Digital measures 

It has been announced that the EU Economic and Financial Affairs Council has reached agreement on the following changes to the EU VAT rules:   

• VAT reporting obligations for intra-EU, cross-border transactions will become fully digital;
• online platforms will be required to pay VAT on the total price paid for short-term accommodation and passenger road transport services where individual service providers do not charge VAT; and
• VAT “one-stop shops” will be improved and further expanded so that businesses will not have to register for VAT in every EU member state in which they do business. 

The changes were proposed as part of the EU’s VAT in the digital age (ViDA) initiative in December 2022.  In April 2023, ICAEW responded to a consultation on legislation to implement the changes. 

ICAEW’s view 

Ed Saltmarsh, Technical Manager – VAT and Customs, said: “This is a significant development for businesses operating in the EU, including UK businesses which trade in or with the EU. Businesses will need to consider the potential impact of the EU’s digital VAT reporting requirements on their operations and are advised to keep a close eye on developments. The UK government may also be taking a keen interest. It recently announced plans to consult on how to promote the wider use of e-invoicing across businesses and government departments.” 

ICAEW has published an article explaining what e-invoicing is, how it works and the current position in the UK.  

Digital VAT reporting 

Businesses will be required to: 

• issue e-invoices for intra-EU, cross-border, business-to-business transactions (goods and services); and 
• automatically report the data to their tax administration. 

National tax administrations will then share the data through a new IT system. The intention is that this measure will improve the information available to EU member states, helping them to effectively combat intra-EU VAT fraud.  

It has been agreed that the EU system should be in place in 2030, and that all existing national systems (which currently only cover domestic transactions) should be compatible with the EU system by 2035. 

Online platforms 

Currently, not all providers of online short-term accommodation rental and passenger road transport services pay VAT. This may be because the person or business is not required to register for VAT, or because they are unaware of registration requirements in their own or other member states.  

Under the new rules, platform operators will be responsible for VAT where service providers do not pay VAT themselves. Under the “deemed supplier” model, the platform operator will collect the VAT (on the total price charged) from the customer and remit it to the tax authorities. The introduction of the new rules will be subject to a short transition period, and member states will have the option of exempting small and medium-sized enterprises.  

The Council believes that this measure will address unfair competition between traditional short-term rental accommodation and passenger transport service providers and those operating through platforms. 

One-stop shops 

The system of one-stop shops allows businesses to declare and remit the VAT due on their sales of goods and services to consumers from one EU country to another, through one member state’s administration and in one language.  

New rules will:  

• extend the scope of the existing one-stop shops to business-to-consumer sales of certain items which are conducted within a member state other than their own, for example, where a business moves stock to another member state in order to sell it there directly to consumers at a later stage; and
• move the liability for the payment of VAT in business-to-business transactions from the supplier of a good or service to the buyer if that supplier is not established in the member state where the VAT is due (country of taxation). This is already applied in some member states but will become mandatory except where the non-established taxable person is already identified in the member state of taxation and the member state concerned so provides. 

Further changes to the import one-stop shop (originally in the ViDA package) are now included in the revised EU customs code currently under discussion