The EU's Economic and Financial Affairs Council (ECOFIN) has approved the Value Added Tax in the Digital Age (ViDA) proposal, aiming to modernize VAT rules and combat tax fraud. ViDA introduces key measures like Digital Reporting Requirements (DRR), VAT collection for the platform economy, and expanded Single VAT Registration, with implementation planned from 2027 to 2035. Businesses must prepare for these changes, which will standardize reporting, enhance compliance, and adapt VAT regulations to the digital economy.
A proposal for VAT in the digital age (ViDA) has been approved.
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Author: Nikolina Basić
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Content accuracy validation date:
14.11.2024
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11:27h
The Economic and Financial Affairs Council (ECOFIN) of the European Union has reached a landmark agreement on the Value Added Tax (VAT) in the Digital Age (ViDA) proposal. This decision follows extensive negotiations and compromises to the original proposal, ensuring unanimous support from all 27 Member States.
The ViDA initiative, a comprehensive overhaul of the EU's VAT rules, aims to modernize and streamline VAT compliance, prevent tax fraud, and adapt regulations to the digital economy. The measures will be implemented gradually from 2027 to 2035, with specific dates yet to be confirmed.
ViDA Initiative refers to:
- Digital Reporting Requirements (DRR): Standardizing digital reporting and e-invoicing for intra-community transactions.
- Platform Economy: Enhancing VAT collection for short-term rentals and passenger transport services via digital platforms.
- Single VAT Registration: Expanding the One-Stop Shop (OSS) for imports and simplifying VAT registration for business-to-business (B2B) transactions.
Businesses operating within the EU must now evaluate how the ViDA package will impact their transaction, invoicing, and reporting processes. Despite the delay in implementing the EU DRR rules, many Member States and other jurisdictions are already adopting domestic e-invoicing and e-reporting regulations, necessitating readiness assessments for compliance.
Next steps:
The EU Commission initially presented the ViDA package on December 8, 2022, comprising three proposals:
- Council directive amending directive 2006/112/EC for VAT rules in the digital age.
- Council regulation amending regulation (EU) No 904/2010 for VAT administrative cooperation.
- Council implementing regulation amending regulation (EU) No. 282/2011 for information requirements in certain VAT schemes.
These proposals require unanimity within the Council and are subject to a special legislative procedure. The European Parliament, having delivered its opinion on November 22, 2023, will be consulted again due to significant amendments by the Council. Businesses are advised to stay informed and prepare for the upcoming changes to ensure compliance with the new VAT regulations.