ViDA Update May 2024

ViDA Update: ECOFIN Council Meeting May 2024

Key Agreements and Debates on VIDA Amendments

On May 14, 2024, the ECOFIN Council convened to conduct a pivotal political debate on the draft amendments to the VAT in the Digital Age (VIDA) package, initially tabled on May 8, 2024. This meeting marked a significant step towards modernizing and harmonizing VAT regulations across the European Union, focusing on the implementation of e-invoices and the simplification of VAT registration processes.

Transition to E-Invoices

One of the primary outcomes of the meeting was the consensus on the issue of electronic invoices and their underlying regulation. Member States agreed to a longer transitional period, extending until July 1, 2030, to fully adapt to the new rules. The new regulations will make electronic invoices the default solution, removing the requirement for customer acceptance, and setting a 10-day deadline for issuing these invoices. This shift aims to streamline transactions, reduce administrative burdens, and enhance the efficiency of VAT compliance across the EU.

Single VAT Registration and the OSS EU Scheme

Another crucial agreement was reached on the Single VAT registration, which is set to come into effect on July 1, 2027.

This development will allow for the application of the One-Stop-Shop (OSS) EU scheme to a broader range of sales, including domestic Business-to-Consumer (B2C) supplies and the movement of own goods. Additionally, the existing call-off stock simplification will be discontinued. The introduction of the Single VAT registration aims to simplify VAT compliance for businesses operating across multiple EU Member States, fostering a more seamless and integrated market.

Unresolved Issues and Future Considerations

Despite the progress, no agreement was reached on Pillar 2 of the VIDA package. Several Member States expressed concerns about enforcing tax neutrality, leading to significant debate. The Belgian Presidency responded by proposing an exemption for SMEs from the ‘deemed supplier’ system for platforms providing short-term accommodation and passenger transport services. However, Estonia maintained its objection, citing the complexity of the draft.

To address these concerns, the separation of the deemed supplier model from the VIDA package was considered. This potential separation would allow for further deliberation and refinement of the model. However, a final decision on this matter is postponed until the Hungarian Presidency takes over.

Looking Ahead

The agreements reached during this ECOFIN Council meeting highlight a significant move towards modernizing the EU’s VAT system, making it more adaptable to the digital age. While the consensus on e-invoicing and the Single VAT registration marks substantial progress, the unresolved issues surrounding Pillar 2 and the deemed supplier system indicate that further discussions are necessary.

As the Hungarian Presidency approaches, it will be critical to continue addressing the concerns raised by Member States to ensure the successful implementation of the VIDA package. The collaborative efforts demonstrated in this meeting set a positive precedent for future negotiations and the ongoing evolution of the EU’s VAT framework.

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