VAT in the Digital Age (“VIDA”) – The digital future of VAT

No consensus reached by ECOFIN on 14 May 2024 on the compromise proposal

On 8 May 2022, the European Commission submitted a draft for a Council Directive on the initiative “VAT in the Digital Age” (ViDA) including the long-awaited proposals for modernising VAT rules in the EU. In general, the proposal for the Council Directive contains the following set of measures that should enter into force step-by-step.

  • Digital Reporting Requirements and E-Invoicing;
  • Platform Economy;
  • Single VAT Registration

The proposal for the Council Directive was criticised harshly by some EU Member States. On 8 May 2024, a compromise proposal was published that was discussed within ECOFIN on 14 May 2024. However, it has not yet been finalised. The originally planned short implementation deadlines were regarded as particularly critical. The implementation of most of the amendments is now to be postponed by 2.5 years.

Key facts

Deadlines for the entry into force of the amendments of the compromise proposal:

1 July 2027: Amendments Platform Economy and Single VAT Registration

1 July 2030: Implementation of digital reporting requirements and compulsory e-invoicing (“DRR”)

After the Directive has entered into force, the EU Member States can also oblige companies based in Austria to issue e-invoices for domestic services. A prior approval by the EU Council and the consent of the invoice recipient will no longer be required. We refer to our newsletter [Link] on the national implementation in Germany.

Details of the amendments of the compromise proposal

Platform Economy – deemed supply chain

  • Digital platforms supporting short-term accommodation rental or passenger transportation will be treated as if they received or supplied the services themselves.
    • When applying the deemed chain of supply, the platform acts as a deemed supplier to the customer and as a deemed recipient to the supplier and invoices the VAT for the underlying service.
    • The service to the platform is regarded as tax-exempted without the right to deduct input tax.
  • Moreover, an obligation is introduced for the platform involved in the supply of goods to inform the owner of the goods of a transfer of the goods between two or more Member States if the owner has not explicitly authorised the transfer.

Single VAT registration

  • The provisions on the reversal of tax liability and the one stop shop (“OSS”) will be extended, the deemed supply chain model will be extended to all supplies within the EU via online marketplaces (also for the transfer of own goods) and the simplification rule for consignment stocks will be abolished.
  • In the case of margin taxation, there is no reversal of tax liability. Platforms that are based in an EU Member State and only enable domestic supplies in that Member State are not within the scope of the deemed supply chain.

E-invoices and digital reporting obligation

  • An e-invoice will only be considered an invoice within the meaning of UStG (Austrian Value Added Tax Act) if it is issued in a standardised format. In any case, one possible format is the one already known from B2G within the meaning of Directive 2014/55/EU.
  • Quasi real-time reporting of intra-Community B2B transactions to local tax authorities based on standardised electronic invoices (generally not affected: national B2B revenue, revenue in third countries, B2C transactions).
  • E-invoices for revenues that are subject to the digital reporting obligation must be issued within 10 days after the chargeable event has taken place.
  • Summary invoices are still permitted, however, they may only contain revenue from one calendar month and shall be issued no later than on day 10 of the following month.
  • The bank details of the supplying company will be a compulsory element.
  • The digital reporting of revenue by the invoice issuer must take place on the day on which the invoice was issued or should have been issued at the latest (i.e. 10 + 0 days after the chargeable event has taken place).
  • The deadline for reporting by the service recipient is 5 days after the invoice is issued or should have been issued at the latest (i.e. 10 + 5 days after the chargeable event).
  • Member States may make the granting of input VAT deduction for transactions that are subject to a national digital reporting obligation dependent on the existence of an electronic invoice in a structured format.
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