The ECOFIN meeting held on 21 June 2024 concluded without the EU member states reaching political agreement on the ViDA (VAT in the Digital Age) proposals due to Estonia’s continued objections to the measures on the platform economy, specifically the deemed supplier rules, which it wants to make voluntary (as was the case after the 14 May ECOFIN meeting). As unanimous consent on the proposals is required, no action was taken. Another revised text of the ViDA proposals was made available but Estonia still refused to sign on. As a result, it will be up to the Hungarian presidency of the council, which began on 1 July 2024, to try to close the gap and come up with a compromise agreement that all 27 EU member states can get behind.
The European Commission first put forward its proposed ViDA package in 2022 (for prior coverage, see the article in the January 2023 issue of Indirect Tax News). The main objectives of ViDA are to modernise and adapt the EU VAT system to the realities of the digital economy, close the VAT gap, ensure VAT compliance and prevent tax fraud. Various digital tools and protocols will help to streamline compliance, minimise errors and improve transparency.
ViDA consists of three pillars:
ViDA will apply to all businesses that supply goods or services to EU customers, regardless of whether the business is established in an EU member state. ViDA initially was scheduled to become effective from 2024 and 2028, but this has been postponed with some parts of the proposal entering into application up to 2035.
Despite the inability of the EU ministers to reach unanimous agreement on ViDA, businesses still need to prepare for its eventual adoption. For one thing, a number of member states are already proceeding with the introduction of e-invoicing. Now is the time to become familiar with the ViDA (as well as any domestic) proposals, start reviewing existing internal processes and software and make any necessary adaptations or upgrades to ensure the business will be fully prepared once ViDA is in effect. A seamless transition to digital invoicing, reporting and registration will pay off in the form of streamlined processes and likely reduced cost and administrative burdens and will help set up the business for compliance with new obligations under ViDA.
E-invoicing
Starting on 1 July 2030, e-invoicing will be the default system for the issuance of invoices, although member states will be permitted to allow other types of invoices (e.g., PDFs, paper invoices) for domestic supplies.
E-invoices will have to comply with the European standard set out in Commission Implementing Decision 2017/1870 (on e-invoicing) and the list of its syntaxes pursuant to Directive 2014/55/EU (on e-invoicing in public procurement). The standard format is a structured electronic format that allows for automated and electronic processing. Hybrid invoices combining data embedded in a structured format and data embedded in an unstructured human-readable format also will be allowed. These e-invoices will not be subject to acceptance by the recipient in transactions subject to the cross-border DRR (see below). EU member states will be able to make holding an e-invoice issued in compliance with the standard a substantive condition to be entitled to deduct or reclaim VAT.
The deadline for issuing an invoice will be 10 days following the chargeable event (and 10 days following the receipt of the payment where payment is made on account). The original proposal set the deadline at two working days.
Unlike the original proposal, the possibility to issue summary invoices will not be abolished. It will be possible to issue summary invoices that cover supplies chargeable in the same calendar month provided the invoice is issued within 10 days following the end of the relevant calendar month. Member states will have the option to exclude the ability to issue summary invoices in fraud-sensitive sectors. If batches containing several e-invoices are sent or made available to the same recipient, the details common to all of the invoices will be able to be mentioned only once if all information is accessible for each invoice.
In addition to the existing invoice requirements, two new requirements are added. Invoices should contain:
DRR on cross-border transactions
Mandatory digital reporting will apply to cross-border transactions that cover:
In principle, both the supplier and the customer will have to report a transaction. A customer will have to report the information no later than five days after the invoice is received. It is possible, however, that the invoicing and reporting measures adopted by the member state offer sufficient guarantees that the supplier will provide the information to the tax administration when an invoice is issued. In that case, member states can waive the DRR for the recipient but should notify the Commission (which will inform the other EU member states).
The information will have to be submitted to the member state that issued the VAT identification number used for the transaction either by the taxable person or a third party. Member states will have to provide for the electronic means of submitting information in the e-invoice. The data collected by the member states will be transmitted to a central electronic VAT information exchange system (central VIES) within one day and stored for 10 years and will be automatically cross-checked and aggregated. The information in the central VIES can only be used to monitor the correct application of VAT and combat VAT fraud. It will be linked to the Transaction Network Analysis system, the central electronic system of payment information (CESOP) and national electronic systems.
Providing accurate data under the digital reporting scheme is a substantive requirement for applying the exemption (zero rate) for intra-Community supplies as is currently the case with the recapitulative statement.
Domestic digital reporting
EU member states are not obligated to implement a DRR for domestic transactions but if they choose to do so, the rules should be in alignment with the cross-border DRR. Member states that have such a system in place on 1 January 2024 or that have been authorised to implement such a system will need to adapt it to the system for cross-border transactions by 2035.
Member states may allow for the transmission of data from e-invoices using other data formats provided they are compatible with the European standard on e-invoicing.
Recapitulative statements and other obligations
The obligation to issue recapitulative statements (i.e., statements prepared by taxable persons in the EU to report their cross-border sales to the local tax administration) will be eliminated as these statements will be replaced by the DRR for cross-border transactions.
The proposal consists of two parts: the introduction of a deeming provision and a new place of supply rule for facilitation services. The rules aim to tackle the challenges in applying the VAT rules and level the playing field between small businesses and other traditional businesses. This will be achieved by making platforms responsible for collecting and remitting VAT due in situations where the underlying supplier is not VAT-registered or uses a special scheme. Platforms also will be required to collect and retain information relating to short-term accommodation rentals and passenger transport for which they are not responsible for VAT.
If adopted, the rules will become effective on 1 July 2027.
Deemed supplier rule
Starting on 1 July 2027, a platform that facilitates the supply of short-term accommodation and/or passenger transport by road via an electronic interface will be considered a “deemed supplier, i.e., the platform will be considered to have purchased and subsequently supplied the underlying services, making it the party responsible for the payment of VAT on the supply to the customer.
A rental will be considered “short term” if it involves an uninterrupted stay of up to 30 days by the same individual (reduced from 45 days in the original proposal). The member states will set the criteria, conditions and limitations for the taxation of the short-term accommodation rentals and notify the VAT Committee before the effective date of 1 July 2027. In the case of road transport, the deeming rule will not apply where a platform only provides the means by which the cost of passenger transport services can be shared between the user and the transport provider.
Platforms will only fall within the scope of the deeming provision if they facilitate the underlying supply, which means that they should enable the connection between a customer and a supplier that results in a supply of services through the platform. Platforms that fulfil certain conditions will not be considered to facilitate a certain supply. Payment service providers, businesses that only provide listings or advertising or redirect or transfer customers to other electronic interfaces also will fall outside the scope of the deeming provision.
Under the deeming provision, the supplier’s supply to the platform will be exempt from VAT without a right to deduct VAT. The subsequent supply to the customer will be subject to VAT unless an exemption applies in the member state where VAT is due, but an exempt supply will not affect the platform’s right to a VAT deduction.
The deeming provision will not apply if the underlying supplier provides the platform with its VAT registration number in the member state where VAT is due or an OSS registration number if it uses the OSS to report the VAT on the supply. Member states may require the platform to validate the VAT registration number, which will only have to be provided once (unless there is a change in activity). The underlying supplier will have to declare to the platform that it will charge any VAT due on the supply. Member states will have the option to exclude from the scope of the deeming provision supplies made within their territory under the special scheme for small and medium-size enterprises (SMEs), with the result that such supplies would be exempt.
Platforms under the deeming provision will not be able to apply the tour operator margin scheme and travel agents under the tour operator margin scheme are not included in the deemed supplier rule.
If a platform discovers that it is not within the scope of the deeming provision based on false information provided by the supplier, the platform will not be liable for VAT if it can prove that it did not and could not reasonably have known the information was incorrect.
Place of supply of facilitation services
Regardless of whether the deeming provision applies, a platform will be considered to provide facilitation services for VAT purposes if either the supplier or the customer on the platform is required to pay the platform for its services.
In the case of B2B services, the place of supply will be the place where the recipient of the services is established. VAT will be reverse charged to the recipient if the service provider is not established in the member state where VAT is due. For B2C services, however, it is unclear whether the services will qualify as an intermediary or electronically supplied service. A special place of supply rule is proposed for B2C facilitation services, which will be subject to VAT at the place where the underlying supply is made.
Recordkeeping
For transactions for which the platform is not a deemed supplier, the platform will be required to keep records of the underlying supplies that it facilitated. These records will have to be made available electronically upon request and be retained for 10 years from the end of the year in which the transaction was carried out. Member states will also be able to request that these records be provided on a regular and systematic basis until automated access to these records is available. It should be noted that recordkeeping provisions for platforms have been in effect since 1 July 2021 for B2C supplies of goods and services that are subject to VAT in the EU. The proposed provision therefore only extends this obligation to B2B supplies.
The general EU VAT rules previously required taxpayers to register for VAT in each member state in which they made taxable supplies and were liable to collect VAT. The OSS, introduced in 2015 for providers and/or digital platforms that supply B2C digital services, allows taxpayers to register in a single member state and declare all VAT in the EU in a single EU return. A further expansion of the OSS in 2021 covers all cross-border supplies of services to private consumers in the EU, as well as all intra-Community distance sales of goods.
The single VAT registration proposal in the ViDA has three components:
As noted above, under the OSS, businesses are allowed to file a single VAT return and make a single VAT payment for VAT due in all EU member states. The member state where the business is registered for the OSS will forward the relevant part of the VAT return and payment to the member state where VAT is due. The OSS currently covers EU distance sales and B2C services and, for platforms that act as deemed suppliers (see below), the scheme covers domestic B2C supplies within the EU.
The revised ViDA text makes it clear that the OSS will be extended to cover other domestic supplies of goods, supplies with installation or assembly, supplies made on board EU passenger transport, and supplies of electricity, gas, heat and cooling. The OSS applies only if the supplier is not established in the member state where the supplies are made.
These measures are slated to take effect on 1 July 2027.
Extension of the mandatory reverse charge rule
EU member states are required to implement a reverse charge rule for certain transactions, but a reverse charge is optional for other transactions, such as where foreign suppliers are involved. Where the reverse charge applies, the recipient rather than the supplier reports the VAT due, and to the extent the recipient has a right to deduct VAT, it will do so in the same VAT return. If the recipient has a full right to deduct VAT, this will on balance result in a nil VAT payment.
The revised ViDA proposal will extend the scope of the mandatory reverse charge to apply to all B2B supplies of goods and services where the supplier is not established in the EU member state where VAT is due, but the recipient is registered for VAT purposes in that member state. The supplier will be required to include the supply for which the VAT is reverse charged in its recapitulative statement until the digital reporting obligations kick in, at which time these supplies will fall within the scope of the DRR. Supplies of goods under the margin scheme for second-hand goods will be excluded from the reverse charge.
Member states will have the option to make the recipient liable for VAT on a transaction if it is not VAT-registered in the EU member state where VAT is due.
The changes to the reverse charge will take effect on 1 July 2027.
Introduction of special scheme for transfers of own goods
If a business transfers its own goods from one EU member state to another, it must report an intra-Community supply and an intra-Community acquisition in the member state of departure, which can give rise to a requirement for multiple VAT registrations.
As under the original ViDA proposal, the revised ViDA text includes the introduction of a new scheme to simplify the compliance requirements for transfers of own goods. The scheme will be available to both EU and non-EU businesses and monthly VAT returns will have to be filed, in which transfers will be reported. Transfers made under the scheme will not have to be reported in the recapitulative statement (nor will they subsequently be included in DRR). The intra-Community acquisition in the member state of arrival of the goods is exempt from VAT. Unlike in the original proposal, transfers of capital goods will be able to be included in the scheme but goods for which there is no full right to a VAT deduction in the member state of arrival are not covered.
Also deviating from the original proposal, if a platform transfers goods on behalf of a business operating on the platform, the business—and not the platform—will be required to report the transfer of own goods and it can use the special scheme. The platform will be required to inform the business whose goods are transferred if the transfer is not made at the specific request of the latter. The platform should inform the business at the latest upon transport or dispatch of the goods.
These measures also will take effect on 1 July 2027.
The call-off-stock arrangement will be abolished because of the new special scheme. The last transfer of own goods under the call-off-stock scheme can be made on 30 June 2027 and the goods will have to be supplied to the customer by 30 June 2028.
No extension of the deemed supplier rule for platforms
As explained above, under the deemed supplier rule, a platform will be deemed to receive and supply goods for VAT purposes for sales of goods made via the platform. The deemed supplier rule currently covers B2C supplies of goods originating from outside the EU (with an intrinsic value of no more than EUR 150) and EU distance sales, and domestic B2C supplies of goods if the supplier is established outside the EU.
The original proposal would have extended the deeming provision to all supplies made within the EU, but this proposal has been abandoned. The European Commission also proposed the mandatory application of the I-OSS for platforms that are deemed suppliers; this has been dropped under ViDA and will be discussed in the context of customs reform.
The changes will take effect as of 1 January 2026
The deemed supplier rule will be evaluated by the European Commission, with a report presented by 1 July 2027. Following the report, the rule may be extended.
Madeleine Merkx
BDO in Netherlands
The European Commission first put forward its proposed ViDA package in 2022 (for prior coverage, see the article in the January 2023 issue of Indirect Tax News). The main objectives of ViDA are to modernise and adapt the EU VAT system to the realities of the digital economy, close the VAT gap, ensure VAT compliance and prevent tax fraud. Various digital tools and protocols will help to streamline compliance, minimise errors and improve transparency.
ViDA consists of three pillars:
- Introduction of common and standardised digital reporting and e-invoicing requirements for intra-Community transactions;
- Updated VAT rules for the platform economy; and
- Expansion of the scope of single VAT registration.
ViDA will apply to all businesses that supply goods or services to EU customers, regardless of whether the business is established in an EU member state. ViDA initially was scheduled to become effective from 2024 and 2028, but this has been postponed with some parts of the proposal entering into application up to 2035.
Despite the inability of the EU ministers to reach unanimous agreement on ViDA, businesses still need to prepare for its eventual adoption. For one thing, a number of member states are already proceeding with the introduction of e-invoicing. Now is the time to become familiar with the ViDA (as well as any domestic) proposals, start reviewing existing internal processes and software and make any necessary adaptations or upgrades to ensure the business will be fully prepared once ViDA is in effect. A seamless transition to digital invoicing, reporting and registration will pay off in the form of streamlined processes and likely reduced cost and administrative burdens and will help set up the business for compliance with new obligations under ViDA.
E-invoicing and digital reporting
Pillar I of the ViDA proposals sets out plans to introduce an EU-wide, transaction-based digital reporting requirement (DRR) that will provide tax administrations with relevant information needed to tackle VAT fraud. The proposed rules include mandatory e-invoicing and digital reporting for intra-EU transactions and an optional DRR for domestic supplies. The objective of these rules is to reduce compliance barriers, enhance tax collection on cross-border transactions and eliminate the fragmentation resulting from EU member states introducing their own digital reporting systems.E-invoicing
Starting on 1 July 2030, e-invoicing will be the default system for the issuance of invoices, although member states will be permitted to allow other types of invoices (e.g., PDFs, paper invoices) for domestic supplies.
E-invoices will have to comply with the European standard set out in Commission Implementing Decision 2017/1870 (on e-invoicing) and the list of its syntaxes pursuant to Directive 2014/55/EU (on e-invoicing in public procurement). The standard format is a structured electronic format that allows for automated and electronic processing. Hybrid invoices combining data embedded in a structured format and data embedded in an unstructured human-readable format also will be allowed. These e-invoices will not be subject to acceptance by the recipient in transactions subject to the cross-border DRR (see below). EU member states will be able to make holding an e-invoice issued in compliance with the standard a substantive condition to be entitled to deduct or reclaim VAT.
The deadline for issuing an invoice will be 10 days following the chargeable event (and 10 days following the receipt of the payment where payment is made on account). The original proposal set the deadline at two working days.
Unlike the original proposal, the possibility to issue summary invoices will not be abolished. It will be possible to issue summary invoices that cover supplies chargeable in the same calendar month provided the invoice is issued within 10 days following the end of the relevant calendar month. Member states will have the option to exclude the ability to issue summary invoices in fraud-sensitive sectors. If batches containing several e-invoices are sent or made available to the same recipient, the details common to all of the invoices will be able to be mentioned only once if all information is accessible for each invoice.
In addition to the existing invoice requirements, two new requirements are added. Invoices should contain:
- In the case of corrective invoices, the sequential number that identifies the corrected invoice; and
- The bank account number or virtual account of the supplier into which the recipient can pay the invoice (this may include multiple accounts).
DRR on cross-border transactions
Mandatory digital reporting will apply to cross-border transactions that cover:
- Intra-Community supplies;
- Transfer of own goods (unless the special scheme is used); and
- Services on which VAT is reverse charged (unless the service is exempt from VAT).
In principle, both the supplier and the customer will have to report a transaction. A customer will have to report the information no later than five days after the invoice is received. It is possible, however, that the invoicing and reporting measures adopted by the member state offer sufficient guarantees that the supplier will provide the information to the tax administration when an invoice is issued. In that case, member states can waive the DRR for the recipient but should notify the Commission (which will inform the other EU member states).
The information will have to be submitted to the member state that issued the VAT identification number used for the transaction either by the taxable person or a third party. Member states will have to provide for the electronic means of submitting information in the e-invoice. The data collected by the member states will be transmitted to a central electronic VAT information exchange system (central VIES) within one day and stored for 10 years and will be automatically cross-checked and aggregated. The information in the central VIES can only be used to monitor the correct application of VAT and combat VAT fraud. It will be linked to the Transaction Network Analysis system, the central electronic system of payment information (CESOP) and national electronic systems.
Providing accurate data under the digital reporting scheme is a substantive requirement for applying the exemption (zero rate) for intra-Community supplies as is currently the case with the recapitulative statement.
Domestic digital reporting
EU member states are not obligated to implement a DRR for domestic transactions but if they choose to do so, the rules should be in alignment with the cross-border DRR. Member states that have such a system in place on 1 January 2024 or that have been authorised to implement such a system will need to adapt it to the system for cross-border transactions by 2035.
Member states may allow for the transmission of data from e-invoices using other data formats provided they are compatible with the European standard on e-invoicing.
Recapitulative statements and other obligations
The obligation to issue recapitulative statements (i.e., statements prepared by taxable persons in the EU to report their cross-border sales to the local tax administration) will be eliminated as these statements will be replaced by the DRR for cross-border transactions.
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BDO Insights
The European Commission has made a choice for e-invoicing and near real time reporting of intra-Community supplies, while harmonizing the rules for member states that wish to apply a similar system for domestic supplies. From a business perspective, harmonisation is welcome because of the existing fragmentation of rules, but the DRR will place an additional burden on businesses. The extension of the time to issue e-invoices—within 10 days from the date of the transaction rather than two working days—and the possibility to issue summary invoices are improvements to the original proposal. Even though cross-checks will be carried out automatically, cross-checking in and of itself will not fully prevent or combat fraud: adequate and qualified staff and resources will be needed to investigate potential mismatches and fraud cases, which will have to be structured carefully to avoid infringing the fundamental rights of businesses. |
Platform economy
The second pillar of ViDA deals with the gig and sharing economy, in particular, platforms operating in the short-term accommodation and passenger transport sectors.The proposal consists of two parts: the introduction of a deeming provision and a new place of supply rule for facilitation services. The rules aim to tackle the challenges in applying the VAT rules and level the playing field between small businesses and other traditional businesses. This will be achieved by making platforms responsible for collecting and remitting VAT due in situations where the underlying supplier is not VAT-registered or uses a special scheme. Platforms also will be required to collect and retain information relating to short-term accommodation rentals and passenger transport for which they are not responsible for VAT.
If adopted, the rules will become effective on 1 July 2027.
Deemed supplier rule
Starting on 1 July 2027, a platform that facilitates the supply of short-term accommodation and/or passenger transport by road via an electronic interface will be considered a “deemed supplier, i.e., the platform will be considered to have purchased and subsequently supplied the underlying services, making it the party responsible for the payment of VAT on the supply to the customer.
A rental will be considered “short term” if it involves an uninterrupted stay of up to 30 days by the same individual (reduced from 45 days in the original proposal). The member states will set the criteria, conditions and limitations for the taxation of the short-term accommodation rentals and notify the VAT Committee before the effective date of 1 July 2027. In the case of road transport, the deeming rule will not apply where a platform only provides the means by which the cost of passenger transport services can be shared between the user and the transport provider.
Platforms will only fall within the scope of the deeming provision if they facilitate the underlying supply, which means that they should enable the connection between a customer and a supplier that results in a supply of services through the platform. Platforms that fulfil certain conditions will not be considered to facilitate a certain supply. Payment service providers, businesses that only provide listings or advertising or redirect or transfer customers to other electronic interfaces also will fall outside the scope of the deeming provision.
Under the deeming provision, the supplier’s supply to the platform will be exempt from VAT without a right to deduct VAT. The subsequent supply to the customer will be subject to VAT unless an exemption applies in the member state where VAT is due, but an exempt supply will not affect the platform’s right to a VAT deduction.
The deeming provision will not apply if the underlying supplier provides the platform with its VAT registration number in the member state where VAT is due or an OSS registration number if it uses the OSS to report the VAT on the supply. Member states may require the platform to validate the VAT registration number, which will only have to be provided once (unless there is a change in activity). The underlying supplier will have to declare to the platform that it will charge any VAT due on the supply. Member states will have the option to exclude from the scope of the deeming provision supplies made within their territory under the special scheme for small and medium-size enterprises (SMEs), with the result that such supplies would be exempt.
Platforms under the deeming provision will not be able to apply the tour operator margin scheme and travel agents under the tour operator margin scheme are not included in the deemed supplier rule.
If a platform discovers that it is not within the scope of the deeming provision based on false information provided by the supplier, the platform will not be liable for VAT if it can prove that it did not and could not reasonably have known the information was incorrect.
Place of supply of facilitation services
Regardless of whether the deeming provision applies, a platform will be considered to provide facilitation services for VAT purposes if either the supplier or the customer on the platform is required to pay the platform for its services.
In the case of B2B services, the place of supply will be the place where the recipient of the services is established. VAT will be reverse charged to the recipient if the service provider is not established in the member state where VAT is due. For B2C services, however, it is unclear whether the services will qualify as an intermediary or electronically supplied service. A special place of supply rule is proposed for B2C facilitation services, which will be subject to VAT at the place where the underlying supply is made.
Recordkeeping
For transactions for which the platform is not a deemed supplier, the platform will be required to keep records of the underlying supplies that it facilitated. These records will have to be made available electronically upon request and be retained for 10 years from the end of the year in which the transaction was carried out. Member states will also be able to request that these records be provided on a regular and systematic basis until automated access to these records is available. It should be noted that recordkeeping provisions for platforms have been in effect since 1 July 2021 for B2C supplies of goods and services that are subject to VAT in the EU. The proposed provision therefore only extends this obligation to B2B supplies.
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BDO Insights
Even though the revised proposal maintains the essence of the original rules proposed by the European Commission, the various options given to member states to set conditions or limitations or to exempt SMEs using the special scheme for SMEs from the deeming provision make the new proposed rules complex. For now, the deeming provision will be limited to two sectors, but it is likely to be extended to other sectors in the future. The European Commission will release an evaluation of the deeming provision by 1 July 2032. The European Commission will release an evaluation of the deeming provision by 1 July 2032. |
Single VAT registration
The third pillar of the ViDA proposals aims to further reduce the need for multiple VAT registrations in member states in which a business is not established and thus alleviate the administrative burden on businesses. Under this proposal, a business will only have to register in its member state of establishment.The general EU VAT rules previously required taxpayers to register for VAT in each member state in which they made taxable supplies and were liable to collect VAT. The OSS, introduced in 2015 for providers and/or digital platforms that supply B2C digital services, allows taxpayers to register in a single member state and declare all VAT in the EU in a single EU return. A further expansion of the OSS in 2021 covers all cross-border supplies of services to private consumers in the EU, as well as all intra-Community distance sales of goods.
The single VAT registration proposal in the ViDA has three components:
- Extension of the OSS;
- Extension of the mandatory reverse charge rule; and
- Introduction of a special scheme for the transfer of own goods.
As noted above, under the OSS, businesses are allowed to file a single VAT return and make a single VAT payment for VAT due in all EU member states. The member state where the business is registered for the OSS will forward the relevant part of the VAT return and payment to the member state where VAT is due. The OSS currently covers EU distance sales and B2C services and, for platforms that act as deemed suppliers (see below), the scheme covers domestic B2C supplies within the EU.
The revised ViDA text makes it clear that the OSS will be extended to cover other domestic supplies of goods, supplies with installation or assembly, supplies made on board EU passenger transport, and supplies of electricity, gas, heat and cooling. The OSS applies only if the supplier is not established in the member state where the supplies are made.
These measures are slated to take effect on 1 July 2027.
Extension of the mandatory reverse charge rule
EU member states are required to implement a reverse charge rule for certain transactions, but a reverse charge is optional for other transactions, such as where foreign suppliers are involved. Where the reverse charge applies, the recipient rather than the supplier reports the VAT due, and to the extent the recipient has a right to deduct VAT, it will do so in the same VAT return. If the recipient has a full right to deduct VAT, this will on balance result in a nil VAT payment.
The revised ViDA proposal will extend the scope of the mandatory reverse charge to apply to all B2B supplies of goods and services where the supplier is not established in the EU member state where VAT is due, but the recipient is registered for VAT purposes in that member state. The supplier will be required to include the supply for which the VAT is reverse charged in its recapitulative statement until the digital reporting obligations kick in, at which time these supplies will fall within the scope of the DRR. Supplies of goods under the margin scheme for second-hand goods will be excluded from the reverse charge.
Member states will have the option to make the recipient liable for VAT on a transaction if it is not VAT-registered in the EU member state where VAT is due.
The changes to the reverse charge will take effect on 1 July 2027.
Introduction of special scheme for transfers of own goods
If a business transfers its own goods from one EU member state to another, it must report an intra-Community supply and an intra-Community acquisition in the member state of departure, which can give rise to a requirement for multiple VAT registrations.
As under the original ViDA proposal, the revised ViDA text includes the introduction of a new scheme to simplify the compliance requirements for transfers of own goods. The scheme will be available to both EU and non-EU businesses and monthly VAT returns will have to be filed, in which transfers will be reported. Transfers made under the scheme will not have to be reported in the recapitulative statement (nor will they subsequently be included in DRR). The intra-Community acquisition in the member state of arrival of the goods is exempt from VAT. Unlike in the original proposal, transfers of capital goods will be able to be included in the scheme but goods for which there is no full right to a VAT deduction in the member state of arrival are not covered.
Also deviating from the original proposal, if a platform transfers goods on behalf of a business operating on the platform, the business—and not the platform—will be required to report the transfer of own goods and it can use the special scheme. The platform will be required to inform the business whose goods are transferred if the transfer is not made at the specific request of the latter. The platform should inform the business at the latest upon transport or dispatch of the goods.
These measures also will take effect on 1 July 2027.
The call-off-stock arrangement will be abolished because of the new special scheme. The last transfer of own goods under the call-off-stock scheme can be made on 30 June 2027 and the goods will have to be supplied to the customer by 30 June 2028.
No extension of the deemed supplier rule for platforms
As explained above, under the deemed supplier rule, a platform will be deemed to receive and supply goods for VAT purposes for sales of goods made via the platform. The deemed supplier rule currently covers B2C supplies of goods originating from outside the EU (with an intrinsic value of no more than EUR 150) and EU distance sales, and domestic B2C supplies of goods if the supplier is established outside the EU.
The original proposal would have extended the deeming provision to all supplies made within the EU, but this proposal has been abandoned. The European Commission also proposed the mandatory application of the I-OSS for platforms that are deemed suppliers; this has been dropped under ViDA and will be discussed in the context of customs reform.
The changes will take effect as of 1 January 2026
The deemed supplier rule will be evaluated by the European Commission, with a report presented by 1 July 2027. Following the report, the rule may be extended.
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BDO Insights
The extensions of the OSS and the reverse charge rule will be welcomed by businesses that can avoid multiple VAT registrations and the related administrative and cost burdens. It should be noted that supplies covered by the new reverse charge rule will also be covered by the DRR starting on 1 July 2030. We are pleased to see that the EU member states have taken the comments by both practitioners and academia into account and limited the extension of the deeming provision. It is surprising, however, that the obligation of platforms to report a transfer of own goods they make on behalf of suppliers operating on the platform has been abandoned. In practice, this would be helpful as it is the platform and not the underlying supplier transferring the goods in that situation. It is unfortunate that transfers of own goods will still have to be declared, but the OSS does make the process easier. Businesses should ensure they are in compliance with the rules to avoid penalties or exclusion from the scheme. |
Ecommerce changes
Updated VAT rules on cross-border B2C e-commerce have been in place since 1 July 2021, and according to the European Commission, these measures have been largely successful. However, there is scope for improvement and ViDA contains proposed changes that will become effective on various dates starting in 2025, including the following:- Clarification of the simplification applying to small businesses: The EU distance selling rules do not apply to small businesses established in one EU member state if the turnover of the business does not exceed EUR 10,000 in the current and preceding year. Distance selling rules require businesses to charge VAT in the EU member state of arrival of the goods for B2C supplies within the EU (unless the monetary threshold is met). The ViDA proposals clarify that only EU distance sales of goods supplied from the member state where the supplier is established are covered by the simplification and are to be included in the threshold. These rules will become effective on 1 January 2026.
- Extension of the OSS to cover all B2C supplies of services: The OSS allows businesses to file a single VAT return in a single member state, with the return and payment forwarded to the member state where VAT is due. Currently, B2C services supplied to consumers living outside the EU, but which are subject to VAT in an EU member state, cannot be reported under the OSS. This will change as from 1 January 2026.
- Corrections under the OSS: Corrections to a VAT return currently must be made in the next VAT return. Under the ViDA proposals, starting from 1 July 2027, the original VAT return will be able to be corrected until the deadline for filing the OSS return expires.
- Tax point: The tax point will be harmonised where transactions are reported under the OSS. Starting on 1 January 2026, member states will no longer be allowed to deviate from the rules that determine the point at which VAT becomes due for supplies reported in the OSS.
- Proper use of the I-OSS: Changes will be made to ensure the proper use of the I-OSS (Import One Stop Shop) and prevent fraud. The I-OSS may be used by businesses that supply goods originating from outside the EU (and that will be imported into the EU) to EU consumers. The I-OSS allows businesses to declare and remit VAT on all such B2C distance sales of imported goods throughout the EU in a single VAT return, rather than in each country where they make a sale. When the I-OSS is used, the supply will be subject to VAT in the member state of arrival (i.e., the consumer’s country), with an exemption from VAT on import. As is the case under the OSS, the VAT due on the supply under the I-OSS can be reported in a single VAT return and the payment of VAT will be made to a single member state. Because the exemption for VAT on imports is sensitive to potential fraud, several measures are proposed under ViDA:
- Linking the consignment number with the I-OSS number provided to the business using the I-OSS. This change will apply with immediate effect from the date the directive enters into force.
- As from 1 July 2027, customs authorities will be granted access to information about an IOSS-registered trader, which should improve risk management and control capabilities of the authorities. Customs authorities will have access to the central VIES starting on 1 July 2030.
- To enhance controls, the total value of goods imported under the I-OSS scheme per I-OSS identification number per the member state of consumption will be exchanged between member states starting on 1 January 2025.
- Obtaining data from platforms: Member state requests for information from platforms should go through the member state of identification. Platforms are required to keep records about sellers and their transactions, records that should be provided at the request of a member state. Based on the ViDA proposals, the member state of identification will coordinate obtaining the records. However, unless and until automatic access to records is available, a member state can obtain the records directly from the taxable person on a regular and systematic basis. The European Commission will evaluate the possibility of automated access to data. Member states must accept the use of a standard form used by platforms to provide the information. In addition to the information that already must be retained, platforms will need to record information about the seller when the deeming provision applies and record the place where the transport of goods starts in situations where the deeming provision does not apply to supplies of goods. These rules will apply as from 1 July 2027.
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BDO Insights
The changes proposed to the e-commerce rules under ViDA are welcome because they clarify issues and address the substantial risks of fraud with the I-OSS. It is important for businesses, including digital platforms, to begin now to prepare for the new measures under ViDA. |
Madeleine Merkx
BDO in Netherlands