The Economic and Financial Affairs Council (‘ECOFIN’) of the EU has now reached political agreement on the ‘VAT in the digital age package’ (‘ViDA’), which introduces significant changes to the EU VAT system.
The ViDA package provides for a number of measures intended to simplify VAT compliance in the digital age and to alleviate the administrative burden for individuals and SMEs. The package also includes measures intended to expedite the provision of data to EU tax authorities, with a view to combatting VAT fraud.
By way of high-level summary, the key changes implemented as part of the ViDA package are as follows:
- Digital Reporting Requirements : The Digital Reporting Requirement (‘DRR’) is a real-time digital reporting obligation in respect of B2B cross-border supplies of goods and services. The report consists of the return of invoice data by a supplier at the time the invoice is issued (or should have been issued). For self-billing, or in instances where the buyer is required to transmit such information, the information is required to be submitted within five days of the invoice date.
- Mandated use of e-invoicing: The use of e-invoicing shall be mandated for intra-Community transactions. Member States are permitted to still allow other invoices (in non e-invoice structured format) for domestic supplies (subject to customer agreement) but may also proceed to mandate a national e-invoicing regime without approval from the EU Commission. The deadline for issuance of an e-invoice shall be 10 days after the chargeable event has taken place.
- EC Sales Listing: The requirement to submit EC Sales List returns (also known as VIES returns) in respect of intra-EU sales will be abolished and will be replaced by the abovementioned DRR.
- Deemed Supplier Model: Platform operators which facilitate short term accommodation rentals & passenger transport services by road will be deemed to be the supplier of these services for VAT purposes and will be obliged to collect the VAT directly from the customer and remit same to the relevant tax authorities. However, the platform will not be the deemed supplier if the underlying supplier furnishes their VAT identification number to the operator of the platform and indicates that it will account for any VAT due on that supply. ‘Short term accommodation’ for these purposes has been defined as rentals of 30 days or less with EU Member States being afforded the option to add further conditions where necessary. ECOFIN has also afforded flexibility to EU Member States to exempt SMEs from such rules.
- Expanded scope of VAT One Stop Shop (‘OSS’): VAT registration requirements will be reduced and streamlined with the expansion of the existing OSS to cover B2C supplies of items such as electricity, gas, heating & cooling, supplies of goods on board ships, aircraft or trains, and supplies of goods with installation and assembly.
- OSS for transfers of own goods - For transfers of own goods, businesses will no longer be required to register in the EU Member State of arrival. Rather, the existing OSS will be extended to include a reporting module for the movement of own goods. It will also cover transfers of call-off stocks and therefore the simplification mechanism in the ‘2020 VAT Quick Fixes’ will cease to apply.
- Mandatory Local Reverse Charge: A reverse charge mechanism shall also be implemented for B2B transactions by non-established suppliers. This is referred to as a ‘local reverse charge mechanism for foreign suppliers’. This mandatory mechanism shall ensure that a supplier who is not established in the country will avoid having to VAT register in the EU Member State of receipt. Currently, such provision is optional for Member States under Article 194 of the VAT Directive and has not been implemented in Ireland.
Regarding implementation dates for the measures outlined in the ViDA package, the earliest voluntary application date is 1 July 2028 in respect of the deemed supplier platform economy provisions, with mandatory application commencing on 1 January 2030. The extended use of the OSS including for transfer of own goods shall be introduced from 1 July 2028 as well. The DRR and mandatory e-invoicing requirements shall apply from 1 January 2030.
A transitional date of 1 January 2035 will apply for EU Member States who have pre-existing domestic digital transaction reporting obligations – such Member States will be required to align their national systems to the DRR model by 1 January 2035.
If you would like to discuss how to ensure your business can navigate the issues that will arise from the implementation of the ViDA package, or indeed discuss any other matters, please contact Matthew Broadstock, Dara Higgins or your usual Matheson contact.