Prepared by Andrea Werner Beilin and Pirola Lorenzo
On December 8, 2022, the European Commission published the action plan “VAT In the Digital Age package (VIDA)” with the aim to assist the tax authorities to prevent fraud using technology.
Accordingly, VIDA requires Member States to review the effectiveness of the current VAT rules against the developments that will be (or have already been) brought by the digital age. In this respect, the European Commission published three proposals of Regulations to amend the following Acts:
- Directive No. 2006/112/EC;
- Regulation No. 2011/282/EU; and
- Regulation No. 2010/904/EU.
The amendments will cover the following areas:
- electronic invoicing and VAT reporting obligations: the information that taxable persons will have to submit to the tax authorities for each transaction in electronic format will be standardized. At the same time, the adoption of electronic invoicing will become mandatory for cross-border transactions between taxable persons;
- digital platforms: VAT rules will be updated (i.e. tax point) and the role of digital platforms in the collection of VAT in the provision of short-term accommodation and passenger transport services will be strengthened;
- multiple VAT registrations in the European Union: the cases in which a taxable person will be required to register in another Member State for distance sales of goods should be reduced through an improvement and expansion of the facilities currently used to declare and pay the VAT due (e.g., OSS and IOSS regimes).
The reason behind the proposals introduced by the European Commission is that the EU VAT rules have remained unchanged over the last ten years and, therefore, they are not able to support the new technologies and their impact on the modern economy and society anymore.
Until 28 February 2023 it will be possible to provide comments on the proposals, which will be included in a summary drafted by the European Commission and submitted to the European Parliament and to the Council of the Union for the related debate.
Given the innovative scope of the new proposals, please find below a summary of the main impacts on the VAT aspects.
Electronic Invoicing and Digital Reporting Requirements (DRR)
The first proposal provides obligations in relation to electronic invoicing and digital reporting requirements. In particular:
1. from 2024, each Member State will be free to impose a general e-invoicing obligation, without requesting a prior authorization to the EU. In this case, Member States should grant the possibility to use the European e-invoicing formats, provided for by Directive 2014/55/EU (i.e., UBL – Universal Business Language and CII – Cross Industry Invoice). In this respect, from an Italian perspective, there should be no substantial impact, considering that:
- in Italy there is already a general .XML electronic invoicing obligation, according to the provisions of Legislative Decree 127/2015; and
- the Interchange Data System (so called “SdI”) is already able to process electronic invoices compliant with European standards with reference to public tenders, in accordance with the Tax authorities Act dated April 18, 2019;
2. from 2028, Member States should implement the electronic invoice as the standard invoicing system. Member States can allow exceptions for specific transactions, apart from cross-border transactions between taxable persons, which will have to be documented by an electronic invoice, issued in accordance with the European electronic invoicing formats provided for by Directive 2014/55/EU (i.e., UBL – Universal Business Language and CII – Cross Industry Invoice).
In addition, starting from 2028, further mandatory elements to be included into the invoice such as, for example, the IBAN of the supplier and the original invoice number in the case of credit notes will be introduced.
The deadline for the transmission of invoices for intra-Community supplies of goods or services rendered to taxable persons resident in the European Union will be changed from the 15th of the following month to 2 working days after the taxable event.
In terms of reporting obligations, as of 2028, the “Intrastat” lists will be abolished and replaced by an analytical (and no longer aggregated) reporting obligation of transactions, which will be transmitted to a new central database “Central VIES” that will be maintained by the European Commission.
VAT treatment of transactions with digital platforms
The VAT rules on the place of supply with regard to the provision of short-term accommodation and passenger transport services will be updated.
In addition, the proposal would require digital platforms operating in the short-term accommodation and passenger transport sectors to ensure the collection and payment of VAT on transactions they facilitate.
Single VAT registration
The last package of proposals concerns the reductions of the cases in which the taxpayers must register for VAT purposes across different EU Member States.
To achieve this goal, the European Commission proposes the Single VAT Registration (SVR) together with:
- the improvement of the existing One-Stop Shop (OSS)/Import One-Stop Shop (IOSS) regimes; and
- the extension of the use of the reverse charge mechanism to minimize the cases where a taxable person is required to register in another EU Member State.
For a deeper discussion, please contact:
PwC TLS Avvocati e Commercialisti