The EU Commission proposes new rules for VAT in the Digital Age

In its 2020 Action Plan for fair and simple taxation supporting the recovery, the EU Commission announced the legislative package ‘VAT rules for the digital age’, which was also included in the 2022 Commission work programme and adopted on the 8th December last year.

This legislative package includes a proposal for a Council Directive amending Directive 2006/112/EC, together with a proposal for a Council Regulation amending Regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age, and the proposal for a Council implementing Regulation amending Council Implementing Regulation (EU) No 282/2011 as regards information requirements for certain VAT schemes.

This package has three main objectives:

(1) Modernising VAT reporting obligations, by introducing Digital Reporting Requirements, which will standardise the information that needs to be submitted by taxable persons on each transaction to the tax authorities in an electronic format. At the same time it will impose the use of e-invoicing for cross-border transactions;

(2) Addressing the challenges of the platform economy, by updating the VAT rules applicable to the platform economy in order to address the issue of equal treatment, clarifying the place of supply rules applicable to these transactions and enhancing the role of the platforms in the collection of VAT when they facilitate the supply of short-term accommodation rental or passenger transport services; and

(3) Avoiding the need for multiple VAT registrations in the EU and improving the functioning of the tool implemented to declare and pay the VAT due on distance sales of goods, by introducing Single VAT Registration (SVR). That is, improving and expanding the existing systems of One-Stop Shop (OSS)/Import One-Stop Shop (IOSS) and reverse charge in order to minimise the instances for which a taxable person is required to register in another Member State.

The measures proposed by the Commission are the following:

Digital Reporting Requirements

Introduction of (quasi) real time transaction reporting on intra EU transactions
Abolition of recapitulative statements
Flexibility in the introduction by MS of reporting on domestic transactions that should in any event conform to the system used for intra EU transactions
For MS where DRR for domestic transactions is already in place, interoperability will be required in the short term, and convergence in the medium term

Platform Economy

Deemed supplier regime for platforms in the accommodation / transport sector (so called “sectoral approach”)
The possibility to broaden the scope of the measure in the long term
Clarifications in the current rules (e.g. new rules for the place of supply of the facilitation services and a presumption determining the status of the provider using the platform)

Single VAT Registration

Extension of the OSS to cover all B2C supplies of goods and services by non-established suppliers,
the transfer of own goods combined with the introduction of mandatory reverse charge mechanism (B2B) by non established persons
Mandatory use of the IOSS for deemed suppliers combined with additional data exchange prior to importation

The discussion of these proposals has started in January in the Working Party on Tax Questions under the Presidency of Sweden which presently occupies the rotating Presidency of the EU Council.

Further information may be obtained from the EU Commission.