Blog

In this article, we want to inform you about a new EU directive known as ViDA (“VAT in Digital Age“), the aim of which is to modernise the VAT system across the EU and to make it more resilient to fraud. The proposal was introduced by the European Commission in December 2022. The proposed rules will apply to sales of both merchandise and services and, as a result, will have an impact on all companies established in the EU.

Under the original plan, these new rules should have been effective one by one from 2024, however, their effect is currently being expected to be moved to no earlier than 2030.

Today’s article brings a short summary of planned changes that will ultimately result in a definitive VAT system where cross-border EU transactions will be seen as local ones.

Pillar 1 = e-Invoicing and Digital Reporting

Electronic invoicing will have to meet the EN 16931 standard and the electronic structure will strictly be required. Paper invoices will no longer be permissible, or will only be permitted in defined cases, as the case may be.

In the area of digital reporting, the EU member states previously implemented various inspection measures (such as inspection reports or real-time reporting). The proposed directive is to harmonise digital reporting in cross-border transactions. DRR (Digital Reporting Requirements) will replace the existing recapitulative statements, and reporting will be performed electronically (while meeting the EN standard) almost in real time. The member states will be able to also introduce the DRR for local transactions, at their discretion.

Pillar 2 = Digital Platforms

Platforms mediating accommodation and transport services will be obliged to pay VAT. In addition to this, rules for determination of the place of supply in agency services provided through a platform in B2C transactions will be specified to a greater detail. The existing voluntary application of the IOSS (import One Stop Shop) mode will be mandatory for those platforms.

Pillar 3 = Single Registration for the VAT Purposes

The OSS (One Stop Shop) mode will be extended to local B2C transactions (supply of goods, supply of goods with installation) or to relocation of one’s goods to another EU member state. The OSS’s scope will also be extended to B2C services provided by a supplier registered outside the EU to all non-businesses (even if they are not established in the EU).

Member states should enable using the local regime of reverse charging applicable to supplies performed by a person not established in the member state where VAT is payable. Each member state is currently authorised to include such possibility in their local legislation. The proposal expects this to become an obligation.

The above-provided information is only intended to be a short summary of what is currently being planned in the EU with regard to VAT. No significant progress has been made in relation to the proposal during Spain’s presidency, but the current presidency of Belgium considers the proposal one of key items on the agenda.

If you want to have more information about this topic, please feel free to contact us.

Michaela Kozminská
kozminska@clarksonhyde.cz