VAT in the Digital Age ViDA

European Union: VAT in the Digital Age (ViDA) Updates

On 8 December 2022, the EU Commission published the proposed legislative changes referred to as “VAT in the Digital Age” package – a proposal for a Directive (1), a Regulation (2), and Implementing Regulation (3):

  1. Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC as regards VAT rules for the digital age {SEC(2022) 433 final} – {SWD(2022) 393 final} – {SWD(2022) 394 final};
  2. Proposal for a COUNCIL REGULATION amending Regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age {SEC(2022) 433 final} – {SWD(2022) 393 final} – {SWD(2022) 394 final}; and
  3. Proposal for a COUNCIL IMPLEMENTING REGULATION amending Implementing Regulation (EU) No 282/2011 as regards information requirements for certain VAT schemes {SEC(2022) 433 final} – {SWD(2022) 393 final} – {SWD(2022) 394 final}.

The feedback period was initially set to 2 March 2023. This was extended to allow stakeholders to consult the draft regulations in all official EU languages.

These acts are open for feedback for a period of 8 weeks with the feedback period ending on 4 April 2023 (midnight Brussels time).

All feedback received will be summarised by the European Commission and presented to the European Parliament and Council with the aim of feeding into the legislative debate.

Denmark – Public Consultation of EU proposals in the area of VAT – VAT in the Digital Age – feedback collected in period 13 Dec 2022 – 23 Jan 2023

Within the legislative process of transposing the EU directive and regulations into the national VAT Law, in the period 13 December 2022 – 23 January 2023, the Danish Ministry of Taxation conducted a public consultation on the EU Commission proposal for modernisation of EU VAT system.

The presentation of the package as well as the feedback received within the public consultation are available on the Ministry website.

Finland – Government sent a U letter to the Parliament

On January 19 2023, the Finnish government sent a U letter to the parliament, to introduce the question of an EU legislative proposal falling within the competence of the parliament.

The letter is published in the Board’s proposals and decisions.

In the press release it is stated:

  • The Finnish government supports the objectives of the proposals;
  • The government supports the goal of utilizing digital technology in the fight against tax fraud; and
  • The government also considers the goal of simplifying the VAT system and reducing the administrative costs of companies to be important

However, the details of the proposals and the costs for companies and the Tax Administration still need to be clarified. It is necessary to examine the reform, especially from the perspective of SMEs.

Netherlands – ViDA – Government issued Decision note supporting ViDA implementation – 13 Jan 2023

On 13 January 2023, the Dutch government issued a Policy note accompanying the report on the Directive and regulation on VAT rules for the digital age, issued by the government’s Working Group Assessment of New Commission Proposals.

Sweden – Ministry of Finance issued Factual Memorandum on ViDA proposal

On 12 January 2023, the Swedish Ministry of Finance issued a memorandum on the ViDA proposal as an initial step of the process of transposing the EU-wide regulations into the national VAT Law.

In the official announcement, it was stated, “The (Swedish) government welcomes work aimed at preventing VAT fraud. Administrative cooperation and information exchange are important in this context. However, it is important that the rules in the VAT area are simple and clear. They should not involve large costs and administrative burdens for the companies. The government also supports measures to promote cross-border trade and companies’ ability to compete on equal terms.”

Sweden – Swedish Business Association Report and Commentary on ViDA Proposal

On 23 January 2023, the Swedish Business Association published their response and commentary addressed to the Ministry of Finance within the feedback process on the EU Commission ViDA proposal.

According to the official announcement, the Swedish Business supports the Business Tax Delegation (NSD) statements:

  • addresses the problem of short referral times for comprehensive reform proposals without translated texts; and
  • supports the work to fight fraud but the measures must be effective, proportionate and not reduce the EU’s competitiveness;
  • points out that the existing “impact assessment” lacks relevant impact analysis;
  • does not consider the proposals to deal with fraud and that the simplification proposals are too weak;
  • lacks accounts of Member States’ cooperation to reduce fraud/collection losses;
  • considers that the proposals should be treated in different parts instead of as a whole;
  • welcomes the increased use of e-invoicing, but questions the timing of its introduction;
  • welcomes an end to clearing models;
  • rejects the proposal for scrapped collective invoices;
  • rejects the requirement for an invoice regarding EU trade to be issued within two days;
  • questions the lack of uniform definition/presumptions around mediation via platforms;
  • welcomes expanded capabilities for OSS that can avoid local registrations; and
  • supports proposals for the expanded possibility for local reverse taxation B2B on an overall level.

Additional views with many examples can be found in the referral response.

United Kingdom Northern Ireland

On 18 January 2023, the HM Treasury published Explanatory Memorandum for European Union VAT in the Digital Age Legislative proposals and their impact on Northern Ireland.

In the Memorandum, a summary of the proposed regulations is presented.

Under the Northern Ireland Protocol, Northern Ireland is required to align to EU VAT law concerning goods.  Some of the proposals are likely to require action in Northern Ireland such as:

  • The proposed amendments to online marketplace liability and efforts for the EU to progress towards single EU VAT registration for intra-EU trade;
  • The proposals for OSS expansion; and
  • The mandatory acceptance of a reverse charge

The Government will be monitoring these developments as well as the ones on the proposed digital reporting requirements which could require new systems and reporting structures.

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