Commission welcomes general approach on VAT in the Digital Age

The Commission welcomes today's general approach announced by the Council on  the Commission's proposals on VAT in the Digital Age. By embracing and promoting digitalisation, this package makes the EU's VAT system more business-friendly and more resilient to fraud. The new rules also mark the first step to address the challenges raised by the development of the platform economy and helps level the playing field between online and traditional short-term accommodation and transport services.

This package introduces 3 measures:

1. 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.
2. 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.    
3. 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.

Next steps

EU Finance Ministers are expected to adopt the proposal following a re-consultation with the European Parliament.

Background

VAT is one of the most important revenue streams for Member State authorities. However, according to the latest VAT GAP Report 2023, Member States lost around €61 billion in VAT revenues in 2021. To address these losses and respond to the increasing digitisation of the economy, in December 2022 the Commission proposed to modernise VAT obligations by promoting the digital transition. This legislative package was announced in the 2020 Action Plan for fair and simple taxation supporting the recovery strategy.

For more information

Council's general approach

VAT in the Digital Age

Quote(s)

Today’s general approach marks a major step forward in updating our VAT rules to new digital realities and simplifying the tax landscape. 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. This package demonstrates our commitment to building a fairer, more efficient digital economy that works for businesses and consumers alike.

Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People

Today’s agreement makes life easier for taxpayers, tackles fraud and promotes fair competition. EU Member States are still losing €61 billion in VAT each year – unified e-invoicing is a key step to reduce this. A single VAT registration will ease the administrative burden for European businesses, helping SMEs expand cross-border. Finally, the deemed supplier regime is crucial to level the playing field between traditional and platform economies. These new VAT rules strengthen our ability to harness the opportunities of digitalisation, while addressing some of its challenges, moving us toward a fairer and more competitive Europe.

Paolo Gentiloni, Commissioner for Economy