EU has finally reached agreement on VAT in the digital age (ViDA) proposal

On 5 November 2024, the Economic and Financial Affairs Council (ECOFIN) of the European Union (EU) met to discuss changes to the EU Value Added Tax (VAT) rules as part of the VAT in the digital age (ViDA) initiative. ECOFIN adopted all three pillars of the proposal, following the adoption of compromises to the original proposals made to satisfy all 27 Member States.

Background

The ViDA initiative is a package of fundamental changes to the common VAT rules across the EU with three pillars and gradual implementation dates. It aims to ensure VAT compliance, prevent tax fraud and elevate the VAT regulations to the next level, fitting the needs of the digital age. Now that the EU Member States' Finance Ministers have reached a political agreement, further legislative steps can be taken to implement the package.

The three ViDA pillars may be summarized as:

1. Digital Reporting Requirements (DRR) — Introducing common standardized Digital Reporting Requirements and e-invoicing for intra-community transactions (i.e., between Member States)
2. Platform economy — Addressing the challenges of the platform economy for short-term rental of accommodation and passenger transport services by enhancing the role of digital platforms in collecting VAT
3. Single VAT registration — Reducing VAT registration requirements in the EU by expanding the scope of the One-Stop Shop (OSS) for imports and the reverse charge for business-to-business (B2B) transactions

Initially, it was intended that the new rules would be implemented generally in 2025 and the DRR rules would apply as of 2028. With a few exceptions, the implementation dates are postponed, but measures are expected to be adopted gradually in the period 2027 to 2035. All dates are to be confirmed as well as any grandfathering of current e-invoicing systems for individual Member States.

Businesses operating in the EU now need to assess how their transactions, invoicing and reporting processes are affected by the ViDA package and how they may set up their systems to ensure that their future VAT reporting requirements are met.

In addition, despite the delay to the EU DRR rules, many Member States and other jurisdictions around the world have already introduced domestic e-invoicing and e-reporting rules or are in the process of introducing them sooner than 2030. Therefore, businesses should also consider undertaking a readiness assessment for their ability to comply with those rules, if they have not already done so.

Next steps

On 8 December 2022, the EU Commission presented the "VAT in the digital age" package, which consists of three proposals:

1. A proposal for a Council directive amending directive 2006/112/EC as regards VAT rules for the digital age
2. A proposal for a Council regulation amending regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age
3. A proposal for a Council implementing regulation amending implementing regulation (EU) No 282/2011 as regards information requirements for certain VAT schemes

The directive and the regulation are subject to a special legislative procedure. Within the Council, unanimity is required for all three legal acts. The European Parliament was consulted and delivered its opinion on 22 November 2023. However, due to substantial changes made by the Council in the directive, the European Parliament will be consulted again on the agreed text.

The text will then need to be formally adopted by the Council before being published in the EU's Official Journal and entering into force.

Details of the amended provisions are set out in these supporting documents

• Draft Council Directive as regards VAT rules for the digital age - General approach (pdf)
• Draft Council Regulation as regards the VAT administrative cooperation arrangements needed for the digital age - Political agreement (pdf)
• Draft Council Implementing Regulation as regards information requirements for certain VAT schemes - Political agreement (pdf)
• Statements