VAT in the Digital Age: European Commission propose measures to modernise the VAT system

28 December 2022

In December 2022, the European Commission proposed to revamp the European Union (EU) VAT system by implementing a series of digital measures that aim to modernise, simplify, and make the EU VAT system more resilient to VAT fraud.

The digital measures proposed include:

A move to real-time digital reporting based on e-invoicing for businesses that operate cross-border in the EU
The proposed introduction of a real-time digital reporting system for VAT purposes (based on electronic invoicing) from 2025 to 2028 will be used by businesses that undertake cross-border sales in the EU and will eventually eliminate the current European Sales Listing reporting obligations. This new system will allow tax authorities to view intra-EU trade as it happens, meaning they can spot any discrepancies or errors. 

It's hoped that once implemented, this new reporting regime will allow EU member states to step up the fight against VAT fraud while also bringing down the administrative burden and compliance costs for EU traders by streamlining processes and removing reporting requirements. 

Updated VAT rules for passenger transport and short-term accommodation platforms
Under the new rules, platform economy operators will become responsible for collecting and remitting VAT to tax authorities in these sectors.

This will ensure a consistent approach across all member states when applying VAT on these types of services and will provide more of a level playing field between online and traditional sales of short-term accommodation and transport services. It will also simplify life for small businesses in this area, as they will no longer have to comply with each country’s specific VAT rules or register in multiple EU jurisdictions.

The introduction of a single VAT registration across the EU
Building on the existing One Stop Shop model for online traders, the proposals will allow businesses selling to consumers in another member state to register only once for VAT purposes for the entire EU, and to fulfil their VAT obligations via a single online portal in one single language. Further measures to improve the collection of VAT include making the Import One Stop Shop mandatory for certain platforms facilitating sales to consumers in the EU.

In the coming months, we will provide more detailed information on each of these new initiatives within our newsletters; however, if you want to learn more now, please visit the Europa website here.