The European Commission has just approved the proposal for a Council Directive revising the VAT

Directive in the aim of making the EU VAT system more consistent with the dynamics of the digital

age.

The reform mainly consists of three pillars:

• The introduction of e-invoicing for all businesses with intra-Community supplies;

• A new VAT collection role for digital platforms for services relate to housing and transport;

and

• Extended VAT reporting obligations for e-commerce stores.

These rules will be phased in between 2025 and 2028.

The European Commission expects these measures will save EUR 1 billion in compliance expenses

for e-commerce sellers and cut EUR 11 billion of the EUR 50 billion lost due to missing trader fraud.

The shift of VAT collection liabilities to travel and accommodation platforms will bring in an extra

EUR 6.5 billion.

Single VAT number – January 2025

The successful One-Stop-Shop for distance selling will be extended to the stock movements by ecommerce sellers followed by B2C e-commerce sales (B2B2C transactions). So, sellers holding stock

in warehouses located in multiple countries (e.g., Amazon FBA, etc.) will be able to use a single VAT

number to report consumers sales within the EU.

The single VAT ID will let companies charge, declare and manage the whole EU VAT via the national

tax authorities, potentially including the auditing procedure.

The stock movement would continue to be taxable with two transactions: arrival and sale. Both of

these will be reported in the OSS, and this would require additional details to be provided to the

Member State of identification (where the OSS is registered).

This procedure will remove the necessity of hundreds of thousands of foreign VAT registrations for

e-commerce sellers. The European Commission calculates that it costs EUR 5,000 per year for

companies to deal with each foreign registration. This will cut the cost of traders by EUR 800 million

per year or EUR 8.7 billion between 2023 and 2032, according to European Commission’s estimates.

IOSS Updates – January 2025

Three important revisions have been addressed for the import one-stop shop (IOSS) which was

introduced as part of the e-commerce VAT package 2021:

• The current threshold of €150 for imported B2C sales will NOT be increased in the immediate

future. Its increase will probably be delayed until customs procedures and requirements are

also reshaped.

• IOSS will be imposed on marketplaces to limit fraud and errors.

• As an anti-fraud tool, a link was established between IOSS numbers and shipping stocks.

VAT of the platform economy – January 2025

The EU will extend the deemed-supplier VAT obligations to platforms facilitating the supply of short term

accommodation and transport services, which currently represent more than 70% of the

platform economy when excluding goods (the so-called “Gig & sharing economy”).

Other fields of the gig & sharing economy could be covered in the future. These may include

professional and manual services, ‘click work’, crowdfunding and P2P lending. But complications

with small entrepreneurs involved in these fields will result in this being done at a later stage.

This is a very complex provision and there has been a huge resistance on behalf of digital platforms.

They believe that their business models, with several parties in the chain, were too intricate for a

simple partition of VAT liabilities. However, several “holiday countries” have pushed for the

introduction of a full VAT liability for these platforms. This is making the timeframe for both

ratification and implementation of these provisions tricky to predict.

Requirements for digital reporting – January 2028

As part of the digital reporting requirements, there are two pathways to tackle VAT fraud and

implement efficiency in the digitalisation of invoicing and reporting.

As a first step, near real-time digital reporting of transaction summary data must be established at

EU level. Secondly, mandatory intra-Community supplies (ICS), sales across EU borders, electronic

invoicing according to EN 16931 and e-invoicing should finally replace paper invoices (with limited

exceptions).

This shift will result in an estimated EUR 11 billion per year (EUR 111 billion over 10 years) in

additional VAT revenues. There are expected to be further gains of EUR 4 billion per year (EUR 41.4

billion over 10 years) in cost savings for businesses due to pre-compiled VAT returns, the end of

recapitulative statements and general cost savings on e-invoicing.

Mandatory B2B Intra-community digital reporting requirements (DRR) near-live transaction

reporting that will replace EC sales list summaries – January 2028

As of 2028, the intra-Community supplies (ISC) and digital acquisition reporting regime will be

implemented for all businesses, which includes those not established within the EU. These data will

be first submitted to the national tax authorities, which will on their turn integrate them into a

common EU database. Nevertheless, no technical reporting specifications for the movement of

transaction data to a common central database are confirmed yet. Most likely, member states will

enjoy some room in the implementation (but, still, under the guidelines set by Implementing

Decision (EU) 2017/1870).

A new database ‘Central VIES‘ will be monitored and managed by the European Commission and

will incorporate transactions and information on the taxpayers’ identity, as well as their VAT ID

number. There will also be some integration with the customs surveillance system and the imminent

central electronic payment information system CESOP.

The implementation of the new intra-EU reporting regime will enable the abolition of EC Sales Lists

(ESL), commonly known as recapitulative statements.

Mandatory intra-Community electronic invoicing – January 2028

All enterprises will be required to be able to send and receive e-invoices according to the European

e-invoicing standard (EN 16931) for intra-Community supplies. The format of electronic invoices will

be structured (XML; UBL; PDF/A3 etc.).

Additional details will be included in the current invoice information, including: IBAN number (or

other identifier) of the account of the supplier receiving the payment; Payment due date; and

whether there are any corrections to the invoice.

Moreover, countries are no longer required to seek EU endorsement for mandatory national einvoicing

according to the existing Article 232 of the VAT Directive. This will necessitate an

amendment to the VAT Directive, Article 218, under which electronic invoicing will be the

predefined system for issuing invoices. The usage of printed invoices will only be possible in

circumstances permitted by the Member States.

Member States can still decide on their own formats but are strongly supported to adopt the EN

16931 standard to further the long-term standardisation of EU reporting systems.