EU draft directive on “VAT in the digital age” has failed for the time being

  • 05/22/2024
  • Reading time 3 Minutes

Last week, the EU economic and finance ministers (ECOFIN) voted on the draft directive on “VAT rules for the digital age”, which was last revised on May 8, 2024. The required unanimity could not be achieved. There were concerns about the tightening of regulations for the platform economy, with the result that Estonia ultimately voted against the directive.

In contrast, the other two pillars of the package have already met with widespread approval. Both in the area of electronic invoicing and digital reporting as well as in the area of uniform EU-wide VAT registration, no far-reaching adjustments to the draft’s content are therefore to be expected, even if the dates of individual measures’ introduction could be postponed further.
The next ECOFIN meeting will be held on June 21, 2024. Belgium would like to work out a new compromise proposal by then in order to be able to adopt the directive within the Belgian Council Presidency before the end of June if possible.

With the ViDA initiative (VAT in the digital age), the EU Commission drafted a package of measures on December 8, 2022 to curb VAT fraud, further harmonize the VAT system and promote digitization at the level of public authorities and companies. The package consists of three pillars:

  1. Introduction of a transaction-based digital reporting system and mandatory electronic invoicing for business-to-business (B2B) transactions between EU Member States,
  2. Tightening regulations in the area of the platform economy, in particular for platform operators in the area of short-term accommodation (e.g., Airbnb) and passenger transportation (e.g., Uber),
  3. Simplification and harmonization of the VAT system, in particular by creating a uniform EU-wide VAT registration.

The measures were originally to be introduced gradually in 2025. The digital reporting system was to be implemented from 2028. In the current draft directive, which has now been rejected, the dates had already been postponed to July 2027 for the platform economy and uniform VAT registration pillars and to 2030 at the earliest for the digital reporting and electronic invoicing pillar. It remains to be seen whether there will be a further delay in the planned compromise proposal for certain areas.

Even without regulation at EU level, measures to digitalize the VAT system are already being implemented by some member states at national level. In Spain, Hungary, France, Italy and Poland, for example, regulations on electronic invoicing for domestic B2G and B2B transactions and/or transaction-based reporting systems have already been adopted or introduced. Germany has also taken an important step towards a digital VAT system with the adoption of the Growth Opportunities Act on March 22, 2024 and the implementation of mandatory electronic invoicing for domestic B2B transactions contained therein. Therefore, even without mandatory requirements from the EU, there is already a clear trend towards a higher degree of digitalization.

Therefore, companies are well advised to deal with the upcoming national and EU-wide new regulations at an early stage. We will be happy to discuss with you how well your company is prepared for the changes and how you can best review and adapt your processes.


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Authors of this article

Marion Fetzer

Partner, Head of Indirect Tax

Certified Tax Advisor

Thorsten Went

Partner Indirect Tax, Head of Digitalisation Tax

Certified Tax Advisor

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