EU ViDA agreement delayed

ECOFIN agreement of VAT in the Digital Age blocked by Estonia seeking compromise on Digital Platform ‘deemed supplier’

July 2027 Single VAT Registration & Platform Economy; July 2030 Digital Reporting Requirements & e-invoicing; Jan 2035 harmonisation with existing e-invoicing

The EU’s VAT in the Digital Age (ViDA) 3-pillared reforms failed to receive Finance Ministers’ political agreement at the 14th May ECOFIN meeting. Estonia used its veto vote, seeking a compromise for member states to opt-in only to ride & accommodation platform deemed supplier obligations. This is the main element of Pillar 2. ECOFIN did agree to the two other pillars, Digital Reporting Requirements and the Single VAT registration – but these only pass if a compromise can be reached with Estonia.

The current Belgian Presidency of the EU Council is likely to reattempt agreement with Estonia by the next ECOFIN, 21 June 2024.

Below are the likely revised proposals and 2 ½ year delayed timetable from the original Dec 2022 ViDA plans.

2024 – upon ViDA agreement and gazetting VAT Directive changes

• Member states are free to impose domestic transaction e-invoicing schemes without prior Directive derogation approval of the EC. This may only be for established businesses on domestic transactions (non ECL).
• Issuance of e-invoices will no longer be subject to the agreement of the customer, and therefore businesses must be prepared to accept e-invoices if a domestic regime is introduced by a member state.
• Separate proposals ‘quick fixes’ to the existing e-commerce VAT rules and processes have been moved back or into the 2028 EU Customs reforms.
• The EC will adopt special measures to prevent VAT fraud around IOSS identification numbers. Including linking an IOSS ID to the import consignment number.

January 2026 – minor modifications to the 2021 e-commerce package

• Modification to the €10,000 B2C distance selling goods and TBE services threshold – it will only apply from the country of establishment of the seller.
• Update to the tax point rules.
• Supplies of natural gas, heating and cooling energy cross-border are deemed distance sales as so may be reported in OSS

July 2027 – Single VAT Registration & Platform Economy pillars

Pillars 2 and 3 are now delayed until July 2027 – the original plan was for Jan 2025. This will allow governments and taxpayers more time to prepare IT system, plus shifts the changes away from the busy year end when many other regular updates or reforms are typically scheduled.

Pillar 2: Platform Economy ride & accommodation sharing

• Short-term accommodation rental and road ride sharing platforms will become the deemed supplier for VAT purposes of their underlying suppliers’ transactions. This means they will have to charge and collect VAT on behalf of the supplier.
• However, exceptions have now been negotiated following concerns and member states may opt to exclude the following two groups of underlying suppliers: 
  • Those who provide their platforms with an identification number for VAT purposes. This enables them to continue to recover input VAT costs against their output VAT; and
  • Those who are using of the new 2025 SME VAT registration special scheme for small enterprises
• In a change from the original proposals, and to keep some consistency between member states, the definition of short-term has been changed from 45 days to 30 days. Member states may also add further conditions in their local laws to qualify the definition of short-term.
• The EC will report on the effectiveness of these measures exceptions by 1 July 2032.
• In a further change, travel agents are to be excluded from the deemed supplier. And, likewise, platform supplies are excluded from TOMS (Travel Operators Margin Scheme.

Pillar 3: Single VAT Registration

• The extension of the OSS return to e-commerce and own stock movements across EU borders. This will enable hundreds of thousands of e-commerce sellers and B2B businesses to significantly cut their foreign VAT registrations and associated costs.
• For non-EU established businesses, the member state of identification for OSS registration will be the country of dispatch of goods.
• OSS will be extended to: supply and install; goods sold aboard ships, trains and aircraft, and energy through systems.
• The proposal to make mandatory the use of the Import One Stop Shop IOSS single return for B2C imported sales has been dropped from ViDA.
• Call-off stock withdrawal as traders will be able to use OSS. No new call off stock arrangements may be used from 1 July 2027. Goods already transferred prior to this date, and still not released, conditions will cease to apply on 30 June 2028.
• However, the proposed extension of marketplace ‘deemed supplier’ to include EU merchants’ sales will not happen. Marketplaces already carry this responsibility for non-EU sellers. This followed canvassing from platforms that the administrative burden would hinder new or existing small marketplaces developing. Also, enforcement would become more difficult when switching collections from EU established merchants to non-EU established marketplaces. The European Commission is to perform an evaluation of the deemed supplier by July 2027 an evaluation of the deemed supplier rules with a view to its full extension. In particular, monitor the use by non-EU established merchant of sham fixed establishments (shell EU companies) to sidestep the existing deemed supplier rules.
• The proposed harmonisation of the non-resident B2B domestic reverse charge (Article 194) rules will go ahead, but it has been modified to give member states some flexibility. Member states will be required ‘shall’ apply the reverse charge when a non-resident supplier supplies a customer that is VAT registered in the country. But Member States are given flexibility if they wish to adopt different rules to apply the reverse charge. For instance, applying the reverse charge only when the customer is established in the Member State that the VAT is due. Margin scheme supplies and works of art are excluded. Such transactions must be disclosed on the ESL.

July 2030 Digital Reporting Requirements pillar

Digital Reporting of intra-community transactions to tax authorities

• Introduction of Digital Reporting Requirements (DRR) for suppliers and their customers of header-level data of:
  • intra-community: supplies; acquisitions; B2B services;
  • reverse charge when the supplier is not established; 
  • supplies of energy to a taxable dealer; and
  • triangulation.
• Each member state will be free to develop their own reporting protocols and technical specifications.
• There have been a number of compromises to this proposal to reflect practical burdens:
  • The reporting deadline has been extended to ’10 days’ from ‘2 working days’ from issuance of the e-invoice. 
  • Member states may exempt customers of goods or services from also reporting the transaction if they can obtain assurances by other means. 
  • In addition to the existing information required of recapitulative statement, additional information will be required including bank details to enable tax authorities to track payments. But there is no longer a requirement to note the payment date which was included in the original proposal.
• Withdrawal of ESL recapitulative reporting since is now supplanted by the new DRR regime, above.
• Domestic transaction reporting schemes will remain an option. Existing schemes, such as SAF-T on domestic reporting, may remain in place. 
• The EC will report back to the Council by March 2033 an evaluation of the functioning of the DRR (including e-invoicing, below) regime.

Mandatory structured e-invoicing for DRR transactions

• Structured e-invoices based on Directive 2014/55/EU (Electronic invoicing in public procurement) will become mandatory for any DRR transaction (see list above). Other formats, including paper, may continue for other transactions e.g. domestic supplies. Hybrid formats such as Germany’s ZUGFeRD will be valid if they include the required data structure.
• This will include a new definition of the EN16931 e-invoice standard.
• There is now inclusion of basic validation requirements of e-invoices, termed ‘accreditation schemes’, where the tax authorities may check data structures via a platform.
• Such e-invoices must be issued by at least the 10th day after the chargeable event (2 days in the original proposal; today the deadline is 15 days after the reporting period end), and there must be no requirement for acceptance by the customer. In the case of payment on account, and e-invoice must be issued within 10 days of receipt of the payment. Self-billing has a deadline of 5 days after the supply. These requirement does not apply to any member states’ reporting regimes on domestic supplies.
• In a change to the original proposals, holding an e-invoice for eligible transactions will become a substantive condition to VAT deduction or reclaims.
• In a compromise proposed by France, taxpayers may engage with third-party e-invoicing service providers
•  E-invoices supplant paper invoices for legal purposes except in limited circumstances. 
• The proposal to prohibit the use of summary invoices has been dropped under pressure from businesses. Instead, they may be used issued with the criteria:
  • that the VAT on the invoice is chargeable in the same month; and
  • the summary invoice must be issued by the 10th of the following month;
  • a fraud-sensitive supply and the member state has exercised its option to prohibit their use.

January 2035 Harmonisation of domestic and intra-community transaction reporting

• The proposal to require existing domestic e-invoice reporting regimes to harmonise to the EU standard has been changed to January 2035 (originally 2027). This separation from the main e-invoicing launch date of July 2030 reflects member states (e.g. Italy, France and Poland) concerns that tax authorities and taxpayers had invested extensively in the already launch/planned domestic regimes.

EU VAT in the Digital Age reforms

The EU Parliament’s ECON had voted on 23 October 2023 for a one-year delay to all 3 ViDA pillars. However, this is non-binding but certainly reflects concerns that businesses and tax authorities will not be ready by 2025 for pillars 2 and 3.

VAT in the Digital Age old timetable – now delayed

• 2025 (now July 2028) – Single VAT Registration & Platform Economy pillars

  • The extension of the OSS return to e-commerce and own stock movements across EU borders.
  • Call-off stock withdrawal as traders will be able to use OSS (see above)
  • Marketplaces become deemed suppliers for their EU sellers’ B2C goods sales across EU borders. They already carry this responsibility for non-EU sellers.
  • The IOSS to become mandatory for marketplaces which have facilitated their sellers’ imported goods sales. Deemed supplier marketplaces will therefore no longer be able to use the special arrangements VAT collections option introduced as part of the 2021 e-commerce VAT package.
  • Harmonisation of reverse charge B2B goods when the customer or supplier is non-resident, and change to ‘may’ provision.
  • Accommodation and ride sharing platforms become liable for users’ VAT collections and reporting.

• 2028 (now July 2030) – Digital Reporting Requirements pillar

  • Introduction of Digital Reporting Requirements for header-level data of intracommunity supplies within two days of the supply.
  • E-invoices supplant paper invoices for legal purposes except in limited circumstances. Member states have the option to impose e-invoices for domestic transactions but all national regimes must converge with the EU e-invoicing standard, EN 16931.
  • No new pre-clearance e-invoice regimes may be introduced by member states. Those already in place, Italy SdI and Poland’s 2024 planned e-invoicing, may continue until January 2028.
  • Ending of summary invoices
  • Mandatory structured e-invoicing for intra-community supplies of goods based on EN 16931 standard. These will include new data fields (e.g. settlement details)
  • Withdrawal of ESL reporting since supplanted by the new DRR regime, above.