Explanatory Memorandum to COM(2022)701 - Amendment of Directive 2006/112/EC as regards VAT rules for the digital age

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dossier COM(2022)701 - Amendment of Directive 2006/112/EC as regards VAT rules for the digital age.
source COM(2022)701 EN
date 08-12-2022


1. CONTEXT OF THE PROPOSAL


• Reasons for and objectives of the proposal

Value added tax (VAT) is a major source of revenue in all EU Member States 1 . It is also a key source of financing for the EU budget since 0.3%of VAT collected at national level is transferred to the EU as own resources, representing 12% of the total EU budget. Despite the key importance of VAT in budgetary policymaking, the VAT system is hampered by sub-optimal VAT collection and control methods. It also imposes excessive burdens and compliance costs.

The revenue loss, known as the ‘VAT gap 2 ’, delineates the issues caused by sub-optimal VAT collection and control. Estimated at EUR 93 billion in total for 2020, a significant part of this loss is due to missing trader intra-Community (MTIC) fraud 3 . The VAT gap also includes revenues lost to domestic VAT fraud and evasion, VAT avoidance, bankruptcies and financial insolvencies, as well as miscalculations and administrative errors. The VAT system is not only prone to fraud, but has also become increasingly complex and burdensome for businesses. In particular, the 30-year-old VAT rules for cross-border trade are not adapted to doing business in the digital age, thus calling for reflection on how technology can be used to reduce administrative burdens and related costs for businesses and at the same time fight tax fraud.

Therefore, in its 2020 Action Plan for fair and simple taxation supporting the recovery 4 , the Commission announced the legislative package ‘VAT rules for the digital age’, which was also included in the 2022 Commission work programme 5 . This proposal is part of this package, together with a proposal for a Council Regulation amending the Regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age 6 , and the proposal for a Council implementing Regulation amending Council Implementing Regulation (EU) No 282/2011 as regards information requirements for certain VAT schemes 7 .

Following the announcement of the Commission’s Tax Action Plan, the Council stated that it “supports the Commission’s suggestion to clarify, simplify and modernise the EU VAT rules”, “welcomes the initiative announced by the Commission to modernise reporting obligations for cross-border transactions (…) and the Commission’s intention to examine the need to adapt the VAT framework to the platform economy” 8 . The European Parliament resolutions generally support initiatives to fight VAT fraud 9 . Further, the European Parliament mentioned its explicit support for the initiative saying it “looks forward to the legislative proposal for modernising VAT reporting obligations” 10 . More recently, the European Parliament adopted a resolution 11 noting the potential for data and digital tools to reduce red tape and simplify various taxpayer obligations, in particular in the area of VAT returns and recapitulative statements, (…) and welcoming the Commission's proposal to modernise, simplify and harmonise VAT requirements, using transaction-based real-time reporting and e-invoicing. The resolution also emphasises that variances in the Member States’ tax regulations constitute a cumbersome challenge and, while endorsing the Union One Stop Shop (OSS), the resolution asks for its scope to be broadened to cover a wider range of services.

This package has three main objectives:

Modernising VAT reporting obligations 12 , by introducing Digital Reporting Requirements, which will standardise the information that needs to be submitted by taxable persons on each transaction to the tax authorities in an electronic format. At the same time it will impose the use of e-invoicing for cross-border transactions;

Addressing the challenges of the platform economy 13 , by updating the VAT rules applicable to the platform economy in order to address the issue of equal treatment, clarifying the place of supply rules applicable to these transactions and enhancing the role of the platforms in the collection of VAT when they facilitate the supply of short-term accommodation rental or passenger transport services; and

Avoiding the need for multiple VAT registrations in the EU and improving the functioning of the tool implemented to declare and pay the VAT due on distance sales of goods 14 , by introducing Single VAT Registration (SVR). That is, improving and expanding the existing systems of One-Stop Shop (OSS)/Import One-Stop Shop (IOSS) and reverse charge in order to minimise the instances for which a taxable person is required to register in another Member State.

VAT reporting and digital reporting requirements (DRRs)

The VAT Directive dates from the 1970s and, as such, the default reporting requirements are not digital. This said, the global trend shows a move from traditional VAT compliance towards real-time sharing of transaction-based data with tax administrations, often based on e-invoicing. The VAT Directive 15 represents a significant barrier towards digitalisation, as Member States need to obtain a derogation for them to be able to adopt DRRs based on obligatory e-invoicing requirements.

Even so, by means notably of such a derogation, several Member States have introduced various types of DRRs, providing information to tax authorities on a transaction-by-transaction basis. The measures have proven successful in increasing VAT collection, thanks to the improvements in tax control and the deterrent effect on non-compliance. The related increase in VAT revenue from 2014 to 2019 is estimated to be between EUR 19 billion and EUR 28 billion in those Member States which have introduced DRRs in this period, corresponding to an annual increase of VAT revenue of between 2.6% and 3.5% 16 .

The VAT Directive grants Member States a wide discretion to introduce the obligations they deem necessary to ensure the correct collection of the tax and to prevent evasion. Therefore, DRRs vary substantially from one Member State to the other. They can consist of (i) the transmission of monthly reports of business transactions, (ii) the real-time submission of invoices, (iii) the real or quasi-real time transmission of invoice data, or (iv) the submission of tax and accounting data or VAT records. Other Member States have implemented non-digital tools for reporting transactions, such as listings which do not provide data at transactional level, but only provide the values of sales or purchases per customer or supplier (listings of suppliers and customers). All these requirements are in addition to the requirement to submit VAT returns.

The scale of the problems caused by the rapid introduction of divergent digital VAT reporting requirements and the need to act swiftly was confirmed by stakeholders during the consultation 17 . The resulting fragmentation in the regulatory framework brings additional compliance costs for businesses that operate in different Member States, and therefore have to comply with varying local requirements, and creates barriers within the single market. With an increasing number of Member States implementing different models of digital reporting obligations 18 , the costs of fragmentation for multinational companies (companies with presence in more than one Member State) 19 are significant. EU-wide they are estimated at about EUR 1.6 billion annually, of which EUR 1.2 billion are borne by small-scale multinational companies and EUR 0.4 billion by large-scale multinational companies 20 .

In addition, the current reporting system of intra-Community transactions (referred to in the VAT Directive as ‘recapitulative statements’ 21 ) does not allow Member States to effectively tackle VAT fraud linked to these transactions The current recapitulative statements date from 1993 and have not substantially changed since then. They are ill-prepared for the digital economy and can hardly be compared to the much more modern digital reporting systems implemented by some Member States for domestic transactions.

Among other shortcomings, recapitulative statements only provide aggregated data for each taxable person, and not transaction-by-transaction data. Moreover they do not allow data from supplies to be cross-matched with that of acquisitions, as the VAT Directive leaves the reporting of intra-Community acquisitions optional for Member States and fewer than half of the Member States have introduced this obligation. Further, theses data may not be available to tax authorities in other Member States at the right time, both because of filing frequency because of the time it takes for local tax authorities to upload data onto the system. These shortcomings were rightly highlighted by almost two thirds of informed stakeholders responding to the public consultation who totally or partly agreed that recapitulative statements would be more effective in fighting intra-EU fraud if data were collected on a transaction-by-transaction basis and closer to the moment of the transaction.

Any reform of the reporting of cross-border transactions inevitably entails changes to administrative cooperation and exchange of data between the competent authorities of the Member States and the VAT Information Exchange System (VIES) 22 .


These issues will be solved, in relation to the fight against VAT resulting from intra-Community trade, by introducing a transaction-by-transaction reporting system that will provide information to Member States in almost real time, in line with the successful systems several Member States have implemented for domestic transactions. In relation to the lack of harmonisation of domestic reporting systems, the issues will be tackled by establishing a common template that those reporting will have to follow, allowing taxable persons to always report data from electronic invoices issued according to the European standard set up in Directive 2014/55/EU on electronic invoicing in public procurement 23 .

VAT treatment of the platform economy

The rise of the platform economy business model 24 has triggered new problems for the VAT system. One of these problems is VAT inequality.

Under VAT rules, a taxable person means any person (natural or legal) who, independently, carries out any economic activity 25 . Taxable persons are required to register for VAT and charge VAT on their sales. However, individuals acting in their private capacity are not considered as taxable persons. In addition, small enterprises are exempt from VAT due to a simplification measure relieving them of VAT administrative obligations.

Until recently, private individuals and exempted small enterprises were not considered to have any impact on market competition with VAT registered businesses. But the platform economy has introduced new business models that are changing this situation.

Private individuals and small businesses can provide their VAT-free services via a platform and with the economies of scale and network effect 26 be in direct competition with traditional VAT registered suppliers. This means that, for example, a hotel could be competing with accommodation listings which do not charge VAT on their services. In Europe the cost of accommodation via a platform can be, on average, some 8% to 17% cheaper than a regional hotel’s average daily rate 27 . The information provided by the “VAT in the Digital Age” 28 study indicates that (although it varies depending on the type of platform) up to 70% of the total of underlying suppliers using a platform are not registered for VAT. More than two thirds of respondents with an opinion on the issue had experienced such distortions of competition.

The passenger transport and accommodation sectors have been explicitly identified by the study as sectors in which VAT inequality is at its most apparent (in that the accommodation platform model competes directly with the hotel sector, and the passenger transportation platform model competes directly with private taxi firms). These are also the two largest sectors of the platform economy 29 , behind the sale of goods via platforms (also known as ‘e-commerce’), which has its own rules regarding the supply of goods.

Another problem area is the lack of clarity on VAT rules that apply to the services rendered by these platforms and, in particular, to identifying the VAT status of the underlying supplier.

The taxable status of those providing services through the platform determines the VAT treatment of the platform facilitation services when the provider is established in a different Member State to that of the platform. In such a situation, regardless of whether the provider is a non-taxable person or a taxable person, the platform could use the One Stop Shop or apply the reverse charge. However, this determination is not straightforward, as the platforms often lack information they need to assess the status of the underlying supplier.

In addition, various rules in the VAT Directive applicable to the platform economy have been applied differently by Member States 30 . For example, the facilitation services charged by the platforms are regarded in some Member States as electronically supplied services, while in others they are regarded as intermediary services. Clarification of these rules is needed, as the current divergent application of EU VAT rules across the Member States can lead to different places of supply being applied 31 , which can subsequently lead to double taxation or non-taxation.

One additional problem area relates to the obligations imposed on the platforms.

Platforms are required to keep certain information 32 relating to supplies facilitated by them and to make this available on request to Member States. However, platforms are faced with a number of different requirements from Member States regarding the timeframe and format for this information. Therefore a regularisation is necessary. In addition, in order to combat fraud platforms need to keep this information and make it available not only for business to business (B2B) (as it is now) but also for business to consumer (B2C) supplies.

These issues will be solved by introducing a deemed supplier model, by which platforms will account for the VAT on the underlying supply where no VAT is charged by the supplier, thereby ensuring equal treatment between the digital and off-line sectors of short-term accommodation rental and passenger transport. In addition, clarifications will be given on the treatment of the facilitation service to allow for a uniform application of the place of supply rules, and steps will be taken to harmonise the transmission of information from the platform to the Member States.

VAT registration requirements in the EU

Businesses carrying out transactions taxed in other Member States still face considerable VAT compliance burdens and costs, which constitute a barrier within the single market. These are estimated as follows:

·The minimum one-off cost of VAT registration in another Member State is EUR 1 200.

·The minimum ongoing cost, on a yearly basis, for VAT compliance in another Member State is EUR 8 000 for an average business and EUR 2 400 for an SME.

The VAT e-commerce package that entered into application on 1 July 2021 provided, for the first time, comprehensive VAT legislation dealing with the e-commerce economy (whereby consumers order, essentially via the internet, directly from suppliers in other Member States and in non-EU countries). The schemes developed (or extended) through the e-commerce package have alleviated the registration burden for businesses carrying out transactions in Member States in which they are not established, avoiding the need for the VAT registration of suppliers/deemed suppliers in each Member State of establishment of their customer.

These schemes are known as the One-Stop-Shop (OSS) for supplies to consumers within the EU and the Import One-Stop-Shop (IOSS) for the importation of small parcels of consumer goods (where the value does not exceed EUR 150). Specific VAT provisions and obligations were introduced for ‘platforms’ (introducing the notion of a ‘deemed supplier’) which have a predominant position in the e-commerce economy.

The implementation of the OSS and IOSS has proved to be a great success as shown by the evaluation 33 of the e-commerce package. The benefits of the OSS and IOSS for businesses and for the single market was confirmed by Member States in the Council Conclusions 34 of the March 2022 ECOFIN.

However, some supplies of goods and services are not covered by either of these simplification schemes and instead remain subject to burdensome VAT accounting requirements in other Member States. These include certain types of supplies of goods that, even though they may have a cross-border aspect, do not fall within the definition of intra-EU distance sales of goods. As the IOSS is currently optional, its capacity to alleviate the need for multiple VAT registrations is limited and the complexity of the import process is not reduced as far as possible.

An extension of the scope of the OSS and IOSS would ensure a further decrease in the need for multiple VAT registrations in the EU.


The VAT in the Digital Age proposal is a REFIT initiative that addresses the VAT rules in the context of rising use of digital technology 35 , among both tax authorities and the business community. The VAT system has not yet fully taken advantage of the opportunities created by these technological advances. New digital tools and solutions will help tax authorities tackle the VAT Gap more efficiently while allowing for VAT compliance to be simplified and reducing associated costs. This initiative thus seeks to further adapt the EU VAT framework to the digital era.

• Consistency with existing policy provisions in the policy area

This initiative is consistent with the proposal 36 tabled in 2018 by the Commission for a definitive VAT system for the taxation of trade between Member States, which is still being discussed in Council. This proposal aims to replace the transitional system in force today 37 by treating intra-Community transactions in the same way as domestic ones. VAT would be due in the Member State of destination of the goods 38 at the rate of that Member State but would be charged and collected by the supplier in its own Member State. The VAT in the Digital Age initiative has the potential to strengthen both the current and the definitive VAT system.

The VAT e-commerce package was designed to reshape, update and modernise the VAT system to ensure its relevance and effective application to the new realities of the e-commerce market. At the same time, the reforms sought to make VAT compliance easier for legitimate businesses who carry out cross-border online commercial activity by taking a new approach to tax collection. The main aim was to create a fairer, simpler and more harmonised system of taxation. This proposal builds on the successful reform of the VAT e-commerce rules by further reducing the need for non-identified trades to register in the Member State of consumption. This will inter alia include an update of the current e-commerce rules applicable to Small and Medium Enterprises (SMEs) allowing SMEs to benefit from the simplifications brought by both the new SME 39 and existing OSS schemes.

The initiative supports the EU’s sustainable growth strategy 40 that refers to better tax collection, reduction of tax fraud, avoidance and evasion and to the reduction of compliance costs for business, individuals, and tax administrations. Improving taxation systems to favour more sustainable and fairer economic activity is also part of the EU’s competitive sustainability agenda.

• Consistency with other Union policies

The VAT in the Digital Age initiative is linked to the treaty-based goal of establishing a functional internal market 41 and reflects the European Commission’s priorities 42 to improve the business taxation environment in the single market, as well as to tackle differences in tax rules that can be an obstacle to the deeper integration of the single market. This initiative seeks to adapt the EU VAT framework to the digital era. Therefore, its objectives are also consistent with one of the six top priorities of the Commission, ‘A Europe fit for the digital age’, and its objective to empower businesses to seize the potential of the digital transformation.


The Commission has set the improvement of tax collection and the reduction of tax fraud, avoidance and evasion as priorities 43 . These two topics are the cornerstone of the initiative. The initiative also supports the EU’s sustainable growth strategy 44 that refers to better tax collection, reduction of tax fraud, avoidance and evasion and to the reduction of compliance costs for business, individuals, as well as tax administrations. Improvement of taxation systems to favour more sustainable and fairer economic activity is also included in the EU’s competitive sustainability agenda.


The VAT in the Digital Age initiative runs alongside other Commission initiatives relating to the Digital Economy, such as the recent proposal for a Directive to improve working conditions of people working through digital labour platforms 45 , and the ongoing work relating to short-term rentals. Under these initiatives the general direction is to make platforms more accountable and play a greater role in the regulatory framework. This is in in line with the changes proposed in this Directive for the platform economy where, under certain circumstances, platforms will be responsible for paying the VAT due instead of small platform suppliers. This will improve the collection of VAT, as many of these suppliers are unaware of their potential VAT obligations and would in any case encounter difficulties in complying with these obligations.

The VAT in the Digital Age initiative also ensures consistency with existing legislation in the digital area such, as the EU Directive on electronic invoicing in public procurement (B2G) 46 . This Directive aims to facilitate the use of a common European standard on electronic invoicing across Member States to promote interoperability and convergence at EU level. This has the potential to reduce obstacles to cross-border trade that arise from the coexistence of different national legal requirements and technical standards in e-invoicing. The VAT in the Digital Age initiative provides for this European standard on electronic invoicing to be the default method for digital VAT reporting requirements purposes.

This initiative is also consistent with the Customs Action Plan 47 . Management of e-commerce is one of the four key areas of action in the Customs Action Plan. As a result, the improvement of the import one stop shop (IOSS) scheme in this proposal is limited to the mandatory provision of this scheme for platforms. Any other improvement or extension, such as the removal of EUR 150 threshold below which this simplification scheme can be used, will be done in the framework of this customs reform 48 .

In the final report of the Conference on the Future of Europe 49 citizens call for ‘Harmonizing and coordinating tax policies within the Member States of the EU in order to prevent tax evasion and avoidance’, ‘Promoting cooperation between EU Member States to ensure that all companies in the EU pay their fair share of taxes’. The VAT in the Digital Age initiative is consistent with these goals.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

This Directive amends the VAT Directive on the basis of Article 113 of the Treaty on the Functioning of the European Union. That Article provides that the Council, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, can adopt provisions to harmonise Member States' rules in the area of indirect taxation.

• Subsidiarity (for non-exclusive competence)

This initiative is consistent with the principle of subsidiarity. Given the need to modify the VAT Directive, the objectives of this initiative cannot be achieved by the Member States themselves. Therefore, the Commission, which has responsibility for ensuring the smooth functioning of the single market and for promoting the general interest of the EU, needs to propose actions to improve the situation.

In addition, as the main problems at stake - sub-optimal VAT collection and control, and excessive burdens and compliance costs - are common to all Member States, uncoordinated fragmented national actions would have the potential to distort intra-EU trade. In the targeted consultation 50 , businesses stated their preference in this regard to have VAT rules applied uniformly at EU level, rather than having to comply with different reporting or registration obligations at national level. As with platforms, there are significant distortions of competition between the on-line and off-line markets in the short-term accommodation rental and passenger transport sectors, as well as a non-harmonised approach to the place of supply of the facilitation services. Therefore, the Commission needs to ensure that the VAT rules are harmonised. Regarding VAT collection and control, the size of the VAT gap and its persistence over time indicates that national instruments are not sufficient to fight cross-border fraud, as shown by the estimated levels of MTIC fraud, which can only be fought efficiently and effectively by coordinated action at EU level. The intra-EU aspect of VAT fraud therefore requires EU intervention regarding reporting obligations.

• Proportionality

The proposal is consistent with the principle of proportionality and does not go beyond what is necessary to meet the objectives of the Treaties, in particular the smooth functioning of the single market.

Proportionality is ensured by the fact that Member States will be able to decide whether or not to introduce domestic reporting requirements based notably on whether the level of domestic VAT fraud is an urgent issue for them. The requirement for interoperability or convergence of national systems with the intra-EU digital reporting is necessary to adopt an EU wide DRR framework.

In the platform economy area, proportionality is ensured by focusing the measure on the accommodation and passenger transport sectors, where the issue of VAT inequality is most acute.

Proportionality is furthermore ensured by the fact that the ‘single VAT registration’ pillar of the initiative does not interfere with national VAT registration processes. Instead, it focusses on limiting the instances in which a trader who is established outside the Member State of consumption is required to register for VAT in that Member State.

An EU-wide framework for handling VAT registration is proportionate as it will make the functioning of the single market more sustainable. Removing the need for multiple registrations within the EU can, by its very nature, only be achieved with a proposal to amend the VAT Directive.

• Choice of the instrument

The proposal requires amending Directive 2006/112/EC on the common system of value added tax (the VAT Directive), Council Implementing Regulation (EU) No 282/2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax and Council Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of value added tax.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

The e-commerce package came into application on 1 July 2021 and introduced a number of amendments to the VAT rules governing the taxation of business-to-consumer (B2C) cross-border e-commerce activity in the EU. The most noteworthy amendments include the extension of the scope of the Union and non-Union Mini One Stop Shop (MOSS) schemes; the abolition of the EUR 22 VAT exemption threshold for imported goods; and the introduction of the IOSS (Import One-Stop Shop) and special arrangements to support the collection of VAT on distance sales of imported goods not exceeding EUR 150.

The Commission conducted an ex-post evaluation of the first 6 months of application of the e-commerce package. The initial results are very encouraging and are testament to the success of the new measures. In total, in the first 6 months, almost EUR 8 billion of VAT was collected via the three schemes (Union and non-Union OSS and IOSS). The results of the evaluation show that approximately EUR 6.8 billion of VAT was collected in the Union One-Stop Shop and non-Union One-Stop Shop schemes, which equates to at least EUR 13.6 billion on an annual basis. Furthermore, in the first 6 months, approximately EUR 2 billion of VAT was collected specifically in relation to imports of low value consignments with an intrinsic value not exceeding EUR 150, which equates to around EUR 4 billion on an annual basis. Of the EUR 2 billion of VAT that was collected in relation to imports of low value goods in the first 6 months, almost EUR 1.1 billion was collected via the Import One-Stop Shop. The package has met the goal of achieving a fairer and simpler system of taxation, while protecting Member States’ VAT revenue has been met.

The implementation of the package has also helped to counter VAT fraud. Analysis from customs data indicates that the top 8 IOSS registered traders accounted for approximately 91% of all transactions declared for import into the EU via the IOSS. This is a very encouraging statistic as it shows the impact the new ‘deeming’ provision for marketplaces has had on compliance. The proposal therefore envisages the introduction of a deemed supplier regime in the accommodation and passenger transport sectors in the platform economy.

•Stakeholder consultations

On 6 December 2019, the European Commission’s Directorate-General for Taxation and Customs (DG TAXUD) organised an event on ‘VAT in the Digital Age’ in Brussels, Belgium. This event brought stakeholders working in the field of VAT together to reflect on the opportunities and challenges that new technologies bring in the area of VAT. In particular, the potential of using advanced technologies was discussed. The seminar also provided a chance to share recent experiences on how Member States use digital solutions for VAT reporting, collecting and fraud-detection.

The Commission worked with two expert groups for discussions at technical level: the Group on the Future of VAT (GFV) and the VAT Expert Group (VEG). Meetings of the GFV (9 February and 6 May 2022) and of the VEG (29 November 2021 and 10 June 2022) took place to discuss different issues related to the VAT in the Digital Age initiative. A sub-group ‘VAT aspects of the platform economy’ composed of members of the GFV and the VEG, was tasked with advising and assisting DG TAXUD by carrying out an in-depth analysis of the problems related to VAT encountered by the different actors in the platform economy. The outcome of its work can be found at: 2. GROUP ON THE FUTURE OF VAT (GFV) - Library (europa.eu) .

Two Fiscalis workshops also took place (May and October 2021) to gather feedback from Member States and stakeholders on the interim report and the draft final report of the ‘VAT in the Digital Age’ study.

A public consultation was also organised, from 20 January to 5 May 2022, resulting in 193 responses. The consultation sought stakeholders' views on whether the current VAT rules are suited to the digital age, and on how digital technology can be used to help Member States fight VAT fraud and to benefit businesses. The consultation report is available on the initiative’s public consultation page: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13186-VAT-in-the-digital-age/public-consultation_en .

Stakeholders agreed there was a disconnect between the old VAT rules and today’s digital age.

On VAT reporting, the respondents agreed that a DRR could bring benefits and made clear their preference for an e-invoicing solution that can also be used for their internal processes. Member States called for more autonomy in deciding on domestic DRR.

On platform economy, stakeholders broadly recognised problems, with more nuanced views depending on the respondent’s business model. Those that would be impacted (i.e. platforms) generally rejected the ‘deemed supplier’ provision and expressed their preference for the status quo.

On VAT registration, stakeholders unanimously agreed that the scope of the OSS/IOSS needs to be extended. Businesses also asked for the reverse charge to be made mandatory for B2B supplies by non-established persons. There was also support for making the IOSS mandatory.

• Collection and use of expertise

The Commission used the analysis carried out by Economisti Associati S.r.l., for the study ‘VAT in the Digital Age’ (running from October 2020 to March 2022) 51 . The final report was submitted on 1 April 2022.

The study’s aim was first to evaluate the current situation with regard to the digital reporting requirements, to the VAT treatment of the platform economy; and to the single VAT registration and the Import One-Stop Shop and secondly, to assess the impacts of a number of possible policy initiatives in these areas.

• Impact assessment

Examined by the Regulatory Scrutiny Board on 22 June 2022, the impact assessment for the proposal obtained a positive opinion (Ares(2022)4634471). The Board recommended more detail be added, to describe better the methodologies used for modelling and to further clarify the options. The impact assessment was accordingly amended to include Member State and sectoral perspectives on the platform economy, the econometric analysis/techniques used for modelling were comprehensively described and the structure of the DRRs linked to the options was detailed.

Several policy options were analysed in the impact assessment.

·For VAT reporting, the options ranged from a simple recommendation to introduce an EU DRR and request for data in a specific format, to the introduction of DRR at both EU and domestic level.

·On the VAT treatment of the platform economy area, the options ranged from legal clarifications to the introduction of a wide ‘deemed supplier’ provision applicable to all sales of services via platforms.

·For VAT registration the options related to intra-EU trade (different ranges of OSS extension and the introduction of a reverse charge for B2B supplies by non-established persons) and importations of low value consignments (making the IOSS mandatory for different suppliers, with/without a certain limit and the removal of the EUR 150 threshold for use of the IOSS).

The analysis revealed that best balance regarding the policy options in terms of effectiveness, proportionality and subsidiarity would be achieved by combining the introduction of DRRs at EU level, a ‘deemed supplier’ provision for the short-term accommodation rental and passenger transport sectors and a combination of broader OSS extension, reverse charge and a mandatory IOSS for platforms.

Between 2023 and 2032 this approach is expected to bring between EUR 172 billion and EUR 214 billion net benefits, including EUR 51 billion in savings. These savings include:

·EUR 41.4 billion from VAT reporting (EUR 11 billion from the removal of old reporting obligations, EU 24.2 billion reduction of fragmentation costs, EUR 4.3 billion savings pre-filled VAT returns, and EUR 1.9 billion e-invoicing benefits);

·EUR 0.5 billion from streamlining and clarifications in platform economy area; and

·EUR 8.7 billion from removing VAT registration obligations. Environmental, social and business automation benefits, as well as benefits related to the functioning of the Internal Market (more level-playing field) and tax control efficiency are also expected.

In line with the sustainable development goals No 8 and 9 52 , a more efficient and sustainable VAT system promotes economic growth, while digital reporting supports business automation and fosters innovation. In line with the ‘digital by default’ principle, the introduction of digital reporting saves paper invoices and benefits the environment.

The impact assessment and its annexes, the executive summary and the Board’s opinion on the impact assessment are available at the consultation’s page on “Have your say” portal: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13186-VAT-in-the-digital-age_en .

• Regulatory fitness and simplification

This proposal is a REFIT initiative to modernise the current VAT rules and take account of the opportunities offered by digital technologies 53 . The proposal is expected to harmonise VAT treatment and promote the provision of cross-border supplies in the single market, and help improve tax collection and therefore ensure sustainable revenues during the recovery from the COVID-19 pandemic.

The expectation is that companies engaged in cross-border transactions will see a net benefit from the introduction of the proposal. Overall, the introduction of digital reporting requirements (DRR) at EU level, the deemed supplier regime and the single VAT registration (SVR), will support the ‘one in, one out’ principle or even go further, to ‘one in, multiple out’ taking account of the multiple obligations created by national authorities. The overall saving over the 10-year period between 2023 and 2032 is estimated at EUR 51 billion and the total implementation cost (for businesses and national administrations) is EUR 13.5 billion in the same period.

The removal of recapitulative statements as a result of the DRR is expected to bring a net benefit to companies engaged in cross-border transactions. However, companies that are not active across borders, (the vast majority of micro and small entities) would incur costs related to the introduction of a DRR. Those costs could be partly mitigated by the introduction of additional services at national level, such as the pre-filling of VAT returns. As for the SVR, it is expected to further reduce the need for multiple registrations in other Member States and help reduce administrative burdens and related costs for businesses involved in cross-border supplies in the single market.

The Fit for Future Platform included the VAT in the Digital Age in its annual work programme for 2022, recognising its potential for reducing the administrative burden in the policy field 54 . The evidence behind the opinion of this expert group of 5 December 2022 has been taken into account during the preparation of this proposal.

• Fundamental rights

Contents

1.

N/A


4. BUDGETARY IMPLICATIONS

The proposal is expected to increase VAT revenues for Member States. The operational objectives are set at a VAT gap decrease of up to 4 percentage points compared with 2019 level, baseline included. The estimated overall benefit between 2023 and 2032 including additional VAT revenue ranges between EUR 172 billion and EUR 214 billion.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

The VAT Committee, an advisory committee on VAT issues in which representatives of all Member States participate and which is chaired by Commission officials from the Directorate General Taxation and Customs Union (DG TAXUD), will monitor the implementation of the VAT in the Digital Age initiative, and discuss and clarify possible interpretation issues between Member States regarding the new legislation.

The Standing Committee on Administrative Cooperation (SCAC) will deal with all possible issues regarding administrative co-operation between Member States resulting from the new provisions covered in this legislative package. In case new legislative developments are required, the GFV and the VEG may be further consulted.

In addition, the Commission and the Member States will monitor and evaluate whether this initiative is functioning properly and the extent to which its objectives have been achieved based on the indicators set out in Section 4 of the impact assessment accompanying this proposal.

• Explanatory documents (for directives)

The proposal does require explanatory documents on the transposition.

• Detailed explanation of the specific provisions of the proposal


2.

Platforms: Articles 28a, 46a, 135 (3), 136b, 172a, 242a, 306



A deemed supplier regime will be introduced in the short-term accommodation rental, and passenger transport sectors of the platform economy (Article 28a). Under this measure, where the underlying supplier does not charge VAT because they are, for example, a natural person or they make use of the special scheme for small enterprises, the platform will charge and account for the VAT on the underlying supply. This will ensure a level playing field between platforms offering services and other traditional suppliers qualifying as taxable persons, while not imposing a burden on the underlying suppliers operating through the platform. The ‘deemed supplier’ model is a simplification measure intended to facilitate the collection of VAT in specific situations. This is typically the case when the intermediary in a transaction (i.e. the platform) is better placed than the underlying supplier to ensure the collection of the VAT due on this transaction. The reasons are either because it would be too burdensome for this underlying supplier to collect the VAT (e.g. when the underlying supplier is a natural person or a taxable person using special schemes for small enterprises), or because it is more secure to collect it from this intermediary (when the underlying supplier is not established in the EU). Further elements relating to the practical application of the measure are in the accompanying proposal to amend Implementing Regulation (EU) No 282/2011.


In order to prevent abuse, it has been clarified that a transaction for which a platform is the deemed supplier cannot be included in the special scheme for travel agents (Article 306).


Further, clarifications to the existing VAT legislation in this area have been introduced. Namely:


·That the facilitation service provided by a platform should be regarded as an intermediary service (Article 46a). This allows for a uniform application of the place of supply rules for the facilitation service.

·That the supply by the underlying supplier to the platform shall be VAT exempt without a deduction right (Article 136b).

·That the provision of short-term accommodation rental shall be regarded as a sector similar in nature to the hotel sector, and therefore not eligible to be exempt from VAT (Article 135). This ensures that the deemed supply from the platform to the final consumer has the same VAT treatment as the provision of services from traditional hotels to the final consumer.

·That the supply by the platform to the final customer should not impact on the deduction right of the platform for its activities (Article 172a).

·That, for supplies falling outside the deemed supplier model, the platform will be obliged to keep the records relating to both business to business (B2B) and business to consumer (B2C) supplies (Article 242a). Accompanying legislation (the proposal to amend Regulation (EU) No 904/2010) will standardise how this information is to be transmitted to the Member States. For supplies falling within the deemed supplier model, the normal VAT accounting rules will apply.


3.

E-invoicing will be the general rule for the issuance of invoices: Articles 217, 218 and 232



The adaptation of the VAT Directive to the new digital reality requires a change in the treatment given to electronic invoices. Until now, the VAT Directive has put on an equal footing paper and electronic invoices. Article 232 required that the issuance of electronic invoices be subject to the acceptance of the recipient. This requirement impeded Member States from implementing mandatory electronic invoicing that could be used as a basis for an electronic reporting system. It also slowed down the development of electronic invoices, as taxable persons could not adapt their invoicing systems to implement full electronic invoicing because they had to issue paper invoices whenever the recipient did not accept electronic invoices.


The proposal changes this situation, providing in Article 218 that electronic invoicing will be the default system for the issuance of invoices. The use of paper invoices will only be possible in situations where Member States authorise them. This authorisation cannot cover those cases that are subject to the reporting obligations in Chapter 6 of Title XI, as that would prevent or create difficulties for the automatic reporting of the data. Taxable persons will always be allowed to issue electronic invoices according to the European standard. This standard is the one adopted by the Commission Implementing Decision (EU) 2017/1870 55 according to the request laid down in Directive 2014/55/EU. The issuance and transmission of electronic invoices cannot be conditional on a prior authorisation of validation by the tax authorities of the Member State in order to be sent to the recipient. Several Member States have been granted a special measure to apply mandatory e-invoicing, where such clearance systems have been implemented. These systems can only be applied by those Member States up to 1 January 2028, ensuring the convergence with the EU digital reporting system.


To ensure that taxable persons will not depend on the authorisation of the recipient to issue an electronic invoice, Article 232 is deleted from the VAT Directive.


Further, the definition of electronic invoice in the VAT Directive is changed to align the concept with the one in Directive 2014/55/EU on electronic invoicing in public procurement, which regulates electronic invoicing in B2G transactions. As a result, when referring to electronic invoices in the VAT Directive, reference will be made to structured electronic invoices.


4.

Deadline for the issuance of invoices on intra-Community supplies of goods and supplies of services where the reverse charge applies: Article 222



In the case of exempted intra-Community supplies of goods and for services supplied by non-established taxable persons subject to the reverse charge, the VAT Directive provides for a deadline to issue an electronic invoice that could take up to forty-five days from the moment the chargeable event occurred.


The new reporting system is built under the philosophy of real-time information. Given that the reporting is based on the issuance of the invoice, such a deadline will delay excessively the arrival of the information on those supplies to the tax administration. For that reason, Article 222 sets up a deadline of two days after the chargeable event takes place for the issuance of invoices in these cases.


5.

Elimination of the possibility to issue summary invoices: Article 223



The aim of the new reporting system is to provide information on transactions in almost real-time to the tax administrations and foster the use of electronic invoices. The possibility to issue summary invoices for a calendar month goes against those goals. For that reason, Article 223 is deleted, so there will be no possibility to continue issuing summary invoices.


6.

Content of the invoices: Article 226



The aim of the new reporting system is to provide the necessary information to tax administrations while minimising the administrative burden for taxable persons. In order to achieve the latter objective, the reporting system will take advantage of the issuance of an electronic invoice to automate the process of reporting. However, for this to be possible, it is necessary to include in the invoice all the information required by the tax administrations for the reporting obligation.


This is the reason why Article 226 has been changed to ensure the inclusion in the invoice of all the data that needs to be reported. The data elements added to the content of the invoice are the identifier of the bank account in which the payment for the invoice will be credited, the agreed dates and amount of each payment related to a concrete transaction, and, in the case of an invoice that amends the initial invoice, the identification of that initial invoice.


7.

Elimination of outdated Articles: Article 237



Article 237 provides for an obligation on the Commission to present a report to the European Parliament and the Council on the impact of the invoicing rules. Given that this obligation has already been fulfilled 56 , there is no reason to keep this Article in the VAT Directive.


8.

Digital reporting system for intra-Community transactions: Articles 262 to 271



One of the objectives of the initiative is to replace the outdated recapitulative statements with a digital reporting requirements system for intra-Community transactions, which will provide faster information on a transaction-by-transaction basis and with higher quality. That information will feed into the risk analysis systems of the Member States to help them counter the VAT fraud linked with the intra-Community trade, in particular Missing Trader Intra-Community fraud. For that purpose, Chapter 6 of Title XI, which referred to the recapitulative statements, refers now to digital reporting requirements, and its new section 1, to digital reporting requirements for intra-Community transactions.


The digital reporting requirements for intra-Community transactions will cover the same transactions that were covered by the recapitulative statements with the exception of the call-off stocks under the conditions set out in Article 17a, which will cease to exist. For this reason, the second paragraph of Article 262 is deleted. In addition, supplies of goods and services subject to the reverse charge mechanism in accordance with Article 194 will also be included in the recapitulative statements and consequently in the digital reporting requirements.


Article 263 provides for the main features of the new digital reporting system: the information has to be transmitted on a transaction-by-transaction basis, the deadline for the transmission of the data is two working days after the issuance of the invoice, or after the date the invoice should have been issued in case the taxable person has not complied with their obligation to issue an invoice, the transmission of the data has to be carried out electronically, and Member States will provide the means for that transmission. Finally, the information can be submitted directly by the taxable person or by a third party on their behalf.


The transmission of the data can be done according to the European Standard. Member States can provide for the transmission of the data from electronic invoices issued under a different format, as long as they also allow the use of the European Standard. In any case, the data formats allowed by Member States will have to guarantee the interoperability with the European standard.


This provision provides flexibility to Member States and taxable persons to use different data formats for the transmission of the data. However, it provides for at least one standard which will be accepted by all Member States and therefore allows companies to submit their data on intra-Community transactions according to the European Standard in any Member State, without needing to adapt to different reporting systems.


The first paragraph of Article 264 provides for the information that has to be submitted for each transaction. Basically, this information is the same that had to be submitted in the recapitulative statements, but detailed for each transaction instead of aggregated by customer. However, there are new fields that have been added to improve the detection of fraud. These new fields are the reference to the previous invoice in case of rectification of invoices, the identification of the bank account into which the payment for the invoice will be credited and the dates agreed for the payment of the amount of the transaction. With a view to a full standardization and interoperability, implementing rules shall be adopted by the Commission to define a common electronic message to this purpose.


Article 266 allowed Member States to request additional data on intra-Community transactions. This possibility runs counter to the desired harmonisation in this field. For that reason, this Article is deleted from the VAT Directive, so taxpayers will always submit the same information when they carry out an intra-Community transaction, irrespective of the Member State in which the transaction takes place.


Article 268 places an obligation on Member States to collect data from the taxpayers that, in their territory, make intra-Community acquisitions of goods or transactions treated as such. The collection of this data was optional for Member States under the recapitulative statements.


The replacement of the recapitulative statements with a new digital reporting system requires the modification of certain Articles of the VAT Directive which contained references to the recapitulative statements, to replace them with the reference to the new reporting system. This is the case with Articles 42, 138a, 262, 265 and 267. Other Articles that regulated aspects of the recapitulative statements and are no longer necessary with the new reporting system have been deleted. This is the case with Articles 266, 269, 270 and 271.


9.

Digital reporting system for supplies of goods and services for consideration carried out within the territory of one Member State: Articles 271a to 273



Apart from replacing the recapitulative statements with a new digital reporting system for intra-Community transactions, the initiative aims to achieve the harmonization of the existing and future reporting systems for supplies of goods and services for consideration carried out within the territory of the Member State, in order to avoid the administrative burden which this fragmented framework entails for taxable persons operating cross-border. These systems will align with the digital reporting system designed for intra-Community transactions, simplifying compliance to taxpayers, which will be able to provide with a common format the data required for both domestic and intra-Community transactions, in any Member State.


This harmonisation is achieved by the rules included in the new Section 2 of Chapter 6 of Title XI.


The first paragraph of Article 271a allows Member States to put in place a reporting system for supplies of goods and services carried out between taxable persons within their territory. The second paragraph of Article 271a allows Member States to put in place reporting systems for any other type of transaction. This second paragraph covers for instance, the reporting of supplies of goods or services carried out by a taxable person to a private individual.


To be noted that Article 271a constitutes an option, but not an obligation for Member States. However, if they decide to put in place a reporting system according to the first paragraph of that Article, that is to say a reporting system for transactions between taxable persons within the territory of their Member State, such a system will have to comply with the features laid down in Article 271b.


The features of the reporting system in Article 271b are similar to the one designed for intra-Community transactions: reporting on a transaction-by-transaction basis, transmission of the data two working days after the issuance of the invoice, or after the date the invoice should have been issued where the taxable person has not complied with their obligation to issue an invoice, the possibility of transmitting the data directly by the taxable person or through a service provider, and the possibility to transmit the data according to the European Standard. Member States can put at the disposal of taxable persons additional tools to transmit the data. The objective is, once again, to provide enough flexibility to Member States and taxable persons to use different methods for the transmission of the data, while providing for at least one standard which will be accepted by all Member States and therefore allowing companies to submit their data according to the European Standard in any Member State, without needing to adapt to different reporting systems.


It will be necessary to verify if the reform of reporting system achieves its objectives of reducing the VAT gap and reducing the costs for taxable persons derived from the fragmentation of those systems. For that reason, Article 271c asks the Commission to submit by March 2033 a report evaluating the results achieved by this reform and, if necessary, a proposal to overcome the limitations and proposing a further harmonisation of domestic reporting. This deadline will allow to evaluate the reporting systems once they are fully implemented, account taken that the full adaptation to the harmonised requirements does not need to take place until 2028.


To achieve the harmonisation of reporting systems it is not enough that the future systems are implemented according to the features laid down in this initiative. Member States which already have reporting systems in place for these transactions will have to adapt them to the features of the harmonised reporting system. For that purpose, the initiative requires that this adaptation takes place by 2028 at the latest.


Article 273 continues to give Member States freedom to implement these obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion. However, this freedom is limited in relation to reporting obligations, which can only be implemented according to the provisions of Chapter 6 of Title XI, in relation to the transactions under their scope.


10.

Single VAT Registration (SVR) and improvements to the existing e-commerce rules and the margin scheme



Modifications and clarifications to the existing VAT legislation have been introduced as set out below.


Moving towards the taxation at destination principle and in line with Article 4 of Council Directive (EU) 2022/542 amending Directives 2006/112/EC and (EU) 2020/285 as regards VAT rates 57 , Article 14 i, point (1)(a), is modified to extend the definition of intra-Community distance sales of goods to cover second-hand goods, works of art, collectors’ items and antiques. Furthermore, Article 35 is deleted and as such, these supplies are taxed at the place of destination in line with Article 33 point (a). As a consequence, it allows for the application of the OSS simplification scheme to declare these distance sales, thereby further minimising the need to register in the several Member States.


In order to reduce opportunities for VAT avoidance, the new Article 39a provides that the supplies of works of art and antiques without dispatch or transport (or supplies where the dispatch or transport of the goods begins and ends in the same Member State) are taxed at the place where the customer is established, has their permanent address or usually resides.


The application of the deemed supplier rule is extended by the modifications to Article 14a. In particular, in respect of supplies of goods made within the EU, paragraph 2 is modified to extend the application of the deemed supplier rule. Under its expanded scope, the deemed supplier rule will now include all supplies of goods within the EU facilitated by an electronic interface, irrespective of where the underlying supplier is established and the status of the purchaser. In addition, a new paragraph 3 is inserted to provide for the application of the deemed supplier rule to certain transfers of own goods that are facilitated via an electronic interface.


The provisions in the VAT Directive pertaining to call-off stock arrangements are amended to introduce a cut-off date, 31 December 2024, beyond which, no new transfers of stock under those arrangements can be effected. Article 17a, which governs call-off stock arrangements is further amended by the insertion of a new paragraph to clarify that the Article will cease to apply with effect from 31 December 2025. These amendments are introduced to reflect the fact that the current call-off stock arrangements will no longer be required as the new OSS simplification scheme for transfers of own goods is comprehensive and encompasses cross-border movements of goods that are currently covered by call-off stock arrangements.


Article 59c stipulates that there is a EUR 10.000 calendar-based threshold, below which cross-border supplies of telecommunications, broadcasting and electronic (TBE) services and intra-Community distance sales of goods, supplied by an EU established supplier who is established in only one Member State, may remain subject to VAT in the Member State where that taxable person supplying those TBE services is established, or where those goods are located at the time their dispatch or transport begins. In addition to cross-border supplies of TBE services, it is now clarified that only intra-Community distance sales of goods that are supplied from the Member State where the taxable person is established are included in that threshold.


The modification in Article 66 helps to clarify the timing of the chargeable event in respect of supplies under the non-Union OSS and Union OSS simplification schemes.


The new paragraph 1a of Article 143 foresees that an implementing act shall be adopted to introduce special measures to prevent certain forms of tax evasion or avoidance by better securing the correct use and verification process of the IOSS VAT identification number of the supplier or of the intermediary acting on their behalf that is required for the application of the exemption provided for in point (ca) of Article 143(1).


In order to further minimise the need to register in a Member State where the taxation of a domestic B2B supply occurs, the modification in Article 194 renders mandatory for the Member States to accept the application of the reverse charge mechanism where a supplier, who is not established for VAT purposes in the Member State in which VAT is due, makes supplies of goods to a person who is identified for VAT in that Member State. This reform will ensure that, in such circumstances, the supplier who is not identified there, does not have to register in that Member State. Further, the modification excludes supplies of margin scheme goods from the mandatory application of the reverse charge mechanism. To ensure adequate follow-up of the goods, this type of supplies is now to be mentioned in the recapitulative statement as referred to in Article 262.


As the new OSS simplification scheme for transfers of own goods covers cross-border movements of goods that are currently covered by call-off stock arrangements, the modifications in Articles 243(3) and 262(2) remove the provisions in the VAT Directive pertaining to call-off stock arrangements with effect from 1 January 2026 as they are no longer required. As already mentioned, a window of 12 months is foreseen so that call-off stocks arrangements effected on or before 31 December 2024 can be finalised.

The modification in Article 359 extends the scope of the non-union OSS to supplies of services from non-EU business to all non-taxable persons, even if they do not have their permanent address, nor do they usually reside, in a Member State.

The modification in Article 365 clarifies the time by which amendments can be made to the relevant VAT returns in the non-Union OSS scheme. Amendments can now be made in the same return insofar as these amendments take place before the time that the return was required to be submitted.

For the purpose of the Union OSS scheme, the new paragraphs in Article 369a broaden the definition of Member State of consumption to include supplies of goods according to Articles 36 (supply of goods with installation or assembly), 37 (supply of goods on board ships, aircrafts or trains) and 39 (supply of gas, electricity, heating and cooling), and domestic supplies of goods.

In Article 369b, it is stipulated that, for the above-mentioned types of supplies, the Union OSS scheme can also be used insofar as these goods are supplied to non-taxable persons (or to taxable persons or non-taxable legal persons whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1) of Directive 2006/112/CE). In addition, the scheme can also be applied for domestic supplies of margin scheme goods to any other taxable person supplied under the margin scheme by taxable dealers.

The modification in Article 369g(1) and the new paragraphs amend the content of the Union OSS return to enable the inclusion of the above-mentioned supplies.

The modification in Article 369g(2) and the new paragraph (2a) clarify the information to be provided in the Union OSS return in relation to the above-mentioned supplies and indicate that zero rated and otherwise exempted supplies of goods are covered by the Union OSS and, therefore, shall also be reported.

The modification in Article 369g(3) indicates that the Union OSS return shall include zero rated and otherwise exempted supplies of services covered by the special scheme.


The modification in Article 369g i clarifies that amendments to VAT returns in the Union OSS scheme after the time that the return had to be submitted, need to be done in a subsequent return.


The modification in Article 369j stipulates that deduction is not possible in the VAT return of the Union OSS scheme but that VAT is to be refunded in accordance with the appropriate refund system.


The new paragraph in Article 369m makes the use of the IOSS mandatory for electronic interfaces facilitating as deemed supplier certain distance sales of imported goods.


Article 369p is amended to provide that, before commencing to use the special scheme for Imports (IOSS), a taxable person or an intermediary appointed on their behalf must indicate to the Member State of identification the taxable person’s status as a deemed supplier in respect of distance sales of goods imported into the EU.


The modification in Article 369r and the new paragraphs provide that, if a taxable person fails to comply with the rules of the IOSS, they will be excluded from the scheme unless the said taxable person is obliged to use this scheme as deemed supplier. If such a deemed supplier persistently fails to comply with the rules relating to this special scheme, they will incur other sanctions rather than exclusion from the scheme.

The modification in paragraph 2 of Article 369t clarifies the time by which amendments can be made to the relevant VAT returns for the IOSS scheme. If amendments are to be made after the time that the return had to be submitted, these have to be done in a subsequent return.

The modification to Article 369w stipulates that, under the special scheme, VAT is not to be deducted but to be refunded in accordance with the appropriate refund system.

The new Articles 369xa to 369xk provide for the application of a new scheme specifically designed to simplify the VAT compliance obligations associated with certain transfers of own goods.

Article 369xa provides definitions that apply to the new scheme for transfers of own goods. Capital goods, or goods that do not allow for a full right of deduction in the Member State where the intra-Community acquisition takes place, are excluded from the special scheme.

Article 369xb defines the scope of the scheme. Any taxable person making transfers of own goods, as defined in Article 369xa, can register to use this special scheme, in which case all of their relevant transfers will be covered by the special scheme.

Article 369xc requires taxable persons making use of the scheme to inform their Member State of identification, by electronic means, in case of commencement, cessation or relevant changes to their taxable activities covered by this special scheme.

Article 369xd provides that a taxable person using this special scheme shall, for the purpose of transfers covered by that scheme, be registered in one Member State of identification only. For the purpose of identification in the special scheme for transfers of own goods, the Member State of identification shall use the individual VAT identification number already allocated to the taxable person in respect of their obligations under the internal system.

Article 369xe provides for the circumstances under which taxable persons making use of the scheme for transfers of own goods shall be excluded from that scheme, including, among other situations, where they persistently fail to comply with the rules of the scheme or cease their relevant activities.

Article 369xf stipulates that VAT returns shall be submitted every month by electronic means, even when no relevant activity has been carried out.

Article 369xg describes the information that the monthly VAT return shall contain and stipulates that amendments to these returns, after the time that the return had to be submitted, have to be done in a subsequent return.

Article 369xh sets out the requirements in relation to the currency to be used in the VAT return.

Article 369xi stipulates that, for transfers of own goods under the scheme, the intra-Community acquisitions are exempt in the Member State to which the goods are dispatched or transported.

Article 369xj stipulates that deduction is not possible in the above-mentioned VAT return but that VAT is to be refunded in accordance with the appropriate refund system or deducted as inputs in the national VAT return of a Member State in circumstances where the taxable person is already identified for VAT purposes in a Member State in respect of activities not covered by the special scheme.

Article 369xk sets out the record keeping obligations for taxable persons making use of the special scheme for transfers of own goods.