EU Commission's VAT in the Digital Age Package delayed

Background

In December 2022, ITH 2022/43 reported that the Commission had published draft directives and regulations on the VAT in the Digital Age (“ViDA”) Package of measures. The package has three main proposals:

1. Introducing Digital Reporting Requirements to standardise the transactional information submitted by taxpayers to tax authorities and the imposition of e-invoicing for cross-border transactions.
2. Clarifying the place of supply rules and enhancing the role of platforms in the collection of VAT when facilitating the supplies of short term accommodation rental and passenger transport.
3. Introducing Single VAT Registration and avoiding the need for taxpayers to have multiple VAT registrations across the EU by improving the existing systems of the One-Stop Shop, Import One-Stop Shop and reverse charge.

The original proposals were intended for approval by the Council of the European Union (“The Council") by the end of 2023 and to be implemented from 1 January 2025 to 1 January 2028. The proposals have been discussed in meetings of the Economic and Financial Affairs Council (“ECOFIN”) - the configuration of The Council which discusses financial and economic affairs such as taxation.

ITH 2023/24 reported that in the ECOFIN meeting of 16 June 2023, while there was general support for the package, some Finance Ministers raised concerns as to the timelines for implementation in respect of digital reporting,e-invoicing and the role of platforms in collecting VAT. This signalled that agreement on the full package and its implementation into EU and Member States’ law may be delayed.

Over the last 6 months discussions have continued to take place between officials from Finance Ministries across Europe to agree revised proposals and compromises across the package. Most notably, the EU Parliament voted to delay all parts of the package by 1 year. Although the EU Parliament’s vote is not binding it signalled general concerns throughout EU Member States on the specifics and timings of the reforms. Given the concerns raised across the institutions of the EU it seems clear that the ViDA package will be delayed. This decision however rests solely with the Council of the EU.

In the final Economic and Financial Affairs Council of 2023 on 8 December, the Spanish presidency presented an update alongside a progress report on the ViDA package. In the progress update it was noted that:

• Digital reporting and e-invoicing - this pillar will require further technical discussions before an agreement on the whole package will be feasible.
• Single VAT Registration - the Presidency believes that the discussions at a technical level are near to completion.
• Platforms - there are some disagreements between Member States over the aims of this proposal and some Member States have suggested that an optional application of the deemed supplier rule should apply. In addition some Member States have suggested the substitution of the deemed supplier rule with reporting obligations imposed on the platforms.

It was noted that further work was necessary to seek agreement. As yet there has been no commitment to agree these details within the timeframe of the next six month presidency.

Implications

We await to see if the ViDA package reaches agreement in future Council presidencies. At the moment, the Commission has not decided to break down the proposal into its three constituent pillars but it is possible that it considers this in the future if the digital reporting or platforms aspects of the proposals prevent implementation of the Single VAT Registration elements.

Although there has been no multilateral agreement on digital reporting and e-invoicing, many EU Member States have already announced new e-invoicing obligations on a unilateral basis. Businesses may therefore need to start considering their EU trade profile in light of the Member States who are implementing e-invoicing and review their invoicing and digital reporting processes.