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VAT in the Digital Age (ViDA)

Keep track of legislative proposals that embrace digitalization and modernize the EU VAT system

This Tax Dossier was last reviewed on 5 September 2024

 

Introduction 

The VAT in the Digital Age (ViDA) Tax Dossier aims at providing accurate, reliable and updated information on the European Commission’s legislative proposals put forward to address:

  • the fight against VAT fraud; and
  • the challenges raised by the development of the platform economy.

The legislative proposals include a series of measures that aim to align the VAT system in the European Union, considering the current technological advancements.

 

Outline Tax Dossier 

This dossier is structured in the following way:

There are three sections that correspond to the three pillars on which these legislative proposals are based. A final section provides background information on the legislative proposals, and a timeline is included to show, if approved, the moment when the European Commission’s legislative proposals:

  • have been adopted;
  • have entered into force; and
  • have been transposed by each of the EU Member States.

Click the section of your interest or simply scroll down:

First Pillar: Digital Reporting Requirements (DRR)

Second Pillar: Platforms as Deemed Suppliers (PDS)

Third Pillar: Single VAT Registration (SVR)

Background 

 

First Pillar: Digital Reporting Requirements

 The goal of the measures included in this pillar is to implement a model of transaction-by-transaction, real-time reporting based on the European Standard. The ultimate policy objective is to reduce obstacles to cross-border businesses and fight VAT frauds. Electronic invoicing (e-invoicing) would be the default invoicing method, and the standardized content of information to be reported would aim at achieving interoperability of the systems.

This pillar entails modifications on administrative cooperation, as the current way of collecting and exchanging aggregated data (through recapitulative statements and through the VAT Information Exchange System (VIES), respectively) is no longer accurate and no longer fits the scale of cross-border transactions and the level of VAT fraud. The proposed changes to Regulation (EU) No. 904/2010, as regard the VAT administrative cooperation arrangements needed for the digital age, are complimentary to the amendments to the VAT Directive. Their goal is to provide for practical rules on how the newly collected data will be exchanged between EU Member States, determine what IT infrastructure is required and regulate what personal data protection rules will govern the new exchange of information.

 

Timeline 

 

Key documents 

 

Latest journal articles and opinion pieces 

           Christian Amand

           Sascha Jafari, Marie Lamensch and Marta Papis-Almansa

 

Second Pillar: Platforms as Deemed Suppliers

The second pillar targets online platforms that allow persons acting in their individual capacity or small businesses, which are generally exempt from the obligation to register and charge VAT, to connect to a large number of consumers. Due to the possibility to access a wide consumer base, this business model (online platforms) puts small service providers, which are generally exempt from the obligation to register for VAT, in direct competition with traditional business operators that qualify as VAT-taxable persons, thereby creating a distortion of competition. This distortion is most significant in the passenger transportation and accommodation sectors provided by online platforms, in which the underlying exempt service providers compete directly with traditional businesses like hotels and taxis. The proposal intends to amend the VAT Directive and IR 282/2011 to consider online platforms facilitating the supply of passenger transport or accommodation services as deemed suppliers.

 

Timeline 

 

Key documents 

 

Latest journal articles and opinion pieces 

           Javier Sánchez Gallardo and Gorka Echevarria

 

Third Pillar: Single VAT Registration

This pillar intends to expand the existing One-Stop Shop (OSS) and Import One-Stop Shop (IOSS) regimes (e-commerce rules) to include in their scope some supplies that are currently excluded. The aim is to facilitate the registration for VAT purposes in one EU Member State when businesses operate across different EU Member States.

 

Timeline 

 

Key documents 

 

Background 

In 2022, the European Commission developed an action plan for fair and simple taxation that emphasized the need to reflect on how technology can be used in the fight against tax fraud and how the current VAT rules in the European Union could be adapted for doing business in the digital age.

The current EU VAT system for intra-EU trade is almost 30 years old and, despite some improvements, has not kept pace with technological advances, the digital economy and changes in the business models. Outdated VAT collection and control methods have contributed to the VAT gap. According to the European Commission, the VAT gap in the European Union in 2020 was estimated to EUR 93 billion, out of which around EUR 60 billion may be attributed to VAT intra-Community fraud and evasion, specifically the intra-Community fraud known as the “missing trader” and “carousel” fraud. Considering this, in the fight against VAT evasion and to make VAT compliance easier for businesses that operate cross-border, the need to update the VAT rules has been discussed by the European Commission and other key stakeholders to consider available new tools and systems in the digital age.

In this context, the ViDA legislative proposals put forward by the European Commission on 8 December 2022 aim at aligning the VAT rules with the current technological advancements.

In particular, the ViDA legislative proposals intend to amend:

 

Timeline

 

Key documents 

 

Latest news reports 

 

Latest journal articles and opinion pieces 

           Marta Papis & Emilia Teresa Sroka

           Krzysztof Lasiński-Sulecki

           Fernando Matesanz

           Patrick Wille

 

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