The ECOFIN meeting on May 14, 2024, highlighted continued divisions among EU member states over the proposed changes in VAT rules tailored for the digital age, known as the ViDA package. Despite extensive discussions, no consensus was reached, primarily due to Estonia’s opposition to the deemed supplier rules. Many consider these rules crucial for protecting SMEs and private consumers from complex VAT obligations. Conversely, Estonia had no objections regarding the proposed Digital Reporting Requirements (DRR) and the simplification through Single VAT Registration.
Belgian Finance Minister Van Petegem emphasized the need for a unified approach, suggesting that Estonia’s ‘opt-in’ mechanism might not be the right solution. The Belgian presidency is actively working towards reaching an agreement on the entire package by the end of June, demonstrating their commitment to finding a balanced and effective solution.
Key updates in the ViDA draft
The revised draft of the ViDA directive released recently outlines significant changes aiming to modernize and streamline VAT handling across the EU. Some highlights include:
- Digital Reporting Requirements (DRR): These requirements, set to be enforced from July 1, 2030, mandate that electronic invoices for cross-border transactions be issued within ten days of the taxable event. The update also promises to remove the EU sales listing requirement and introduce real-time reporting exclusively for cross-border transactions.
- Platform Economy Adjustments: Starting January 1, 2026, platforms facilitating goods transactions and July 1, 2027, for those involved in short-term accommodation and passenger transport will have to adhere to newly deemed supplier obligations. This change requires platforms to charge and collect VAT, even when the underlying supplier is not obliged.
- Single VAT Registration: From July 1, 2027, a more consolidated approach will take effect to reduce the administrative burden on businesses engaging in cross-border B2C transactions. The €10,000 EU-wide threshold for registration or the One-Stop Shop (OSS) system does not account for sales from a stock located in a member state different from that of the establishment.
These changes, part of the ViDA package, significantly stride towards reducing the VAT gap, which has resulted in substantial revenue losses across the EU. They also aim to simplify the VAT process for businesses operating in the digital sphere, potentially offering new opportunities and efficiencies.
Key takeaways
- Estonia’s stance: Continued opposition to deemed supplier rules, protective of SMEs and consumers.
- Timeline for DRR: Implementation is set for mid-2030, with phased adoption across member states.
- Platform responsibilities: Increased VAT collection duties from 2026.
- Single VAT system: Broader implementation and simplification expected by mid-2027.
Further negotiations are expected as member states work towards a compromise by the end of the Belgian presidency. For a detailed overview of the revised draft, you can access the full document here.
