The Council agreed its position Tuesday on a modernisation of EU VAT systems designed to help combat VAT fraud and ease administrative obligations for small companies and individual service providers.
As a major revenue stream for Member State authorities, the latest ‘VAT GAP Report 2023’ found that Member States lost around €61 billion in VAT revenues in 2021. The proposal to modernise VAT obligations promotes in particular the digital transition.
“This is a cornerstone for the digital transition and a significant step in improving the competitiveness of the EU,” said Hungary’s finance minister Mihaly Varga, for the EU presidency.
The package introduces 3 measures:
- The new system introduces uniform real-time digital reporting for VAT purposes based on e-invoicing for cross-border transactions, which will provide Member States timely with the valuable information they need to step up the fight against VAT fraud. E-invoicing will furthermore accelerate business transformation in the digital age by streamlining operations, ensuring compliance and security, enabling data-driven decision-making, and supporting scalability for future growth and innovation.
- Moreover, platform economy operators in the passenger transport and short-term accommodation rental sectors will become responsible for collecting and remitting VAT to tax authorities, where the underlying supplier does not charge VAT. This measure will contribute to a better level playing field between online and traditional services and will make life easier for the underlying hosts and drivers, who will not be liable for the VAT.
- Finally, this initiative will further reduce the need for multiple VAT registrations in different Member States, expanding the already existing ‘VAT One Stop Shop’ model for shopping-commerce companies.
“By streamlining and modernising VAT processes, we are significantly reducing the administrative burden on businesses – particularly for SMEs – and allowing them to focus on growth rather than red tape,” said EC vice-president Valdis Dombrovskis.
EU finance ministers are now expected to adopt the proposal following a re-consultation with the European Parliament.
