VAT in the Digital Age

New EU initiatives: VAT in the platform economy and digital real-time reporting.

The overall “VAT Gap” (the difference between expected VAT revenues and the amount actually collected) in the EU in 2020 was reported at EUR 93 billion.

To lower intra-Community VAT losses and to align VAT administration with the reality of the digital economy, the European Commission announced a package of VAT reforms in December 2022 –  “VAT in the Digital Age” or ViDa.

Two key proposals that will be further revised in 2023-2024, and which may affect EU businesses the most, along with a number of other suggested changes, are:

• VAT real-time digital reporting requirements (DRR) and e-invoicing for intra-Community suppliers.

According to the proposal, mandatory electronic invoicing within 2 business days from the date of supply, as well as real-time sharing of the supply data with the authorities, will be introduced in 2028. If a supplier fails to submit data, the transaction will be not eligible for intra-Community zero/VAT exemption application.

• New VAT requirements for platforms

Under current EU VAT rules, the providers of short-term accommodations or passenger transport services, e.g. those individuals renting out an apartment, are obliged to collect and remit VAT to the tax authorities. At the same time, the majority of such providers are not aware of such an obligation or lack the resources to comply with it. Starting in 2025 the digital platform operators selling such services will be responsible for collecting and paying VAT, which will equalise VAT treatment for the platform economy vs. traditional service models.

***

The proposed changes are complex and will need to be adopted by all EU member states.  Beginning in 2024, EU member states must develop common DRR and other standards, and businesses must adopt new VAT compliance rules.

Asgard Consulting contacts:

Yana Butrimovich yb@asgard-consult.com