VAT in the digital age (ViDA)

ViDA is a recent proposal by the EU which will impact UK businesses who trade with EU businesses.

The EU proposals were published in December 2022 aiming to reduce the VAT gap (amount of VAT that national research indicates the economy should generate compared to the amount actually paid to tax authorities) and make compliance more efficient. The proposal contains the following four elements:

E-invoicing

EU member states, from January 2024 will be able to impose e-invoicing for domestic sales without any new legislation or permission. The recipient of the invoice cannot reject their issue. E-invoicing is set to be mandatory from 2028 for intra-EU sales.

Digital Reporting Requirements (DRR) from 2028

Digital Reporting Requirements (DRR) effective from 2028 will mark the end of the EC Sales List (ESL), introducing a shift to digital reporting for all intra-EU B2B sales at the transaction level. This transition involves adopting a "near-live" reporting mechanism, requiring businesses to report sales to the national tax authority within two days of the transaction and the national tax authorities will then transfer this information to a centralised EU database.

Sales via digital platforms from 2025

• Import One Stop Shop (IOSS) to become compulsory for traders that import goods for sale via platforms into the EU and withdrawal of the current €150 threshold for IOSS
• “Deemed supplier” rules to be extended to digital platforms that provide short-term accommodation (Airbnb for example perhaps) and passenger transport (flightfinder website perhaps). Potential increase in Airbnb prices in EU, as the sale price will now include VAT (some EU member states have different rules about VAT treatment of short-term accommodation, so consideration to an EU wide rule). Estimated additional VAT revenue to EU of €6 billion per year, mention that in future other industries such as crowdfunding and professional services to be added
• The VAT “place of supply” of the platform’s services to the seller (whether b2b and b2c) becomes the same as the place of supply of the underlying transaction
• Separate review of Tour Operators Margin Scheme (TOMS), no proposals yet made

Extension of existing OSS scheme from 2025

Single EU wide VAT registration, can now include b2c sales of installation of goods, sales of goods in ships and aircraft and sale of gas/electricity for heating. Also, intra-EU movements of own goods can now be declared in OSS which is the end of the €150 threshold.

However, all of these introductory dates are yet to be confirmed. A recent suggestion is to defer them by one year and will require a vote at the EU Parliament, but clearly this is the direction of travel for the EU.

These proposed changes will impact the following UK businesses:

• Those that already have a UK VAT registration somewhere in the EU
• Those that use the One Stop Shop
• Those that sell goods or services via an online platform to EU consumers

For further information please contact our Indirect Tax Services team.