Hungary proposals to unlock agreement on VAT in the Digital Age
The current president of the Council of the EU, Hungary, is seeking a compromise over the Estonian block of the final pillar of VAT in the Digital Age, Platform Economy. Twice, Estonia has vetoed the pillar because of its opposition to the mandatory VAT deemed supplier obligations for accommodation and ride sharing platforms. Once agreed, the whole ViDA package can be fully agreed, including Digital Reporting (e-invoicing) and Single VAT Registration.
Hungary may pursue three routes starting at this week’s Working Party on Tax Questions (High Level) to win over Estonia and its supporters, including:
- Since the Estonia opt-in proposal (see below) hasn’t yet been formally submitted, Hungary may try to gauge whether objecting states (notably Spain and Italy) will back down to win backing for all of ViDA;
- Limit the deemed-supplier requirement to just the accommodation platforms as Estonia is objecting only to it for ride sharing; or
- Put a time limit, and formal review on the Estonian opt-in proposal.
It is increasingly likely that a final agreement will not be found until the November ECOFIN meeting of EU Finance Ministers on 5th November.
Estonia’s voluntary opt-in proposal for digital platforms
Since May, Estonia has remained concerned that the mandatory requirement for ride and accommodation sharing platforms to account for VAT of their 3rd party traders would undermine neutrality and adversely affect smaller traders that were below the VAT registration threshold. A Belgian-proposed compromise in May changed this deemed supplier obligation to allow member states to opt out SME businesses – including provision of a database for platforms to manage eligible traders based on the 2025 Special SME Scheme. The latest draft of the proposals has removed the admin conditions for member states to use the SME sheme option.
But this has not convinced Estonia, which wants a state-level optional opt-in on deemed supplier to remove its veto and allow agreement on Pillar 2.
EU VAT in the Digital Age reforms
| EU VAT in the Digital Age | |
| 3 pillars to improve efficiency of VAT for all and reduce fraud | |
| 1. Digital Reporting Requirements; e-invoicing | 2030-35: Mandatory digital reporting of intra-community transactions; obligation to be able to issue and receive intra-community e-invoices; member states free to impose own e-invoicing or real-time reporting but most conform to EU e-invoice standard EN 16931 |
| Read more about EU Digital Reporting Requirements (DRR) | |
| Structured e-invoices mandated for intra-community supplies | |
| EC Sales lists replaced by Digital Reporting Requirements | |
| Withdrawal of EU permission requirements for e-invoicing | |
| 2 Platform economy | July 2027: Travel & accommodation sharing platforms to become deemed supplier / liable to users' VAT. New definitions of the roles of providers, users and platforms to avoid double and no-taxation |
| Read more - Travel & accommodation platforms deemed suppliers for EU VAT | |
| 3 Single VAT Registration; extension of OSS | July 2027: Following the 1 July 2021 introduction of the One Stop-Shop (OSS), extended to cover movement of own stocks prior to cross-border B2C to reduce the foreign, non-resident VAT registrations & returns. Plus to movements of own stock with ending of 'call-off' stock burden |
| More details on Single VAT Registration in the EU | |
| Call-off stock VAT simplification ends | |
| Harmonisation of B2B Reverse Charge rules | |
