What is it?

The DRR pillar includes new rules for near real-time digital reporting based on structured e invoices. Key purpose of this pillar is giving EU Member States valuable information in the fight against VAT fraud and bringing down the administrative and compliance costs for EU traders. This pillar includes the following measures:

E-invoices

• A revised version of the EN16931 e-invoice standard, together with the Directive 2014/55/EU (e-invoicing in public procurement) will govern the standards for the e-invoices and should be allowed by EU Member States.
• This allows hybrid e-invoices (combining structured data and human readable unstructured data). 
• For domestic transactions other standards may be allowed, next to the EU standard.
• Two new invoice requirements will be introduced: reference to the sequential number which identifies the corrected invoice in case of corrective invoices and the bank account number or virtual account of the supplier into which the recipient can pay that invoice.
• EU Member States may introduce the substantive condition that VAT recovery is subject to having an e-invoice.
• In case of intra-EU transactions subject to intra-EU DRR e-invoices can be issued without prior acceptance by the recipient (although there are exceptions). EU Member States may also waive the prior acceptance by the recipient in case of mandatory domestic e-invoices.

Optional domestic e-invoices and DRR

• EU Member States will have the option to introduce mandatory e-invoicing for all transactions, though up to 2030 limited to domestic (not cross-border) transactions for taxable persons established within the country. The compromise contains a minimal regulatory framework on the e-invoicing models and formats to be applied.
• Per 1 July 2030 (2035 for EU Member States with existing domestic DRR regimes or mandates prior to 1 January 2024), harmonization in terms of models and formats for domestic DRR may become effective (though it will still not be required based on EU legislation).
• EU Member States having implemented domestic DRR may make VAT recovery subject to having an e-invoice.

Intra-EU e-invoices and DRR

• E-invoicing for cross-border transactions will become mandatory for intra-EU supplies (i.e., VAT exempt cross-border supplies of goods within the EU and the corresponding acquisitions, most activities subject to reverse charged VAT including cross-border services within the EU (unless exempt), and movement of own goods – unless the special regime is used (see our alert on SVR)).
• DRR will become a material requirement for correcting “number acquisitions” and VAT exemptions for intra-EU supplies.
• The e-invoice should be issued within 10 days of the chargeable event.
• At the moment the e-invoice is issued for an intra-EU supply of goods or supply subject to the VAT reverse charge rule, a subset of the data should be reported to the tax authorities by the supplier (near real-time digital reporting). 
• The recipient should report the transaction (intra Community acquisition, and reverse charged VAT due by recipient or fiscal representative) within 5 days to the tax authorities (though Member States can opt out if they have alternative controls in place).
• Data collected by EU Member States must be subsequently transmitted to a central e-VAT information exchange system (“central VIES”) within one day.
• The EU Sales Listing (recapitulative statement) will be replaced by the aforementioned digital reporting.

Other changes

• New invoice requirement to refer to cash accounting, where applicable.
• The proposal explicitly states that EU Member States may allow the use of a public portal for e-invoices. This is considered a relief for SMEs.

What else should I know?

The specific EU wide definition of an e-invoice will only come into effect as from 1 July 2030 and abolition of customer consent as provided in article 232 of the VAT Directive is not completely removed (only mandatory for intra-EU e-invoices and subject to EU Member State options for domestic e-invoices). The question is however how such local options will impact companies that are not established but conducting transactions in these jurisdictions (e.g., a foreign company locally buying products in a country with a domestic e-invoice requirement). It seems reasonable to assume that many companies operating in the EU will need to take measures to be able to issue and/or receive invoices in a structured way in advance of 2030.

The EU standard EN 16931 for e-invoices will enter into force on 1 July 2030 and should be seen as a minimum standard. A question for companies looking to implement software solutions, while adhering to domestic standards (which may be broader), is whether they should still accommodate these local variations.

What are the key changes since the December 2022 proposal?

• The possibility to issue summary invoices remains, though with more strict conditions.
• The deadline of issuing an e-invoice and reporting is now 10 days following the chargeable event, which was originally two working days for issuing and another two working days for reporting.
• The possibility to issue a hybrid invoice is a new measure.
• There is no longer a requirement to mention the payment due date.
• The explicit statement that pre-clearance is not allowed has been removed. This may be interpreted as a political concession on an option to allow pre-clearance, though we have to wait for further details. It has been clarified that third parties may fulfil the DRR.
• The link between the VAT recovery and e-invoice was not included in the earlier proposal.
• The article defining the scope of DRR has been rewritten, making the scope more clear.

Timeline

What is the envisaged timeline? 

The key dates are as follows:

• 20 days after publication of the Directive: EU Member States may require e-invoices for domestic transactions without prior derogation approval from the European Commission. If exercising this option, EU Member States may waive the currently required consent to accept e-invoices by the recipient.
• 1 January 2026: new mandatory invoice reference for cash accounting invoices.
• 1 July 2030: DRR for intra-EU transactions to tax authorities and mandatory structured e-invoicing for DRR transactions. Convergence towards EU standards for domestic e-invoices, for countries without current mandates.1 January 2035: Further convergence towards EU standards: EU Member States with domestic DRRs in place as of 1 January 2024, or those granted permission to implement such a system before that date, should align with the EU standards.

What’s next?
Now that the Council has reached a general approach on the ViDA package, the European Parliament has to be reconsulted on the text of the proposal in view of the substantial differences between the Commission proposal of December 2022 and the latest Presidency compromise text of October 2024. Considering that the earlier feedback from the European Parliament to a large extent has been processed in the updated proposal and the fact that the second consultation will be a simplified procedure, we do not expect any changes to the proposal. The agreed proposal will then go through a legal linguistic check and the directive will then need to be formally adopted by the Council before being published in the EU’s Official Journal and enter into force.

We recommend businesses to proactively prepare. This in particular applies to the DRR, as timely developing an implementation roadmap for DRR readiness with a focus on priority countries is needed to make available the required resources. Local developments like in Belgium, France, Germany, Poland, Romania, and Spain are likely to be followed by more countries.

What is it?

The platform economy pillar seeks to shift the VAT liability to platforms and to increase the level playing field between the online and traditional business models. This includes the following measures:

Deeming provision accommodation and transport sector

• Under a deeming provision in VAT a platform is deemed to have purchased and subsequently supplied the underlying goods or services. Effectively, this makes the platform liable for the payment of VAT on the transaction to the customer.
• The extension of the deeming provision in VAT will include platforms in the short-term rental of accommodation (maximum 30 nights) and passenger transport services by road between two points in the EU unless the (original) supplier had provided a VAT number and declared that it will the charge VAT due on the supply (that is, the rules will be applicable to companies applying the VAT exemption for SMEs). In summary, no VAT is to be charged on the underlying service supplied by the supplier to the platform. The platform will be required to charge and collect the VAT from the customer.
• The short-term rental of accommodation will be taxed under criteria, conditions and limitations set by the EU Member States. These criteria, conditions and limitations must be communicated to the VAT committee before 1 July 2028. The European Commission will publish a list of the criteria, conditions and limitations set by EU Member States by 31 December 2028.
• EU Member States may temporarily opt out (up to 2030) for a period of 10 years to suppliers using the new 2025 special scheme for small and medium enterprises (SME). The EU Member States have to inform the VAT Committee if they want to exercise this option. The European Commission will publish a list of the EU Member States that have exercised this option
• The deemed supply from the supplier to the platform will be VAT exempt without a VAT recovery entitlement. The subsequent supply to the customer will be taxed, unless an exemption applies in the EU Member States where VAT is due.
• The deeming supply rule does not apply if the underlying supplier provides the platform with a VAT identification number of the Member State where VAT is due or OSS identification number if it uses the OSS to report the VAT on those supplies.
• The special scheme for tour operators (“TOMS”) cannot be applied if a platform is a deemed supplier. On the other hand, if a taxable person qualifies as a travel agent under the TOMS, it will not be subject to the deemed supplier rules.
• Deemed supplier model for supply of goods by taxable persons established outside the EU is only changed slightly to include supplies to taxable persons whose intra-Community acquisitions are not subject to VAT..

Place of supply of facilitation services

• The facilitation service provided by the platform to a non-taxable person will be VAT taxable at the place of the underlying service. The VAT on this service will not be recoverable by the non-VAT taxable person.
• Platforms that are not covered by the deemed supplier model but do facilitate short-term rental of accommodation, will be obliged to keep records of B2B and B2C services for 10 years from the end of the year during which the transaction was carried out.

What are the key changes to the December 2022 proposal?

• The definition of short-term rental has changed from 45 days to 30 nights, with EU Member States having the flexibility to include criteria, conditions and limitations for short-term rental.
• Passenger transport is limited to passenger transport by road.
• The December 2022 proposal also included deemed supplier rules from transfers of own goods via platforms. This has been excluded. Platforms should instead inform the owner in case of such transfers. The owner should report the transfers (though can do so via the TOOG OSS as addressed hereinafter).
• It is clarified that VAT exempt supplies to platforms are to be included in the small and medium-sized enterprises (SME) threshold.
• A new addition is that European Commission may request automatic access to the records supplied by platforms to their tax authorities.

Timeline

What is the envisaged timeline? 

The key dates are as follows:

• 1 July 2028: Implementation of updated platform rules for short-term accommodation (maximum 30 nights) and passenger transport and related rules mentioned above. Option for EU Member States to exclude platform rule for services by SMEs.
• 1 January 2030: EU Member States no longer have the option to exclude platform rule for services by SMEs.

Spain has indicated that it will seek an approval to apply the exceptions before 1 July 2028.

What’s next?

Now that the Council has reached a general approach on the ViDA package, the European Parliament has to be reconsulted on the text of the proposal in view of the substantial differences between the Commission proposal of December 2022 and the latest Presidency compromise text of October 2024. Considering that the earlier feedback from the European Parliament to a large extent has been processed in the updated proposal and the fact that the second consultation will be a simplified procedure, we do not expect any changes to the proposal. The agreed proposal will then go through a legal linguistic check and the directive will then need to be formally adopted by the Council before being published in the EU’s Official Journal and enter into force.

What is it?

The Single VAT Registration (“SVR”) pillar is one of the pillars of the ViDA package. Political agreement on the October 2024 text has been reached political agreement during ECOFIN on 5 November 2024. The SVR pillar seeks to decrease the administrative burden for taxpayers. 

The Single VAT Registration

The SVR pillar seeks to decrease the administrative burden for taxpayers by reducing the need for foreign VAT registrations. It is not a new type of registration. The SVR is a reference to the following measures minimizing the need for foreign VAT registrations:

• Extending the One-Stop Shop (“OSS”) scheme, including domestic supplies.
• A new OSS scheme for transfer of own goods (“TOOG OSS”). 
• Continued use of the Import OSS (“I OSS). 
• Extending the scope of the local reverse charge rules to all supplies by taxpayers not established and non-registered in that country to locally VAT registered taxable persons (“local reverse charge”). Local reverse charge supplies are to be reported in the European Sales Listing (up to the introduction of Digital Reporting Requirements in July 2030).

Union OSS

The union OSS facilitates remitting VAT due for (amongst others) cross border sales of goods within the EU to consumers (by suppliers established within or outside the EU) and to cross border services (by suppliers established within the EU).

The requirements for the OSS returns are further laid down, e.g. including zero rates and exemptions. Furthermore, it is stipulated how corrections can be processed. The updated rules also specify how VAT refunds on costs should be obtained (that is: via VAT refund requests, not via deductions).Finally, there are some technical changes, e.g. in terms of in which country a non-EU established company should register for the scheme.

Non-Union OSS

The non-Union OSS facilitates remitting VAT due by business established outside the EU and rendering services to non-business customers taxable within the EU. This scheme is mainly used for electronically supplied services.

The non-Union OSS is extended to services to customers not established or resident within the EU. The requirement that the customer does not qualify as a taxable person remains as is. Furthermore, the updated rules specify how VAT refunds on costs should be obtained (that is: via VAT refund requests, not via deductions, unless there is an existing VAT registration). 
The union scheme is extended to also include local supplies (outside the country of establishment), installation supplies, supplies on board and supplies of electricity. 

TOOG OSS

A transfer of own goods from one EU Member State to another EU Member state is a deemed supply for EU VAT purposes. This often triggers VAT registration requirements in the country of arrival.

The current rules include a simplification for call-off stock, whereby under strict conditions the TOOG is not a deemed supply. This simplification will be replaced by introducing a new optional OSS to report the TOOG. In the new scheme there will still be a deemed supply, though the acquisition will be VAT exempt without registration requirement and without limitation on the entitlement to recover input VAT. Application of the scheme requires a timely notification to the Member State of identification (generally the Member State of establishment) and monthly VAT returns. 

The activities subject to the TOOG OSS will have to be reported in the EU Sales Listing (and later the DRR). The reportable data includes the “ship from country”, “ship to country”, “value” and VAT identification numbers in the countries involved (if available). The invoice for the deemed supply does not have to state the customer’s VAT number.

IOSS

The import OSS is a simplification to facilitate remitting VAT on sales of products from outside the EU to consumers within the EU. It allows business to report such sales and the related VAT liability for all EU Member States via an OSS, the Import OSS or IOSS. It can be used for sales with a value up to EUR 150.

The changes are relatively small in terms of VAT registrations relief. An important change is an anti-fraud measure establishing a link between the consignment number and VAT identification number. It is stipulated that this scheme cannot be used by taxable persons using the small business relief simplification. 

Furthermore, the updated rules specify how VAT refunds on costs should be obtained (that is: via VAT refund requests, not via deductions). Finally, the updated rules elaborate how corrections can be processed in a next return.

Reverse charge

Shifting the VAT liability from a supplier to a recipient is referred to as the “reverse charge” rule. The reverse charge rule is a proven instrument to limit the need for foreign VAT registrations for cross border activities.

Based on the current rules Member States may determine that the VAT is due by the recipient rather that the supplier where a taxable supply of goods and services is provided by a taxable person not established in the Member State in which the VAT is due. This option remains in place, though in case the supplier is not established and not VAT-registered in the Member State in which the VAT is due and the recipient is VAT-registered in that Member State, application of the VAT reverse charge rule is mandatory. 

The activities subject to reverse charge based on this rule will have to be reported in the EU Sales Listing (and later the DRR), and invoices will have to be issued no later than on the fifteenth day of the month following.

Other

• Clarification on the use of the EUR 10,000 threshold for distance sales, where foreign stocks are used.
• Changes in the options for Member State to derogate from the tax point rules for services reported via the non-Union OSS / supplies via the union OSS.
• Cosmetic changes in application for the various OSS schemes (e.g., if a company does not have a website address it does not have to be shared).
• In case the tax point is based on the payment by the customer, Member States may determine that the supplier is only entitled to VAT recovery at the moment its purchase invoices have been paid. 
• In case of application of the simplified triangulation rule, this has to be stated explicitly on the invoices.
• Up to extension of the union OSS for the supply of gas and electricity, such supplies will be considered distance sales rather than local sales outside the Member State of establishment.
• The Regulation includes new requirements for Member States to share details in the current and new central VIES system, such as the amounts of import via the IOSS scheme per country. The new central VIES system should be centrally hosted to increase the uptime. It is detailed that the administration should also include the place of departure of goods supplied.
• If a taxable person (e.g. a third party logistics provider) transfers goods of another taxable person from one EU Member State to the other (e.g. between two warehouses), the first taxable person (the logistics provider) should inform the latter including date, quantity, ship from and ship to details.
• The Implementation Regulation includes further details on the various OSS schemes, including on commencing and ending and processing of corrections.

This section addresses the changes compared to the original ViDA proposal from December 2022.

• The original ViDA proposal also included updated place of supply rules for the supply of second-hand goods, works of art, collectors’ items, or antiques. These changes have been deleted.
• In the original ViDA proposal it was unclear whether the extended reverse charge rule was mandatory for suppliers. Moreover, it also applied if the supplier has a VAT registration in the Member State involved. It has been clarified in the updated proposal that it is mandatory and limited to suppliers without a VAT registration in the country involved.
• It was intended to make the IOSS scheme mandatory for marketplaces, though this has been removed. The Council of the European Union continues to work on a mandatory IOSS.

Timeline

The most significant changes in this pillar are effective 1 July 2028. The key dates are as follows:

• 20 days after publication: anti-fraud measure for IOSS to link the consignment number to the VAT number.
• 1 January 2027: technical changes (time of supply, time of VAT recovery, clarification of current OSS rules, transitional rules for TOOG OOS). Extension of Non-Union OSS to services to non-established persons. Qualification of cross border supply of gas and electricity as deemed intra Community distance sale.
• 1 July 2028: introduction TOOG OOS, extended use of Union OSS, changes in reverse charge rule.
• 1 July 2029: end of transitional rules for consignment stock simplifications.
• 1 July 2030: requirement for invoices to refer to triangulation transactions.

What’s next?

Now that the Council has reached a general approach on the ViDA package, the European Parliament has to be reconsulted on the text of the proposal in view of the substantial differences between the Commission proposal of December 2022 and the latest Presidency compromise text of October 2024. Considering that the earlier feedback from the European Parliament to a large extent has been processed in the updated proposal and the fact that the second consultation will be a simplified procedure, we do not expect any changes to the proposal. The agreed proposal will then go through a legal linguistic check and the directive will then need to be formally adopted by the Council before being published in the EU’s Official Journal and enter into force. Finally, the Directive should be transposed to national law.