VAT In The Digital Age: European Commission Proposes New EU VAT Measures
Entitled ‘VAT in the Digital Age', the primary intention of this proposal is to modernise the VAT system to make it more appropriate for the digital age, whilst also curbing situations...
CONTRIBUTOR ARTICLE To print this article, all you need is to be registered or login on Mondaq.com. On the 8th of December, the European Commission proposed the introduction of a number of new measures pertaining to the current EU VAT system. These come in light of the 2022 VAT Gap report, which revealed that Member States lost approximately €93 billion in VAT revenues in 2020.
Moreover, the measures also seek to solve various VAT-related issues which have arisen due to the growth of the platform economy in the EU. Entitled 'VAT in the Digital Age', the primary intention of this proposal is to modernise the VAT system to make it more appropriate for the digital age, whilst also curbing situations of cross-border VAT fraud. In fact, the Commission believes that the proposed measures will allow Member States to collect up to €11 billion more in lost VAT revenues annually.
What are the proposals of the European Commission? A new real-time digital reporting system based on e-invoicing Through the modernisation of the way in which companies account for VAT in cross-border business, Member States will have an accurate image of all the transactions taking place, in almost real time. The new system proposed by the Commission is centred around e-invoicing, which will not only allow Member States to collect more in previously lost VAT but will also effectively reduce administrative and compliance costs for the EU traders and companies. Updated VAT rules for the platform economy Given the evident rise in the platform economy throughout the years, the Commission felt the need to create new rules which specifically cater to this industry.
In this regard, new rules are being proposed which shall impact those persons or companies in the passenger transport and short-term accommodation sectors. Essentially, platform operators in these sectors will be obliged to collect and remit VAT to the tax authorities in situations where the users fail to do so. A single VAT registration for businesses selling to consumers across the EU Those businesses who wish to sell to consumers all across the EU will be able to register only once for VAT purposes for the entire Union.
This new measure would allow businesses to fulfil their VAT obligations through a single online portal. Additionally, the 'Import One Stop Shop' shall be made mandatory for certain platforms facilitating sales to consumers in the EU. The proposed measures would now need to be adopted by the European Council.
Watch this space for more details on this topic. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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