VAT in the Digital Age - ViDA
In December 2022, the European Commission presented proposals for the modernization of VAT rules under the concept of VAT in the digital age ("ViDA"). Currently, the European Parliament is considering a number of amendments proposed by individual member countries. The ViDA proposal must still undergo the approval process before it enters into force.
ViDA consists of three key parts:
- Electronic invoicing
- Delivery Facilitation Platforms - Expanded Use
- Unified registration for VAT and improvement of special (OSS, iOSS) schemes
If the proposal is approved, the various measures will take effect between 1 January 2024 and 1 January 2028.
Changes to electronic invoicing and reporting
The proposed ViDA contains the following changes:
- From 1 January 2024
- From 1 January 2028
From 1 January 2024
- New definition of an electronic invoice to harmonize the existing rules of electronic invoicing for public procurement. An electronic invoice will be defined as a document that has been issued, sent, and received in a structured electronic format that allows its automatic and electronic processing
- The right of the recipient of an electronic invoice to reject an electronic invoice and request a paper version instead will be abolished
From 1 January 2028
- The deadline for issuing an invoice for cross-border transactions within the EU (e.g. intra-Community supply of goods or supply of services with a place of supply in another member state, which is subject to the transfer of tax liability) is set for two working days after the taxable transaction has been made. The current deadline for issuing an invoice for such transactions is 15 days after the end of the month in which the taxable performance took place, which means a significant shortening of the deadline.
- A new system for digital "real-time reporting" will be created for cross-border transactions within the EU. Taxable persons will have to send the required information to the tax office within two working days of issuing the invoice or receiving the payment.
VAT and platforms from January 1, 2025
The new proposal extends the current functioning of the platforms to all deliveries of goods in the EU and certain services via an electronic interface, in particular short-term rentals of tourist accommodation and personal transport provided by certain persons, e.g. non-taxable or non-resident person. The platforms will be responsible for the collection and remittance of VAT.
Since the provision of services will be considered as the delivery of services by the platform, the platform will be obliged to charge VAT on the price of the delivered service. Supply to providers will be considered "exempt" with no right to deduct VAT.
Unified registration for VAT from 1 January 2025
As part of this package, it is proposed to:
- Extend the transfer of tax liability rule to all goods and services supplied by a non-resident person to a VAT payer in the state of supply
- Extend the use of single point of contact schemes ("OSS and iOSS") to cover B2C deliveries of goods including home deliveries of second-hand goods, works of art, collectables and antiques
- Introduce new rules for the transport of own goods and cancel the current simplification for consignment warehouses
These changes are intended to reduce the need for multiple VAT registrations in different Member States.
Current expert discussion / amendments
Individual EU member states have proposed more than 300 amendments. The most significant are:
- Retention of domestic requirements for real-time reporting introduced by Member States;
- Extension of the deadline of 2 working days for issuing electronic invoices for cross-border transactions;
- Postponement of entry into force of the proposed provisions by 24 months;
What does that mean?
The proposed changes, especially the transition to electronic invoicing and "real-time reporting", will affect all businesses and create additional costs for business for technological solutions and process setup. This will primarily affect smaller entities without sufficient resources to implement these changes. They will, however, be able to take advantage of more favourable conditions for VAT registration. Entities operating in the EU should begin considering their readiness for these changes now.
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