Commission welcomes general approach on VAT in the Digital Age
VAT in the Digital Age
The Commission welcomes today's general approach announced by the Council on the Commission's proposals on VAT in the Digital Age. By embracing and promoting digitalisation, this package makes the EU's VAT system more business-friendly and more resilient to fraud. The new rules also mark the first step to address the challenges raised by the development of the platform economy and helps level the playing field between online and traditional short-term accommodation and transport services.
This package introduces 3 measures:
- The new system introduces uniform real-time digital reporting for VAT purposes based on e-invoicing for cross-border transactions, which will provide Member States timely with the valuable information they need to step up the fight against VAT fraud. E-invoicing will furthermore accelerate business transformation in the digital age by streamlining operations, ensuring compliance and security, enabling data-driven decision-making, and supporting scalability for future growth and innovation.
- Moreover, platform economy operators in the passenger transport and short-term accommodation rental sectors will become responsible for collecting and remitting VAT to tax authorities, where the underlying supplier does not charge VAT. This measure will contribute to a better level playing field between online and traditional services and will make life easier for the underlying hosts and drivers, who will not be liable for the VAT.
- Finally, this initiative will further reduce the need for multiple VAT registrations in different Member States, expanding the already existing ‘VAT One Stop Shop' model for shopping-commerce companies.
Next steps
EU Finance Ministers are expected to adopt the proposal following a re-consultation with the European Parliament.
Background
VAT is one of the most important revenue streams for Member State authorities. However, according to the latest VAT GAP Report 2023, Member States lost around €61 billion in VAT revenues in 2021. To address these losses and respond to the increasing digitisation of the economy, in December 2022 the Commission proposed to modernise VAT obligations by promoting the digital transition. This legislative package was announced in the 2020 Action Plan for fair and simple taxation supporting the recovery strategy.
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