VAT in the Digital Age
What's happening now—and what's coming—in the EU

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On December 8, the European Commission proposed the VAT in the Digital Age (ViDA) package, arguably the most revolutionary reform concerning the value-added tax (VAT) in the European Union in recent years.

The ViDA package includes a proposal to amend the European Union’s Council Directive 2006/112/EC, Regulation 904/2010, and Implementing Regulation 282/2011. The proposal is expected to reduce the revenue deficit by up to four percentage points compared to the 2019 level and to lead to an increase in VAT revenue of between €172 and €214 billion from 2023 to 2032.

The collection deficit in 2020 was estimated at €93 billion, accounting for 9.1 percent of the €1.02 trillion that should have been collected in the European Union. Although this is lower than the 11.4 percent collection deficit of 2017, it still represents a significant figure that needs to be reduced. Some member states, Spain and Italy for example, have taken measures to cut this deficit.1 However, these measures have led to fragmentation in VAT reporting mechanisms within the European Union, substantially increasing the costs of complying with VAT obligations.

The ViDA package comprises a series of far-reaching measures aimed at modernizing the EU VAT system to align it with the contemporary digital business landscape. Concurrently, the European Commission aims to enhance the VAT system’s effectiveness in combating fraud and the “VAT gap” by introducing digital invoicing and real-time reporting similar to the Spanish Immediate Supply of Information (SII).2 This move aims to end the proliferation of diverse real-time reporting models that have emerged across the European Union in recent years. The package has three pillars:

  • to modernize VAT declaration obligations and introduce digital notification requirements, which will standardize the information that taxpayers must submit, in electronic format, to the tax authorities on each operation and, in particular, at the intra-European Union level;
  • to create a new VAT regime for platforms that operate in the short-term accommodation rental (less than forty-five days) and passenger transport sectors so they are “deemed suppliers” for VAT purposes and collect VAT on the operations they facilitate; and
  • to improve and extend the existing one-stop-shop and taxable-reversal systems to minimize cases where a taxable person is required to register in another member state.

The twenty-seven EU member states have not yet approved the package, but it is estimated that, with compromises, they eventually will. As of this writing, it remains uncertain whether approval will occur during the Belgian presidency (which began on January 1). In any case, under the current wording, its effects would take place gradually between January 1, 2024, and January 1, 2028.

This article addresses the main modifications the ViDA package will introduce.

The Platform Economy

The term “platform economy,” as the European Commission defines it, refers to business models in which collaborative platforms facilitate activities to create an open market for the temporary use of goods or services, often provided by individuals. This collaborative economy involves three categories of agents:

  • service providers—individuals who share assets, resources, time, and/or skills. They can be occasional service providers (peers) or professionals acting in a professional capacity (professional service providers);
  • users—the consumers of the services provided through the platform; and
  • intermediaries—the collaborative platforms that connect service providers with users and facilitate transactions between them.

From a revenue perspective, French officials Pierre Collin and Nicolas Colin have gone so far as to say that “the digital economy is an integral part of the lives of millions of individuals, but its added value is escaping our control.”3

The 2022 EU-commissioned study, VAT in the Digital Age, volume 2: The VAT Treatment of the Platform Economy, aligns with this thesis, in that it recognizes that:

the problems related to the application of the special schemes for SMEs [small and mid-sized enterprises] operating in the platform economy are of great importance primarily due to potential violation of the equality and neutrality principles. Special schemes for SMEs typically remove the need for VAT registration or significantly simplify compliance for micro taxpayers; they usually come with a VAT exemption. This puts those micro taxpayers at an advantage, but their (very) limited size is considered not to affect the market level-playing field too negatively. However, when it comes to the platform economy, online platforms aggregate thousands, or millions, of micro suppliers. Therefore, any VAT advantage granted to transactions carried out by these suppliers risks tilting the level-playing field between traditional and platform-based business models.4

In short, simplified VAT compliance and a lower VAT burden can potentially allow smaller businesses to outperform larger businesses not exempt from VAT and lead to the growth of economic activities below the VAT threshold.

In this context, it seems that many individuals and small businesses can provide services through an online platform without accounting for VAT. Due to economies of scale and the network effect, they can compete directly with traditional VAT-registered providers. This situation, the EU study argues, creates unfair competition because, for example, short-term accommodations through a platform can cost, on average, between eight percent and seventeen percent less than the average daily rate of a regional (VAT-registered) hotel.

To remedy this situation, the EU-requested study, which became the basis for the ViDA proposal, proposes that, starting in 2025, platforms in the short-term accommodation rental sector (such as Airbnb) and passenger transport (such as Uber) must collect VAT for the operations they mediate.

To establish the responsibility of collecting VAT for operations (such as short-term accommodations) that are currently exempt in many member states or are not subject to VAT due to the provider’s status (such as not meeting the minimum threshold to be considered a business or professional for tax purposes), the study introduces the concept of a “considered supplier.” This concept assumes two services: one service from the underlying provider (exempt for VAT purposes), and the other service from the platform to customers (subject to and not exempt from VAT).

For this rule to operate, the ViDA package proposes the addition of Article 28a to the existing Council Directive 2006/112EC (the VAT directive), with a series of requirements. Article 28a would read as follows:

Notwithstanding Article 28, a taxable person who facilitates, through the use of an electronic interface such as a platform, portal, or similar means, the supply of short-term accommodation rental, as referred to in Article 135(3), or passenger transport, shall be deemed to have received and supplied those services themselves where the person providing those services is one of the following:

      • an unestablished person who is not identified for VAT purposes in a member state;
      • a nontaxable person;
      • a taxable person carrying out only supplies of goods or services in respect of which VAT is not deductible;
      • a nontaxable legal person;
      • a taxable person subject to the common flat-rate scheme for farmers; and
      • a taxable person subject to the special scheme for small enterprises.5

Article 9b of the implementing document proposes to amend the definition of “facilitate” set in Implementing Regulation 282/2011, a definition so broad that it seems almost impossible for platforms to avoid invoking Article 28a:

For the application of Article 28a of Directive 2006/112/EC, the term “facilitates” shall mean the use of an electronic interface to allow a customer and a supplier offering supplies of short-term accommodation rental or passenger transport through the electronic interface to enter into contact, which results in a supply of those services through that electronic interface.

However, a taxable person shall not be considered to facilitate a supply of short-term accommodation rental or passenger transport where all of the following conditions are met:

      • that taxable person does not set, either directly or indirectly, any of the terms and conditions under which the supply is made;
      • that taxable person is not, either directly or indirectly, involved in authorizing the charge to the customer in respect of the payments made; and
      • that taxable person is not, either directly or indirectly, involved in the provision of those services.

That same provision establishes that Article 28a will not apply to taxpayers in charge of the following activities:

      • the processing of payments in relation to the supply of short-term accommodation rental or passenger transport;
      • the listing or advertising of short-term accommodation rental or passenger transport; and
      • the redirecting or transferring of customers to other electronic interfaces where short-term accommodation rental or passenger transport services are offered for sale, without any further intervention in the supply.

In practice, if the underlying provider fails to provide the platform with a VAT identification number (VAT ID), the provision outlined in Article 28a comes into effect, as stipulated in Article 9c of the VAT Implementing Regulation 282/2011. However, this situation doesn’t imply that having a VAT ID is unnecessary. If a provider possesses one and falls under any of the categories defined in Article 28a (such as taxable individuals engaged in operations ineligible for VAT deduction or legal entities exempt from being taxable individuals, or those under the special regime for agriculture, livestock, and fishing), the VAT identification number should not be communicated to the service-providing platform.

However, this rule is inconsistent from a technical point of view, as Nevia Čičin-Šain of the University of Vienna points out in a recent blog post:

Since members of the Group of 4 can be in possession of a VAT number (e.g. in member states where SMEs are identified for VAT purposes, or if they obtained it for intra-EU acquisitions or even for domestic reverse charge), the second sentence of the proposed Article 9c IR stipulates that the members of the Group of 4 are prohibited from communicating their VAT numbers to the platform.

This prohibition seems to be in contradiction with the obligation to communicate the VAT number to the platform imposed by other rules. The current Article 55 IR requires taxable persons and non-taxable legal persons that are liable to account for VAT on the basis of Article 196 VATD (reverse charge) with respect to services received to communicate their VAT number to their service provider.[…] Hence based on this rule, a SME purchasing cross-border facilitation services from the facilitating platform would have to communicate its VAT number to the platform. In addition, DAC 7 also requires Reporting Platform Operators to collect VAT numbers from their Reportable Sellers when they provide, inter alia, rental of immovable property or rental of any mode of transport (i.e. sectors also covered by the proposed ViDA rules).6

For connecting suppliers with clients, platforms earn commissions, and their classification has always been contentious (whether as electronic or intermediary services, each having different place-of-supply rules). Article 46a of the ViDA proposal states that this type of service is now categorized as intermediation and is taxed where the underlying service is situated. This applies when the service is not provided to taxable persons.

As the European Union’s study, VAT in the Digital Age: The VAT Treatment of the Platform Economy, acknowledges:

All in all, as a result of a unified treatment of facilitation services as intermediary (both compared to the current state of affairs and to their classification as ESS), a certain amount of revenue would be shifted to countries where the real estate is located rather [than] where the owners or consumers are residing. In absolute terms, the revenue shifting is not large: EUR 209 million if the intermediary services approach is chosen and EUR 50 million under the ESS approach. This corresponds respectively to 2.9 and 0.7 percent of the VAT revenue from platform-based accommodation services.

In terms of who is going to benefit under the two approaches, opting for the intermediary service approach would benefit the touristic destinations, while the ESS would benefit the member states of origin of the tourist.7

Additionally, short-term rental services have been deemed equivalent to those offered by the hotel sector. As a result, they lose the exemption they previously enjoyed in certain states, such as France, Greece, Italy, and Spain, according to Article 135.3 of the directive.

The registration obligations outlined in Article 242a of the ViDA proposal impose significant burdens on platforms. For services not covered by the “deemed supplier” rule, the platform must maintain records related to both business-to-business (B2B) and business-to-consumer (B2C) services. On the contrary, for services covered by that provision, the standard rules for records shall apply.

To assist platforms in fulfilling these VAT obligations, the ViDA proposal offers the option of using a one-stop-shop system. This enables them to pay all VAT owed in other states in a single member state, without using the system to deduct incurred VAT amounts.

Last, it is determined that operations in which the platform where the deemed supplier rule kicks in are not encompassed by the special regime for travel agencies or TOMS. Furthermore, the provision of service by the platform to the end customer as a deemed supplier should not impact the platform’s right to deduction, as proposed in Article 172a of the amended provision of the VAT directive by ViDA.

As Merkx, Gruson, Verbaan, and Van Der Doef point out:

such a provision about the deduction right of the platform is not included in the current deeming provision of [Article 14a of the] VAT directive nor the proposed extension of it. We therefore conclude that for those provisions the supplies for which the platform is a deemed supplier can in principle be taken into account for determining the right to deduct VAT. The difference might be explained by the fact that the supplies under [that] deeming provision will likely be subject to VAT and not exempted. The platform’s own supplies will likely also be taxed. However, we believe that regardless of whether the supplies are exempt or taxed they should not influence the platform’s right to deduct because it will distort the extent to which the platform has the right to deduct VAT […]. That the turnover generated from sales for which the platform is the deemed supplier should not be taken into account when determining the extent of VAT deduction on general costs incurred. Article 172a VAT directive should—with that view in mind—be regarded as a clarification of that fact.8

A criticism that can be directed at the proposal concerning platforms is that, by not allowing the right to deduct for underlying providers, the cost of providing services may have to increase above what traditional operators pass on.

As noted in a recent article this author co-wrote with Javier Sánchez Gallardo on the topic:

It does not appear that the European Union has been excessively proactive in proposing a VAT regime for the platform economy because it has limited itself to extending what it already introduced for electronically supplied services and distance sales of goods, with slight adjustments. But while on that occasion substantial fraud was alleged by non-EU suppliers, this situation is about unfair treatment compared to the taxation applicable to hotels (not taxis) but without digging into the underlying issue, which is that in some member states specific exemptions from VAT apply. Instead of eliminating such exemptions and leaving the platforms free of obligations for the operations carried out by the providers that use them to offer their services, it has been decided to challenge them because this eases the life of the tax authorities.9

Real-Time Electronic Billing and Reporting

National Electronic Invoicing

Starting on January 1, 2024, member states have the authority to make electronic invoicing mandatory, as long as they adhere to the standards outlined in Directive 2014/55/EU of the European Parliament and Council, dated April 16, 2014, on electronic invoicing in public procurement. This directive governs electronic invoicing in transactions between companies and public administrations.

In this context, ViDA’s proposed Article 217 establishes that an “electronic invoice” is an invoice containing the information stipulated by the VAT directive. Additionally, the invoice must be issued, transmitted, and received in a structured electronic format that allows for automated and electronic processing.

This definition ensures alignment with the provisions of Directive 2014/55/EU, which defines an electronic invoice as an “invoice issued, transmitted, and received in a structured electronic format that allows for automated and electronic processing.”

Moreover, the proposed amendment to the VAT directive specifies that member states will not need to seek explicit authorization from the Council of the European Union, as is currently required (under Article 395 of the VAT directive), to implement an exemption from Articles 218 to 232 of the directive in the name of fraud prevention. This applies to the imposition of electronic invoicing, since this method of billing is fundamentally voluntary for operators. Therefore, imposing electronic invoicing, as long as doing so does not violate the directive, does not necessitate a request for authorization.

Intra-Community Electronic Invoicing

The proposed amended Article 218 establishes that, starting January 1, 2028, structured electronic invoicing will become the default for issuing invoices. Paper invoices will be allowed only in situations EU member states have authorized, excluding cases falling under the scope of intra-Community digital notification.

Once this intra-Community electronic invoicing system is introduced, member states that previously used electronic invoicing must transition to the Community model, based on Directive 2014/55/EU.

The new system stipulates that tax authorities cannot subject electronic invoicing to mandatory prior verification, as Italy currently allows.

For intra-Community supplies of exempt goods and services provided by unestablished taxpayers subject to the reverse charge mechanism, the proposed amended Article 222 establishes a two-day period from the tax accrual date for issuing invoices.

Article 223 of the VAT directive has been removed, thus ending the ability to issue summary invoices. This change will impact not only intra-Community operations but also national ones. Having generated substantial controversy in various business sectors, this measure is likely to be reviewed and revised.

Similarly, Article 226 of the VAT directive has been amended to ensure the inclusion of all necessary data in the invoice to be communicated through the intra-Community digital notification system. These data include:

  • the identifier of the bank account (IBAN) to which the invoice payment will be credited;
  • payment due dates for transactions, or for agreed-upon partial payments, plus the date and amount of each payment;
  • the amount of each payment corresponding to a specific transaction; and,
  • in an amended invoice, the identification of the initial invoice to be corrected, including the sequential number of the modified invoice.

Digital Notification System for Intra-Community Operations

Starting January 1, 2028, reporting at the transaction level will apply to all intra-Community operations currently declared in monthly European sales listings. This encompasses intra-Community supplies, stock transfers, intra-Community acquisitions, and intra-Community supplies of services, with the exception of call-off stocks as mentioned in Article 17a of the VAT directive, which will cease to exist.

Similarly, as of January 1, 2028, supplies of goods and services subject to the reverse charge mechanism under Article 194 of the VAT directive will also be incorporated into the digital notification.

This obligation applies to both suppliers and recipients of goods and services. It must be fulfilled within at most two business days from the invoice issuance date or the date the invoice should have been issued.

Failure to meet this reporting obligation, either by omission or error, as stated in Article 138.1a of the VAT directive, will result in the loss of exemption with the right to deduct (zero rate) for intra-Community deliveries of goods. However, when it comes to omissions or similar errors in reporting the provision of intra-Community services within the digital notification system, penalties will be less severe.

Additional fields have been introduced to strengthen fraud detection, including identifying the previous invoice in the case of invoice corrections, the bank account for invoice payment, and the agreed-upon payment dates and amounts for the transaction.

Conversely, member states cannot request additional information, so as to reduce administrative burdens on taxpayers and to avoid further complicating intra-Community reporting.

National Digital Notification System

Starting on January 1, 2028, national notification systems, such as the Spanish SII, are expected to be harmonized across the European Union. This applies whether such systems are currently in use or are under consideration, using a common format for both national and intra-Community operations. The goal is to enable companies to present their data across any member state according to the European standard, without having to adapt to varying notification systems.

No doubt this measure will be contested in some jurisdictions, because:

[m]ember states who have already implemented domestic requirements on electronic invoicing or real-time reporting will need to ensure that their systems are adapted to comply with the EU standard before 1 January 2028. For the pre-clearance e-invoicing model in Italy, the introduction of ViDA will thus have a great impact on the current setup of their e- invoicing system. Furthermore, countries in which SAF-T or Local Sales and Purchase Listings are required to be submitted, shall most likely have to re-assess whether and to which extent these periodical reporting obligations are allowed under the new EU standard for digital reporting on a (near) real-time basis. The real time-reporting system as currently introduced in Hungary—and in Spain after the additional introduction of mandatory B2B e-invoicing—appear to be mainly compliant with the envisaged EU standard and does most likely not require a full reform of its setup. Given the uncertainty regarding the features of the digital reporting-model adopted by the European Commission, it is however difficult to assess what the impact on the real-time reporting obligations will be in more detail.10

Article 271a of the VAT directive, as amended by ViDA, grants member states the ability to establish a notification system for B2B provision of goods and services between taxpayers in each member state’s territory as well as for any other types of operations, such as B2C. It’s important to note that this provision permits EU member states to introduce digital notification systems at the national level but does not enforce this type of reporting in real time.

The features of the national notification system outlined in Article 271b are akin to those defined for intra-Community operations:

  • communication of information for each individual operation;
  • data transmission within two business days after invoice issuance or after the date the invoice should have been issued, if the taxable person has not fulfilled their invoicing obligation;
  • direct data transmission by the taxable person or through a service provider; and
  • transmission of data from electronic invoices conforming to the European standard on electronic invoicing and the list of their syntaxes in accordance with Directive 2014/55/EU.

VIES System

Through the amendment of Regulation 904/2010 on administrative cooperation and the fight against VAT fraud, the ViDA package proposes establishing a central electronic VAT information exchange system, the central VIES.

The central VIES will consolidate information concerning cross-border B2B transactions transmitted by member states for each taxable person. Additionally, it will enable the comparison of reported intra-Community deliveries of goods and services with data on intra-Community transactions.

Furthermore, the central VIES will process information provided by member states alongside other VAT-related data exchanged under Regulation 904/2010, including customs and payment data. This data will be retained only for the time tax authorities need to conduct VAT checks.

The central VIES will store information for five years, offering member states a reasonable period to carry out VAT audits. Afterward the data will be permanently deleted.

Access to the central VIES will be restricted to authorized officials designated by their respective member states and solely for overseeing the accurate application of VAT legislation and combating VAT fraud. The central VIES will ensure appropriate security for stored data in accordance with the regulations governing the processing of personal data by EU institutions.

National tax authorities and the central VIES will exchange information through a shared secure communications network. This network currently facilitates information exchanges between tax and customs authorities, with all necessary security measures including data encryption.

Risks of Real-Time Reporting

Marta Papis-Almansa points out that the ViDA proposal raises concerns, primarily about the challenges presented by the use of new technologies within the framework of constitutional values and principles, including human rights and primary EU law. Additionally, it brings attention to the underlying principles of VAT, such as the principle of neutrality.

Papis-Almansa says these real-time reporting systems collect, store, and analyze substantial amounts of data, including information that permits the identification of individuals and, consequently, their personal data—encroaching on the right to privacy and the right to safeguard personal data outlined in Article 7 of the Charter of Fundamental Rights of the European Union. Although the proposed administrative cooperation rules restrict the data collected in the central VIES to anti-fraud purposes, no equivalent restrictions are planned for using the information collected through electronic invoicing at the national level.

Another highly pertinent issue centers on the compatibility of the principle of neutrality with anti-fraud measures. The European Court of Justice (ECJ) has underscored in its case law the precedence of material requisites over formal stipulations, as in the cases of C-518/14 (Senatex), concerning VAT deduction for noncompliant invoices; C-664/16 (Vadan), deciding no right to deduct VAT without invoices; and C-610/19 (Vikingo Fővállalkozó Kft.), concerning the right to deduct VAT even when invoices lack credibility. In particular, in Senatex, the ECJ underlined that:

Under Article 167 of Directive 2006/112, the right to deduct arises at the time when the deductible tax becomes chargeable. The substantive conditions which must be met in order for the right to arise are set out in Article 168(a) of that directive. Thus, for that right to be available, first, the person concerned must be a taxable person within the meaning of that directive and, secondly, the goods or services relied on to give entitlement to the right of deduction must be used by the taxable person for the purposes of his own taxed output transactions and those goods or services must be supplied by another taxable person as inputs.11

Papis-Almansa’s privacy cautions are profoundly significant, foreseeing a system in which regulatory compliance potentially outweighs all other concerns:

The proposed provisions do not provide sufficiently specific safeguards which would aim at the prevention of abuse of personal data. Reliance on DRRs [digital reporting requirements] to combat fraud should also be in line with the underlying principles of VAT, such as the principle of neutrality of the tax for taxable persons, one of the consequences of which is the superiority of substantive requirements over formal requirements, as established by the [ECJ]. Lack of payment of output VAT to the tax authorities or lack of compliance with the formal requirements such as DRRs should not, by itself, result in the automatic limitation to the rights of the taxpayer, such as the right to deduct input VAT. Such “mismatches” by themselves should not be considered fraudulent or abusive.12

It becomes challenging to conclude that such measures are justifiable even in the context of combating VAT fraud, given the seriousness of their intrusion into individual privacy. The access to information about personal purchases that the central VIES will grant to tax authorities poses a significant risk to individual privacy. It might not be farfetched to liken this access to unlawful surveillance.

Single VAT Registration

Reverse Charge Mechanism

To minimize the need for registration in the member state where a national B2B delivery or service occurs, the modification of Article 194 of the VAT directive as of January 1, 2025, mandates applying the reverse charge mechanism when a supplier not established for VAT purposes in the member state where VAT is due supplies goods or services to a person identified for VAT purposes in that member state. Therefore, that supplier would not require a VAT ID number to carry out such transactions in other member states.

This regulatory change will not significantly affect member states like Spain, which adopted this rule for years when doing so was still voluntary.

Deliveries of goods under the special regime for secondhand goods, art, antiques, and collectibles are excluded from the mandatory application of the reverse charge mechanism.

From 2025, these transactions are summarized in a monthly statement. But as from 2028 they will need to be reported on a transactional basis (e.g., every time they are performed).

Expansion of One-Stop-Shop Systems

One-stop-shop systems allow EU and non-EU companies not registered for VAT in a member state where transactions are subject to VAT to register for B2C transactions with one of the EU member states and comply online in the member state of registration with VAT obligations (registration, regular submission of VAT returns, VAT payment) in all other member states. The applicable VAT rates are those of the member states where consumption occurs. The member state of registration is responsible for distributing VAT revenue to the member states where VAT is due.

However, this simplification is optional for taxpayers and, furthermore, the Import One-Stop-Shop (IOSS) system is limited to the importation of low-value goods. (See Import Regime section below.)

Regime Outside the EU

The current scope of application of the special regime—constituted by the one-stop-shop mechanism to report certain transactions—covers all services that taxable persons not established in the European Union provide to persons who are not taxable persons and which, in accordance with the rules for establishing the location of service provision, take place in a member state. The ViDA package proposes to extend this one-stop-shop modality to services provided by non-EU companies to all final consumers, even if they lack a permanent address or residence in a member state.

Member states may no longer allow the tax to be payable, at the latest, when the supplier issues the invoice or receives payment from the customer. Likewise, changes to VAT returns can be made in the same return to the extent that these changes take place before the tax return must be filed.

EU Regime

As of July 1, 2021, the following operations can be declared under this one-stop-shop regime:

  • cross-border provision of telecommunications, radio, and television services or by electronic means to persons who lack the status of EU taxable persons;
  • any other cross-border provision of services in the European Union to persons who lack the status of any taxable person;
  • all intra-Community distance sales of goods; and
  • the electronic interfaces to which the fiction of the considered supplier applies can declare intra-Community distance sales of goods, as well as certain national deliveries of goods in this EU regime.

Given that with the ViDA package, the concept of intra-Community distance sales of goods is extended to include secondhand goods, works of art, collectibles, and antiques, these operations will be subject to VAT in the destination member state and suppliers will be able to pay VAT through the EU scheme. Supplies of art objects and antiques without dispatch or transport (or supplies in which the dispatch or transport of the goods begins and ends in the same member state) will be taxed according to the place of residence of the purchaser. For purposes of the EU regime, the definition of the member state of consumption will be extended to include deliveries of assembly or installation goods, deliveries of goods aboard ships, aircraft, and trains, and deliveries of gas, electricity, heating, and refrigeration, and national deliveries of goods. The EU regime can also be used to the extent that these goods are delivered to companies whose intra-Community acquisitions of goods are not subject to VAT.

On the other hand, zero-rated supplies of goods and services are covered by this one-stop-shop regime. Modifications to VAT declarations of this modality after the moment in which the declaration had to be presented must be made in a subsequent declaration.

Import Regime

IOSS is a simplified regime for collecting VAT on imports of low-value shipments (a maximum of €150), which allows their settlement and payment to be made by the supplier/electronic platform on a regular basis and in the member state in which they are registered, for all small shipments with a final destination to consumers in any EU member state. Under this regime, imports are exempt from VAT. The platform will account for the VAT at the point of sale to the customer and which will remit this tax to the Taxing authorities when due.

The IOSS system will be mandatory for electronic interfaces that facilitate certain distance sales of imported merchandise as deemed suppliers.

Stock Transfer Scheme

Unlike the other one-stop-shopping schemes, the regime established for stock transfers applies to B2B operations.

The one-stop-shop scheme for intra-Community stock transfers is introduced, so the call-off stock regime becomes obsolete as of January 1, 2026. In this sense, a period of twelve months is foreseen so that call-off stock agreements concluded up to and including December 31, 2024, can be finalized.

The new scheme for stock transfers is available to companies both inside and outside the European Union.

The member state of registration will be where the taxpayer that transfers goods from one member state to another is established or, in the case of taxpayers not established in the European Union, has a permanent establishment. Failing that, the state where the transport of goods begins will be considered the member state of registration.

Once the new one-stop-shop system is applied, those who carry out stock transfers must use the system for all other transfers of their own goods.

Companies must submit a monthly electronic VAT return, even if they have not transferred any of their own assets in a given month. VAT returns must specify destination member states.

The consequence of the new stock transfer regime is that intra-Community acquisitions by persons transferring goods in the destination member state will be exempt from VAT, because otherwise they would have to obtain VAT records to declare and liquidate the VAT of those operations.

The special regime excludes capital goods or goods that do not allow the full enjoyment of the right to deduction in the member state in which the intra-Community acquisition takes place.

On this subject, as Pawel Mikula of Deloitte in Katowice, Poland, has pointed out in a recent article:

The introduction of this solution may facilitate compliance obligations for companies that moved their own goods between warehouses located in different countries for sale to various, previously undefined customers. The transfer of own goods to a warehouse in the destination country will be reported through OSS in the member state of identification. Given the other proposed changes discussed below, subsequent local B2C as well as B2B deliveries in the destination country should not trigger registration. This is because the former will also be settled through OSS, whereas the latter will be settled through a uniform reverse charge mechanism throughout the Union. This change, in particular, will be a convenience for entities selling in different EU countries, where the shipment of goods to the consumer does not take place from a single location, but from warehouses located in other EU countries. This area of change is also likely to eliminate a series of numerous and serious interpretative doubts related to applying the current call-off stock regime.13

Status of the File

On December 8, 2023, the Economic and Financial Affairs Council (ECOFIN) provided an update on the advancements related to the ViDA proposal, initially released a year prior, by both the European Commission and the EU member states.

Regarding the proposal’s DRR segment, finance ministers of EU member states underscored the significance of a unified reporting framework for intra-Community transactions based on e-invoicing. However, opinions differed among member states regarding the extent of harmonization to be attained.

In addressing the platform economy, a consensus was reached on the pivotal role platforms should play in collecting VAT for short-term accommodation rentals and passenger transport services. Despite this, several member states voiced apprehensions about the deemed supplier model, and some ministers advocated for flexibility in the taxation framework for short-term accommodation.

ECOFIN expressed its backing for the strengthening of one-stop shops and the reverse charge mechanism. Nevertheless, some ministers called for additional analysis on certain proposed features, such as the extension of the deemed supplier model or the mandatory import one-stop-shop.


In the ViDA package we face a far-reaching reform that, if approved, will revolutionize the VAT system on many fronts. There will be losers, such as short-term accommodation and transport platforms, but also beneficiaries, like multinational companies. This package will allow the harmonizing of digital notification systems within the European Union. Additionally, electronic commerce platforms will benefit from the new stock transfer reporting regime, which will reduce the need for VAT IDs across the board.

Another potential controversy lies in the relationship between formal and material requirements, as we have observed before. These real-time reporting systems emphasize formalities at the expense of the material requirements that form the basis of the right to deduct tax. The practical application of these systems will be vital for assessing whether the excessive reliance on formalities has damaged the guarantees and rights accorded to taxpayers.

The ViDA proposal must be examined closely to ensure that its current clarity doesn’t become blurred during negotiations with EU member states.

Given that promised simplifications often lead to greater complication, we cannot overlook Pawel Mikula’s warning of future complexity in managing EU VAT.14 

Gorka Echevarria is global tax leader at Lexmark International Technology.

Gorka Echevarria


  1. Madeleine Merkx, John Gruson, Naomie Verbaan, and Bart Van Der Doef, “VAT in the Digital Age Package: Viva la ViDA or Livin’ la ViDA Loca?” Wolters Kluwer EC Tax Review (May 3, 2023): 1–19,
  2. European Commission, Directorate-General for Taxation and Customs Union, Grzegorz Poniatowski, Mikhail Bonch-Osmolovskiy, Adam Śmietanka, and Agnieszka Pechcińska, VAT Gap in the EU: Report 2022, Publications Office of the European Union, 2022,
  3. Pierre Collin and Nicolas Colin, “Task Force on Taxation of the Digital Economy,” Report to the French Minister for the Economy and Finance, the Minister for Industrial Recovery, the Minister Delegate for the Budget, and the Minister Delegate for Small and Medium-Sized Enterprises, Innovation, and the Digital Economy (January 2013).
  4. European Commission, Directorate-General for Taxation and Customs Union, prepared by Economisti Associati and CASE [Giacomo Luchetta, Enrico Giannotti, Grzegorz Poniatowski, Bradford Rohmer, and Stephen Dale], VAT in the Digital Age—Final Report, vol. 2, The VAT Treatment of the Platform Economy, Publications Office of the European Union (2022),
  5. Quoted in Nevia Čičin-Šain, “Newly Proposed VAT Rules for Sharing Economy Platforms—Some Fine-tuning Needed?” Kluwer International Tax Blog (March 22, 2023),
  6. Čičin-Šain.
  7. European Commission, Directorate-General for Taxation and Customs Union, VAT in the Digital Age—Final Report, vol. 2, The VAT Treatment of the Platform Economy.
  8. Merkx, Gruson, Verbaan, and Van Der Doef.
  9. Francisco Javier Sánchez Gallardo and Gorka Echevarria Zubeldia, “The Platform Economy Will Have Its Own VAT Regime in 2025,” International VAT Monitor 34, no. 4 (2023): 167–170,
  10. Merkx, Gruson, Verbaan, and Van Der Doef.
  11. European Court of Justice, Judgment of the Court (Fourth Chamber), September 15, 2016, Senatex GmbH v. Finanzamt Hannover-Nord, Case C-518/14.18/14,
  12. Marta Papis-Almansa, “VAT in the Digital Age. Real-time Digital Reporting Based on E-invoicing for Businesses,” Highlights and Insights on European Taxation 2023, no. 2 (February 2023).
  13. Pawel Mikula, “VAT in the Digital Age. Introduction of a Single VAT Registration Across the EU,” Highlights and Insights on European Taxation (February 2023).
  14. Mikula.

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