VAT in the Digital Age

On 8 December 2022, the European Commission published new VAT proposals “VAT In the Digital Age (VIDA)” in order to adapt the VAT rules for cross-border transactions, reduce administrative burdens and related costs for business and to combat VAT fraud using technology.

The VIDA package will amend the VAT Directive and the VAT Implementing Regulations and focus on the following purposes:

1.  Modernising VAT reporting obligations and electronic invoicing rules

As from 1 January 2024 only invoices that have been issued, transmitted and received in a structured electronic format which allows for automatic electronic processing will be considered to be electronic invoices. The proposal also sets out that as from 1 January 2028, all invoices will be required to be issued in electronic format. It is then up to each Member States to provide for the use of paper invoices for certain transactions. However, this will not be allowed for invoices related to intra-EU transactions.

It is also being proposed that as from 1 January 2028,  the current recapitulative statements (EC sales listings) will be replaced by an analytical reporting obligation to a new central database called “Central VIES” maintained by the European Commission. The data in the central VIES database will be used by local tax authorities to cross-check the data reported by the supplier and the customer.

2.  Modernising VAT rules to face the challenges of the platform economy

The current VAT legislation on the place of supply for the provision of short-term accommodation and passenger transport services will be updated.

The current proposal requires digital platforms operating in the short-term accommodation and passenger transport sectors to undertake new reporting obligations to ensure the collection and payment of VAT on transactions they facilitate.

3.  Avoiding the obligation for multiple VAT registrations in the EU by introducing a Single VAT Registration.

Further to the introduction of the One Stop Shop and Import One Stop Shop system, the European Commission aims to further minimise the obligation to register for VAT purposes in multiple EU Member States by introducing Single VAT Registration (SVR). This will require:

• an extension of the so-called One Stop Shop to certain B2C supplies of goods and to the movement of own goods and call-off stock; and
• the introduction of a mandatory reverse charge mechanism for domestic B2B supplies by non-established taxable persons.

Most of these changes are proposed to enter into force as of 1 January 2025 whereas Digital Reporting Requirements and obligatory e-invoicing for certain transactions are proposed to enter into force on 1 January 2028.

PwC Malta’s VAT team will continue following developments to the VIDA proposals in order to be in a position to support the business community in implementing the necessary changes that these legislative developments are likely to require.

VAT in the Digital Age is one of the many key topics that will be discussed during the upcoming PwC 2023 VAT conference, VAT to the Future, on 2 June. To find out more about the event and its agenda, speakers and topics visit here.