At the end of 2022, the European Commission published proposals with far-reaching implications for the European VAT system. These proposals should give the VAT system a long-awaited update to better reflect an increasingly digital society. These proposals have been published under the aptly named VAT in the Digital Age (ViDA). Now, after almost two years of political wrangling, there is agreement on the plans.
We briefly outlined the proposals in our earlier article, but over the past two years much tinkering has continued. At their core, the proposals have remained largely the same. ViDA still consists of three pillars, namely: a single central VAT registration, the VAT treatment of the platform economy, and digital reporting obligations. However, the exact content does differ from the initial proposal in some respects. In this article, we discuss the main points of the ViDA proposal.
Pillar 1: Digital reporting requirements & e-invoicing
Perhaps the most far-reaching part of the package of changes concerns electronic invoicing (e-invoicing) and digital reporting requirements (DRV). These changes have far-reaching implications and affect a large group of business owners.
From July 1, 2030, it will be required to issue an electronic invoice (e-invoice) for certain international supplies/services. These include the following supplies/services:
- cross-border intra-EU supplies (and acquisitions) of goods and services;
- supplies and services for which the VAT is reverse-charged (e.g., under the new mandatory reverse charge mechanism);
- shipment of own goods (for which there is currently no obligation to issue an invoice at all).
Note that an e-invoice is not the same as sending an invoice in PDF.
In principle, these electronic invoices must be issued within 10 days of the taxable event. This is considerably faster than currently required. When issued, the invoice must be shared real-time/automatically with the Tax Office. As a result, the ICP declaration is abolished - after all, this information is already known to the Tax Office through the DRV.
While the supplier or service provider must provide the details of the sale at the time the e-invoice is issued or should have been issued, the buyer must report the transaction no later than 5 days after receiving the invoice. This should more effectively detect and combat fraud and abuse by the authorities.
Not all ERP systems or accounting packages are capable of sending or receiving e-invoices. Thus, you may have to switch ERP packages if the ERP package in question are not going to accommodate these changes.
This pillar brings several other changes. For example, specific requirements will apply to self-billing, and the issuance of collective invoices will also be modified. In addition, additional invoice requirements will apply:
- Account number where recipient can pay invoice;
- For a correction invoice: invoice number original invoice;
- When applying the simplified ABC rule: "triangulation act"
In addition to the mandatory effective date of the changes regarding e-invoicing (July 1, 2030), member states are also given the option to introduce such capabilities/obligations earlier. In addition, member states have the option to introduce additional domestic reporting requirements that are not covered by the DRV.
For the time being, there is no indication that the Netherlands will introduce e-invoicing obligations before then. However, there are already several member states that have introduced or will introduce such measures (such as Germany, Belgium and Italy, among others). With activities abroad, it is therefore increasingly important to identify the tax consequences in advance - also given the fact that ERP/administration systems may not be able to meet local requirements.
Pillar 2: VAT treatment of the platform economy
Many of the proposals regarding the platform economy did not make it into the agreement. However, online platforms may be subject to new VAT obligations. Indeed, ViDA creates new VAT obligations for platform operators that facilitate short-term rentals of accommodations (up to 30 nights) and/or passenger transport by road (think platforms such as Airbnb, Booking, or Uber).
Such platforms will become liable for VAT payment under certain conditions. Indeed, as a result of the changes, it is assumed for VAT purposes that the underlying service provider/landlord provides a service to the platform, and the platform then provides that service to the customer. This is referred to as the platform fiction. The (notional) service from the underlying service provider to the platform becomes exempt from VAT and the platform must charge VAT to the customer.
The platform fiction applies as a starting point, but does not apply when the platform has received a (valid) VAT/OSS number from the service provider and the service provider has declared that it will charge all VAT due. If the platform fiction does not apply, the platform is still subject to an administration obligation.
These measures will enter into force no later than July 1, 2030, but member states may optionally implement the obligations as early as July 1, 2028. If you offer certain services through a platform, it is important to determine whether your platform may be affected by these new rules.
Pillar 3: Expansion of one-stop shop and 'single' VAT registration
This pillar introduces a large number of changes. While we see some welcome changes, in many cases the goal - one VAT registration in the EU - is not yet achieved. Below are the most important changes:
- The existing OSS system will be extended by Jan. 1, 2027 for cross-border supplies of gas/electricity/heat/cold.
- By July 1, 2028, the OSS will be expanded to allow virtually all B2C supplies of goods and services (i.e., including local supplies) to be declared in it.
- Currently, entrepreneurs are often faced with local registration obligations when transferring their own goods to another EU member state. With effect from July 1, 2028, a special scheme within the One-Stop-Shop (OSS) will therefore also be introduced to declare the transfer of own goods. This will make it possible to avoid local VAT registration under conditions.
- Currently, Member States have a specific regime (subject to conditions) for the transfer of goods under a so-called "call-off stock" regime. As a result of the aforementioned change regarding the transfer of own goods, this specific regime has become redundant. Effectively, the current regime will be completely abolished by July 1, 2029.
- A mandatory reverse charge mechanism is introduced for domestic B2B supplies where the supplier is neither established nor registered for VAT in the country of supply, while his customer has local VAT registration.
- In addition, Member States are given room to introduce a reverse charge mechanism with wider effect. The mandatory reverse charge mechanism is thus a kind of minimum standard for the entire EU, and Member States can additionally fill in their own arrangements. A broader reverse charge mechanism already exists in the Netherlands; so the impact here is expected to remain limited.
Importance for practice
ViDA brings large-scale changes to the current VAT system, particularly with regard to invoicing and reporting obligations. ViDA is also no longer just a proposal, but legislation that just needs to be hammered out by the appropriate EU bodies. Now that there is political agreement, this is expected to be only a matter of time.
The impact of ViDA is huge and for many entrepreneurs there is work to do. Although the new time frame is much broader than in the initial proposals, we advise you to map out in the short term how ViDA will affect your company and to prepare for it as soon as possible (a baseline measurement). Of course, we will be happy to support you with this baseline measurement. It is conceivable that it will be necessary to switch to a new ERP system, which in practice often involves a longer period (sometimes even years) of preparation and implementation.
In April 2025, we will host several seminars/webinars where we will discuss the ViDA changes in more detail. As soon as more is known about this, we will notify you. In the meantime, do not hesitate to contact us to discuss the impact on your organization. You can reach us at 040-2 504 504 or at btw@govers.nl.