On 12 January 2023, the Swedish Ministry of Finance issued a fact memorandum regarding the EU proposal to amend EU regulations as well as Directive 2006/112/EC on the common VAT system and how this relates to VAT rules for the digital age.
The Memorandum on proposed amendments highlighted a few core aspects of ViDA, including measures regarding digital reporting and mandatory e-invoicing for all cross-border transactions between taxable persons within the EU.
Fortunately, we broke down the key takeaways, so you don't need to. Here's what you need to know.
VAT in the Digital Age Initiative overview
The ViDA initiative centres around The Commission's fair and simple taxation action plan. The action plan underlines the need to evaluate and rethink how tax authorities can best digitise the common VAT rules and utilise technology to combat tax fraud whilst benefiting businesses. It questions whether current VAT rules are adapted to business in the digital age and where (and how) certain amendments could deem beneficial.
The legislative proposal covered in the action plan covers three main pillars:
Modernise VAT reporting obligations (Digital reporting requirements)
The proposed amendments will introduce real-time digital reporting requirements via e-invoicing. This aims to combat fraud and improve how Member States receive and transmit valuable information.
Update the rules on platform economy
The updated EU VAT regime will hold platform economy operators in the travel and accommodation sector liable for collecting and remitting VAT to tax authorities.
Introduce a single EU VAT registration
The new VAT One Stop Shop' (OSS) model for eCommerce allows B2C businesses that sell to other member states to register for VAT purposes for the entire EU in one go.
The act is currently open for an eight-week feedback period from 8 December 2022 until 4 April 2023. The European Commission will review and summarise feedback from member states and present this to the European Parliament and Council to feed into the legislative debate.
Sweden releases memorandum on proposed amendments to VAT EU Directive for Digital Age
The fact memorandum aims to alter some of the EU regulations and directives on the common VAT system regarding the digital age. Some of the core proposed measures include the following:
Regarding digital reporting requirements:
- Sweden proposes options for EU countries to introduce digital reporting requirements for national transactions. This will allow the right to deduct input VAT for services that platforms provide to final buyers.
- Digital reporting and e-invoicing are to be made mandatory for cross-border transactions.
- A proposed two-day reporting requirement for transactions
Regarding platform economy:
- Sweden proposes to exempt sellers on platforms from VAT on underlying services they provide (this will clarify that input VAT deductions are not permitted in these cases).
For more information on the VAT rules for the Digital Age proposed by the Council Directive, read more on the EU VAT regime changes here.
Stay on course with VAT IT
Uncertainty can be daunting, especially when significant changes still need to be confirmed. Fortunately, your business can stay ahead of the compliance curve and ensure you're continuously updated with the latest changes, proposals and possible amendments. Don't let anything catch you off guard. Instead, stay prepared, compliant and recovered with VAT IT.
Subscribe to our monthly VAT newsletter