VAT in the Digital Age
22 February 2023
As part of its response to the digitalisation of the economy the EU Commission has issued proposals to change the EU VAT system (https://taxation-customs.ec.europa.eu/taxation-1/value-added-tax-vat/vat-digital-age_en). What are the key points in the Commission’s proposals and what would be the major challenges for corporates if they are implemented as currently proposed?
Philip Nolan, VAT Partner: On 8 December the European Commission launched its long-awaited proposals to modernise the VAT rules within the EU collectively known as “VAT in the Digital Age package” (“ViDA”).
The ViDA consists of three key parts, which are very briefly summarised below:
- Digital reporting and E-invoicing
- the introduction of e-invoicing and a two working day digital reporting requirement for all intra-community business supplies on a transaction-by-transaction basis with effect from 1 January 2028.
- The Platform economy
- the introduction of a “deemed supplier” for VAT purposes for certain platforms in the short-term accommodation rental and passenger transport sectors with effect from 1 January 2025.
- The Single VAT registration
- the extension of the reverse charge rule for intra-community business supplies and the One Stop Shop for certain supplies to private consumers together with the introduction of new rules for the transfer of own goods with effect from 1 January 2025.
The proposed rules are extensive and complex and will take some time to fully digest. To become effective, the proposed measures must be unanimously approved by all EU member states (which will be challenging), so they will be subject to robust debate during 2023 and possibly further revised.
However, affected businesses should begin to familiarise themselves with the proposals so they can assess the likely impact on their business. In particular, on the digital reporting and e-invoicing side, the new requirements will put an additional burden on businesses who need to review the extent to which existing systems will be able to cope with the new e-invoicing (both issuing and receiving e-invoices), and digital reporting requirements under the proposals.
Content adapted from Finance Dublin’s Irish Tax Monitor.