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EU Member States Again Fail to Agree on VAT in the Digital Age Proposal

Indirect Tax Alert | VAT Alert

On 21 June 2024, the Economic and Financial Affairs Council (ECOFIN), under the Belgian presidency, faced another setback as the 27 EU member states failed to reach an agreement on the VAT in the Digital Age (ViDA) proposal.

Since its initial release on 8 December 2022, the ViDA proposal has outlined the European Commission’s ambitious plans to modernize VAT reporting by leveraging digital opportunities.

During the previous ECOFIN meeting on 14 May 2024, Estonia opposed the current proposal due to concerns about the new deemed supplier regime, which imposes VAT collection responsibilities on platforms facilitating short-term accommodation rentals and passenger transport. Estonia suggested making these rules optional, allowing member states to decide whether or not to implement them in their national VAT legislation. In response, the presidency proposed alleviating the administrative burden for platforms and underlying suppliers in member states that exempt SMEs from the deemed supplier regime. However, these changes were insufficient to achieve consensus.

The inability to reach a consensus is seen as a significant disappointment for the Belgian presidency, which had aimed to secure a vote on ViDA during its term.

For more details on the initial proposal and the concerns raised, please refer to our previously published report here.

Implications for businesses

One of the primary goals of the ViDA proposal was to harmonize the e-invoicing and Digital Reporting Requirements (DRR) framework for both domestic and intra-EU transactions. The failure to agree means that businesses operating in multiple member states will continue to face varied e-invoicing models and must invest in diverse IT solutions to meet compliance requirements.

On the other hand, member states will still need to request derogations from the European Commission to implement mandatory B2B and B2C e-invoicing, adding a requirement that limits the potential for swift implementation.