member State of arrival and should not give rise to registration requirements.
As of 1 July 2028 it will no longer be possible to transfer goods to another Member States under the call-off stock arrangements. Until 30 June 2029 goods that have been transferred under the call-off stock arrangements before 1 July 2028 can still be supplied to the customer under application of that special scheme.
Register
If you have questions regarding ViDA we are of course happy to help. Please contact one of our VAT advisors for more information.
ViDA consists of three pillars: (1) Digital real-time reporting based on e-invoicing, (2) the Platform economy and (3) the Single VAT registration. The text adopted by the EU member states is largely similar to the one made public in May 2024. We will therefore in this article address the main elements of the proposal in brief. For a more in depth explanation of the text adopted we refer to our earlier articles about the compromise text made public in May 2024 (article on e-invoicing and digital reporting, article about the platform economy and our publication about the single VAT registration).
Digital real-time reporting based on e-invoicing
The digital real-time reporting based on e-invoicing aims to combat VAT fraud and to ensure uniform rules within the EU. The rules include: e-invoicing, mandatory digital reporting for intra-EU transactions and optional digital reporting for domestic supplies and services. E-invoicing obligations only apply to transactions that are subject to digital reporting obligations in cross-border transactions. In short, this concerns intra-Community supplies and acquisitions, supplies of goods and services on which VAT is reverse-charged and transfers of own goods. An EU-standard for e-invoices will be applicable. For the supplier, the deadline for issuing an e-invoice and reporting the data is ten days after the taxable event. The customer must also report data on the transaction within five days after the receipt of the invoice. The Sales Listing or recapitulative statement will be abolished.EU Member States can also introduce digital reporting and e-invoicing obligations for domestic transactions, but this is not mandatory. If they do so, it should be possible to use the EU format. Already as of entry into force of the Directive adopted by the Members States Member States can impose the obligation to taxable persons established in their territory to issue electronic invoices for supplies of goods and services other than cross-border supplies. Member States can also determine whether or not the electronic invoices will be subject to acceptance of the recipient of the supply.
The new rules on e-invoicing and digital reporting enter into application as of 1 July 2030. Member States that already have a domestic real-time reporting system in place (or have been authorized to introduce it by the European Commission) on 1 January 2024, have until January 2035 to adapt their system to the EU standard.
Platform economy
The second pillar of ViDA contains two measures: (1) the introduction of a deeming provision and (2) a new place of supply rule for platform facilitation services. The proposed rules aim to address problems with the application of VAT rules to the platform economy and seek to create a level playing field between businesses operating in the platform economy and traditional businesses.The deeming provision entails that the platform is liable for the payment of VAT on the transaction with the ultimate customer. This is because the platform is deemed to purchase the service from the underlying supplier and deemed to provide it to the customer. This provision only applies to short-term rental of accommodation (up to 30 nights) and passenger transport services by road. The supply between the provider of the service and the platform is exempted from VAT without a right to deduct VAT under this deeming provision. By providing his VAT number or One-Stop-Shop registration number to the platform and declaring that he will charge VAT on the service offered, the service provider can escape the application of the deeming provision and its inability to deduct VAT. The consequence is, of course, that he will have to charge and remit VAT on the service himself.
The new place of supply rule applies to B2C platform facilitation services. These services will be taxed for VAT at the place where the underlying service is subject to VAT.
Platforms should keep track of the underlying service they have facilitated and make data about the supplier and the provided service available electronically to Member States upon request in situations where the deeming provision does not apply. These rules will be applicable as of 1 July 2028 (at the earliest) or from 1 January 2030 (at the latest). In the text made public in May 2024 this was 1 July 2027. The rules have therefore been postponed with one year.
Single VAT registration
The third pillar, the single VAT registration, aims to limit the number of VAT registrations of businesses within the EU. The rules consist of three elements: (1) extension of the One Stop Shop (OSS) regime, (2) extension of the mandatory reverse charge mechanism and (3) a special regime for the transfer of own goods.The rules under the single VAT registration will come into application on 1 July 2028 (this was 1 July 2027 in the May 2024 compromise text).
The OSS makes it possible for businesses to submit a single VAT return for the VAT due in the EU Member States. This scheme currently already applies to all B2C services and EU distance selling (and for platforms in some cases of domestic B2C supplies). The proposal extends it to all domestic B2C supplies, B2C supplies with installation and assembly, B2C supplies of electricity, gas, heating and cooling (already enter into application as of 1 January 2027) and B2C supplies on board of EU passenger transport.
The mandatory reverse charge rule is extended to all B2B supplies and services where the supplier is not established and VAT registered in the EU Member State where VAT is due and the recipient is identified for VAT in that Member State.
A special system for the transfer of own goods is introduced. Transfers are reported in this optional scheme on a monthly basis. The intra-Community acquisition of goods is subsequently exempted in the Member State of arrival and should not give rise to registration requirements.
As of 1 July 2028 it will no longer be possible to transfer goods to another Member States under the call-off stock arrangements. Until 30 June 2029 goods that have been transferred under the call-off stock arrangements before 1 July 2028 can still be supplied to the customer under application of that special scheme.
Changes and clarifications to the existing e-commerce rules
The adopted rules also contain some amendments on the rules applicable on B2C e-commerce since 1 July 2021. It is important to note that most of the changes have been postponed with one year. For a detailed description of those rules we refer to our earlier article about this topic.More information
As the Member States have now adopted the rules, they will need to take the necessary measures both on a national and EU level for implementation of these rules on the dates set. If there are any developments we will of course keep you updated. If you want to know more about the new rules, please join our webinar. You can register by clicking on the button.Register
If you have questions regarding ViDA we are of course happy to help. Please contact one of our VAT advisors for more information.