Digital Certificate to replace paper version from 1 July 2026
The EU’s regular meeting of Finance Ministers, ECOFIN, is set to approve on 10th December the proposed Electronic VAT Exemption Certificate.
This follows a positive 6 November European Commission’s Working Party on Tax Questions progress review
The EC made the proposal in July 2024 to amend the VAT Directive to allow for a digital VAT exemption certificate. There is already a paper exemption certificate available which will be replaced from 1 July 2026 with a transition period to 30 June 2030
Digital VAT Exemption certificate proposal
The proposal aims to amend Council Directive 2006/112/EC (the VAT Directive) by introducing an electronic exemption certificate to confirm that a transaction qualifies for specific exemptions under the first subparagraph of Article 151(1) of that Directive. Currently, the VAT and/or Excise Duty exemption certificate is paper-based and requires a handwritten signature. This move to an electronic certificate aligns with the EU’s broader digitalization efforts, reduces administrative burdens, and allows Member States to meet EU legislation requirements for processing electronically signed documents.
The initiative’s origins lie in the increasing digital demands and a request from Member States for a feasibility study on the electronic exemption certificate’s implementation. Following broad support in various EU meetings and expert groups, the proposal was developed. It suggests using a PDF e-form accompanied by a fully electronic process, leveraging existing technologies developed by DG TAXUD.
To facilitate the transition, Member States can continue using the paper version of the exemption certificate until June 30, 2030. This transitional period allows flexibility and ease in switching to the electronic procedure on a transaction-by-transaction basis. Additionally, there will be no distinction between domestic and cross-border transactions, and the electronic certificate will apply to VAT exemptions granted by refunds according to Article 151(2) of the VAT Directive.
The proposal also introduces a new provision clarifying that if the conditions for exemption are not met or cease to apply, the eligible body or individual who issued the certificate is liable to pay any VAT due. This ensures that taxable persons are not unfairly disadvantaged by additional VAT claims, as only the eligible body or individual would have the relevant information on the exemption conditions. To avoid unnecessary burdens, Member States may allow these bodies or individuals to pay the VAT without full VAT registration.
The auto-validation clause from Article 51(2) of the VAT Implementing Regulation will remain for the new electronic procedure. This means that if the goods or services are for official use, Member States can dispense with the requirement for the exemption certificate to be electronically signed by the host Member State, under certain conditions to prevent abuse.
The new rules are set to be applied from July 1, 2026, giving Member States adequate time to implement the new electronic VAT exemption certificate and procedure. The proposal is consistent with existing policy provisions, as it follows the adaptation in 2022, which extended the scope of exemptions under Article 151(1) of the VAT Directive to include Union activities under the Common Security and Defence Policy (CSDP) and measures in response to the COVID-19 pandemic.
The electronic VAT exemption certificate is also consistent with the EU’s digitalization policy, such as the Berlin Declaration on the Digital Society and Value-based Digital Government, and it aids Member States in complying with EU requirements for advanced electronic signatures.
Legal Basis, Subsidiarity, and Proportionality
The proposal is based on Article 113 of the Treaty on the Functioning of the EU, which allows the Council to adopt provisions for harmonizing Member States’ rules on indirect taxation. According to the principle of subsidiarity, Union-level action is necessary because the VAT Directive currently prevents Member States from independently introducing an electronic VAT exemption certificate. The proposal adheres to the proportionality principle by not exceeding what is necessary to achieve its objectives, leading to long-term administrative simplification and cost savings.
Consultations and Impact Assessments
No stakeholder consultation was conducted due to the technical nature of the initiative, but the Commission carried out a technical study in consultation with Member States. No separate impact assessment was performed, as the initiative’s scope is narrow and highly technical. However, the proposal supports citizens’ rights regarding personal data processing, as protected by Article 8 of the EU Charter of Fundamental Rights and Article 16 of the Treaty on the Functioning of the European Union.
Budgetary Implications
The proposal is expected to reduce administrative burdens and costs associated with the paper version of the VAT exemption certificate. The estimated cost of implementing and operating the digital solution is EUR 2.9 million, primarily funded by the FISCALIS programme within the current Multiannual Financial Framework. Member States’ costs, mainly for providing access to the central application, are expected to be low. The scope of VAT exemptions will not change, so there will be no impact on the EU budget.
Other Elements
The proposal does not require explanatory documents on transposition. Article 1 of the proposal aims to amend the VAT Directive, allowing the Commission, in consultation with Member States, to adopt measures for an electronic exemption certificate for transactions qualifying under the first subparagraph of Article 151(1) of the VAT Directive. The technical details for the electronic format and processing of the certificate will be set out in implementing acts adopted following the examination procedure in Regulation (EU) No 182/2011.
In summary, the proposal seeks to modernize the VAT exemption process by introducing an electronic certificate, reducing administrative burdens, and aligning with broader EU digitalization efforts. Member States have until July 1, 2026, to implement the new procedure, with a transitional period for continued use of the paper version until June 30, 2030.
