EU ViDA agreed at ECOFIN 5th Nov; Pillars 2 & 3 delays

VAT in the Digital Age agreed at ECOFIN 5th November; further delays to Single VAT Registration & Platform Economy pillars

EU Finance Ministers gave political agreement to ViDA on 5th November 2024, with a revised implementation timetable:

• July 2028  Single VAT Registration
• Jan 2030  Platform Economy (voluntary July 2028)
• Jul 2030  Digital Reporting & e-invoicing (harmonisation Jan 2035)

The proposals now return to the EU Parliament to reapprove the compromises due to the substantial differences between the EC’s initial proposal and the ECOFIN text. This should be a formality given the extended timetable.  It then moves for acceptance to the Council for early 2025 start.

Early 2025: upon Council acceptance of ViDA

• 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 may adopt special measures to prevent VAT fraud around IOSS identification numbers. Including linking an IOSS ID to the import consignment number.
• Live streaming evidence of place of supply rules clarified in support of new virtual events VAT rules coming into effect in 2025.

January 2027:  modifications to the 2021 e-commerce package

• These changes were originally scheduled for January 2026, but following the delays in ratification over the summer of 2024, they have been postponed to 2027.
• Modification to the €10,000 B2C distance selling goods and TBE services threshold – only intra-Community distance sales of goods carried out from the Member State where the taxable person is established or domiciled are to be taken into consideration (Article 59c).
• Update to the tax point rules.
• Supplies of natural gas, electricity, heating and cooling energy cross-border are deemed distance sales as so may be reported in the One-Stop Shop (OSS) VAT return (Article 369aa).
• The deemed supplier obligations will apply to supplies of goods within the EU made by taxable persons not established within the Community to other taxable persons (Article 14a 2). Currently, this only applies on B2C supplies.
• Businesses taking advantage of the 2025 SME VAT registration scheme may not also use the IOSS return (Article 369m).

July 2028 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 because there is no longer a need to report the acquisition in the destination country via further VAT returns. The existing OSS return will be adapted to include a new reporting module for movement of own goods. 
• For non-EU established businesses, the member state of identification for OSS registration will be the country of dispatch of goods.
• The original proposal to exclude capital goods from the OSS extension has been dropped provided the owner is entitled to full VAT recovery
• OSS will be extended to: supply and install; goods sold aboard ships, trains and aircraft, and energy through systems (Articles 369a, 369b and 369g).
• 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 2028 (Article 17a). Goods already transferred prior to this date, and still not released, conditions will cease to apply on 30 June 2029.
• 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 2033 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. Any invoices must be issued within 15 days of the end of the reporting period (Article 222).
• Margin scheme supplies and works of art are excluded. Such transactions must be disclosed on the ESL.

July 2028 Pillar 2: Platform Economy voluntary launch ride & accommodation sharing

• Start of voluntary phase of Pillar 2, VAT collections obligations for ride & accommodation sharing platforms (deemed supplier). Countries such as Spain will likely take up this early adoption.

Jan 2030 Pillar 2: Platform Economy mandatory launch

• Start of mandatory phase of Pillar 2
• 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 (Article 28a).
• However, exceptions have now been negotiated, and member states may opt-out for a period of ten years to exclude the following two groups of underlying suppliers: 
  • Those who provide their platforms with an identification number for VAT purposes (including OSS number) and declare they will report the VAT due in their return. 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 (Article 28a).
• 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 (Article 135 (2)).
• An EC report evaluating the operation of the deemed supplier regime and the application of the VAT rules on facilitation services will be produced by July 2033.
• 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) (Article 28 and Article 306.3).
• The digital platform record keeping requirements remain as per the initial proposal.

July 2030 Pillar 1: Digital Reporting Requirements and e-invoicing

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 (Article 262):
  • 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 (Article 262). 
  • 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. 
• Central VIES – EC operated transaction database
  • A new ‘Central VIES’ central database will be overseen and maintained by the EC, and will include DDR transactions and ID info of taxpayers, including their VAT identification number. It will also have some integration into the Customs Surveillance system and the upcoming Central Electronic System of Payment CESOP information
  • It will also give transparency for customers to see what intra-EU transactions are being reported against their VAT numbers. This will help prevent them potentially being caught-up in VAT frauds unaware. This may be enabled by a common EC endpoint.
• 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 (Article 218).
• This will include a new definition of the EN16931 e-invoice standard (draft due July 2025) (Article 216).
• There is now inclusion of basic validation or technical 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) (Article 222). There must be no requirement for acceptance by the customer (Article 232). 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 (Article 223):
  • 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.
• Any member states which have launched a domestic real-time reporting regime after 1 January 2024 must harmonise to the EU ViDA standard.

July 2032

• Phasing out of legacy VIES

January 2035 Pillar 1: Harmonisation of domestic and intra-community transaction reporting

• The proposal to require existing domestic e-invoice reporting regimes to harmonise to the ViDA e-invoicing 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) concerns that tax authorities and taxpayers had invested extensively in the already launch/planned domestic regimes.
• This applies to member state regimes introduced prior to 1 January 2024.

EU VAT in the Digital Age reforms