EC as regards VAT rules for the digital age - Main contents

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dossier	COM(2022)701 - Amendment of Directive 2006/112/EC as regards VAT rules for the digital age.
document	COM(2022)701
date	December 8, 2022

(1) The rise of the digital economy has significantly impacted on the operation of the Union VAT system, as it is unsuited to the new digital business models, and does not allow for the full use of the data generated by digitalisation. Council Directive 2006/112/EC ⁶⁰ should be amended to take account of this evolution.

(2) The VAT reporting obligations should be adapted to address the challenges of the platform economy and to reduce the need for multiple VAT registrations in the Union.

(3) VAT revenue loss, known as the ‘VAT Gap’, was in 2020 estimated at EUR 93 billion ⁶¹ in the Union, a significant part of which consists of fraud, in particular missing trader intra-Community fraud ⁶² , estimated in the range of EUR 40-60 billion ⁶³ . In the final report of the Conference on the Future of Europe 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.

(4) In order to increase tax collection on cross-border transactions and to end the existing fragmentation stemming from Member States’ implementation of divergent reporting systems, rules should be laid down for Union digital reporting requirements. Such rules should provide information to tax administrations on a transaction-by-transaction basis, in order to allow cross matching of data, increase the control capabilities of tax administrations and create a deterrent effect on non-compliance, while reducing compliance costs for businesses operating in different Member States and eliminating barriers within the internal market.

(5) To facilitate the automation of the reporting process for both taxable persons and tax administrations, the transactions to be reported to tax administrations should be documented electronically. The use of electronic invoicing should become the default system for issuing invoices. Nevertheless, Member States should be allowed to authorise other means for domestic supplies. The issuance of electronic invoices by the supplier and its transmission to the customer should not be conditional on a prior authorisation or verification by the tax administration.

(6) The definition of an electronic invoice should be aligned with that used in Directive 2014/55/EU of the European Parliament and the Council ⁶⁴ , to achieve standardisation in the area of VAT reporting.

(7) For the VAT reporting system to be implemented in an efficient manner, it is necessary that the information reaches the tax administration without delay. Therefore, the deadline for the issuance of an invoice for cross-border transactions should be set at 2 working days after the chargeable event has taken place.

(8) The electronic invoice should facilitate the automated transmission to the tax administration of the data needed for control purposes. For this purpose, the electronic invoice should contain all the data that have to be later transmitted to the tax administration.

(9) The implementation of the electronic invoice as the default method for documenting transactions for VAT purposes would not be possible if the use of the electronic invoice remains subject to the acceptance by the recipient. Therefore, such an acceptance should no longer be required for the issuance of electronic invoices.

(10) The Commission has complied with its obligation to present a report to the European Parliament and the Council on the impact of the invoicing rules applicable from 1 January 2013 and notably on the extent to which they have effectively led to a decrease in administrative burdens for businesses, as required by Article 237 of Directive 2006/112/EC. As this obligation has already been fulfilled, it should be removed from that Directive.

(11) The obligation to submit recapitulative statements for the reporting of intra-Community transactions should be removed, as the digital reporting requirements for intra-Community transactions cover, under their scope, the same transactions, but with faster and more detailed information. The digital reporting requirements cover the same transactions that the recapitulative statements with the exception of transactions under call-off stocks arrangements, as referred to in Article 17a of Directive 2006/112/EC, which should be reported through the one-stop-shop (OSS) return.

(12) In order to facilitate for taxable persons the transmission of the invoice data, Member States should put at the disposal of the taxable persons the necessary means for such transmission, which should allow that the data is sent by the taxable person directly or by a third party on that taxable person’s behalf.

(13) Whilst the information to be transmitted through the digital reporting requirements for intra-Community transactions should be similar to what was transmitted through the recapitulative statements, it is necessary to request taxable persons to provide additional data, including bank details and payment amounts, so that tax administrations can follow not only the goods but also the financial flows.

(14) Placing an unnecessary administrative burden on taxable persons operating in different Member States should be avoided. Therefore, such taxable persons should be able to provide the required information to their tax administrations using the European standard laid down in Commission Implementing Decision (EU) 2017/1870 ⁶⁵ , which fulfils the request laid down in Article 3(1) of Directive 2014/55/EU to create an European standard for the semantic data model of the core elements of an electronic invoice. Member States should be allowed to provide for additional methods to report the data that could be easier for certain taxable persons to comply with.

(15) In order to achieve the necessary harmonisation in the reporting of data on intra-Community transactions, the information to be reported should be the same in all Member States, without the possibility for Member States to request additional data.

(16) An important element in the fight against VAT fraud related to intra-Community transactions is to compare the data declared by the supplier with the data declared by the customer. For that purpose, the person acquiring the goods and the recipient of the services should be required to report the data on their intra-Community transactions.

(17) Several Member States have put in place divergent reporting requirements for transactions within their territories, leading to significant administrative burdens for taxable persons which operate in different Member States, as they need to adapt their accounting systems to comply with those requirements. In order to avoid the costs derived from such divergence, the systems implemented in Member States to report supplies of goods and services for consideration between taxable persons within their territory should comply with the same features of the system implemented for intra-Community transactions. Member States should provide for the electronic means for the transmission of the information and, as is the case for intra-Community transactions, it should be possible for the taxable person to submit the data in accordance with the European standard laid down in Implementing Decision (EU) 2017/1870, even though the relevant Member State could provide for additional means to transmit the data. The data should be allowed to be sent by the taxable person directly or by a third party on that person’s behalf.

(18) Member States should not be obliged to implement a digital reporting requirement for supplies of goods and services for consideration between taxable persons within their territory. However, if they are to implement such a requirement in the future, they should align it with the digital reporting requirements for intra-Community transactions. Member States which already have a reporting system for these transactions in place should adapt such systems to ensure that the data are reported in accordance with the digital reporting requirements for intra-Community transactions.

(19) In order to evaluate the effectiveness of the digital reporting requirements, the Commission should prepare an assessment report evaluating the impact of digital reporting requirements on the reduction of the VAT gap and in the implementation and compliance costs for taxable persons and tax administrations, in order to verify whether the system has achieved its objectives or needs further adjustments.

(20) Member States should be able to continue to implement other measures to ensure the correct collection of VAT and to prevent evasion. However, they should not be able to impose additional reporting obligations on the transactions that are covered by the digital reporting requirements.

(21) The platform economy has raised certain difficulties for the application of the VAT rules -in particular the establishment of the taxable status of the provider of the service and the level playing field between small and medium-sized enterprises (SMEs) and other businesses.

(22) The platform economy has led to an unjustified distortion of competition between supplies performed through online platforms that escape VAT taxation, and supplies performed in the traditional economy that are subject to VAT. The distortion has been most acute in the two largest sectors of the platform economy behind e-commerce, namely the short-term accommodation rental sector and the passenger transport sector.

(23) It is therefore necessary to lay down rules to address the distortions of competition in the short-term accommodation rental and passenger transport sectors by changing the role that platforms play in the collection of VAT (becoming the ‘deemed supplier’). Under this model, platforms should be required to charge VAT where VAT is due but the underlying supplier does not charge it because they are, for example, a natural person or a taxable person using the special scheme for small enterprises.

(24) Member States interpret the place of supply of the facilitation service provided by the platforms to non-taxable persons differently. Therefore it is necessary to clarify this rule.

(25) Some Member States rely upon Article 135(2) of Directive 2006/112/EC to apply a VAT exemption to short-term accommodation rental, while others do not. In order to ensure equal treatment and consistency, whilst continuing to address the distortion of competition in the accommodation sector, it should be clarified that this exemption does not apply to short-term accommodation rentals. The criteria used to identify short-term accommodation rentals, which shall be regarded as having a similar function to the hotel sector, are only to be applied for the purposes of this Directive and are without prejudice to the definitions used in other Union legislation. This Directive therefore does not create an EU definition of short-term accommodation rentals.

(26) In order to avoid that platforms making deemed supplies are inadvertently included in the special scheme for travel agents, or vice versa, transactions for which the platform is the deemed supplier should be excluded from that special scheme.

(27) This proposal is without prejudice to the rules laid down by other Union legal acts, in particular, Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market For Digital Services and amending Directive 2000/31/EC (Digital Services Act) ⁶⁶ regulating other aspects of the provision of services by online platforms, such as obligations applicable to providers of online platforms allowing consumers to conclude distance contracts with traders.

(28) Council Directives (EU) 2017/2455 ⁶⁷ and 2019/1995 ⁶⁸ amended Directive 2006/112/EC as regards the VAT rules governing the taxation of business-to-consumer cross-border e-commerce activity in the Union. Those amending Directives reduced distortions of competition, improved administrative cooperation and introduced a number of simplifications. Whilst the amendments introduced by those Directives that apply since 1 July 2021 have been largely successful, the need for certain improvements have nevertheless been identified.

(29) To this end, some existing rules should be clarified. This includes the rule on the calculation of the EUR 10 000 calendar-based threshold laid down in Article 59c of Directive 2006/112/EC, below which supplies of telecommunications, broadcasting and electronic (TBE) services and intra-Community distance sales of goods, supplied by a Union established supplier 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. Article 59c of Directive 2006/112/EC should be amended to ensure that only intra-Community distance sales of goods that are supplied from the Member State where the taxable person is established are included in the calculation of the EUR 10 000 threshold, but not distance sales made from a stock of goods in another Member State.

(30) Directive 2006/112/EC should also be amended to clarify that all business-to-consumer supplies of services, supplied within the Union by taxable persons established outside the Union, fall within the scope of the special scheme for services supplied by taxable persons not established within the Community (the non-Union scheme), and not only supplies of services to Union established customers. Following the introduction of the new rules on VAT rates by Council Directive (EU) 2022/542 ⁶⁹ and the foreseen entry into force of the new SME rules ⁷⁰ and in order to cover exemptions under Article 151 of Directive 2006/112/EC regarding supplies of goods and services inter alia under diplomatic, consular arrangements and to certain other international bodies, it is also necessary to broaden the Union OSS scheme under Title XII, Chapter 6, Section 3 of Directive 2006/112/EC by ensuring that zero-rated and VAT-exempt supplies fall within the scope of that scheme, such as supplies by small and medium-enterprises (SMEs). In addition, Directive 2006/112/EC should be amended to clarify the time by which amendments by the taxable person making use of the special schemes can be made to the relevant VAT returns across the three existing simplification schemes; the non-Union OSS, the Union OSS and the Import OSS (‘IOSS’). This clarification will allow taxable persons registered for the schemes to make corrections to the relevant VAT returns up to the deadline of submission of those returns. Finally, the timing of the chargeable event in respect of supplies under the Union and non-Union OSS simplification schemes should be clearly settled in order to avoid differences in the application of the rules amongst the Member States.

(31) VAT identification is, in general, required in every Member State where taxable transactions take place. However, to reduce the instances in which multiple VAT registrations are required, Directive (EU) 2017/2455 introduced into Directive 2006/112/EC a number of measures to minimise the need for multiple VAT registrations. In order to further reduce the need for multiple VAT registrations, a number of extension measures have been identified to support the objective of a single VAT registration in the Union. Rules should therefore be laid down to provide for these extension measures.

(32) Amongst other measures, Directive (EU) 2017/2455 extended the scope of the Mini OSS to become a broader OSS, covering all cross-border supplies of services to non-taxable persons taking place in the Union and all intra-Community distance sales of goods. Exceptionally, electronic interfaces, such as marketplaces and platforms, which become deemed suppliers for certain supplies of goods within the Union can also declare certain domestic supplies of goods in the Union OSS scheme. To support the objective of a single VAT registration in the Union, the scope of the Union OSS scheme should be further expanded to cover other supplies of goods, including domestic business-to-consumer supplies of goods in the Union by taxable persons who are not identified for VAT purposes in the Member State of consumption, ensuring that businesses do not need to register for VAT in each Member State where such supplies of goods to consumers take place. In addition, the scope of the Union OSS scheme should be expanded to also include domestic supplies of margin scheme goods to any person, when those goods are supplied by a taxable person (taxable dealer) who is not identified in the Member State were such supplies of goods take place. This amendment would allow taxable dealers to benefit from the OSS simplifications, and allow for the VAT due on those supplies to be declared and paid in one Member State of identification via the enlarged Union OSS scheme.

(33) VAT is normally charged and accounted for by the supplier of the goods or services. However, in certain circumstances Member States may provide that, under the reverse charge mechanism, the recipient of the supply, rather than the supplier, is obliged to account for the VAT due. To further support the objective of a single VAT registration in the Union, rules should be laid down for the mandatory application by Member States of the reverse charge mechanism in situations where a supplier is not established for VAT purposes in the Member State in which VAT is due. A supplier, making supplies of goods or services to a person who is identified for VAT in the Member State where the supply is taxable, should be entitled to apply the reverse charge. For control purposes, such supplies should be reported in the recapitulative statement.

(34) Directive (EU) 2017/2455 introduced into Directive 2006/112/EC the liability of electronic interfaces, such as marketplaces and platforms, when acting as deemed supplier, where they facilitate certain supplies of goods to consumers in the Union. In terms of supplies of goods made within the Union, the deemed supplier rule is currently limited to supplies of goods to non-taxable persons, where those goods are supplied in the Union by taxable persons not established in the Union. In order to level the playing field between Union and non-Union traders and minimise the costs of doing business cross-border within the Union, measures should be adopted to further reduce the compliance burden for Union sellers that operate via electronic interfaces. Under its expanded scope, the deemed supplier rule would include all supplies of goods within the Union facilitated by an electronic interface, irrespective of where the underlying supplier is established and irrespective of the status of the purchaser.

(35) Directive (EU) 2017/2455 introduced into Directive 2006/112/EC a specific simplification, the IOSS, which was designed to reduce the VAT compliance burden associated with the importation of certain low value goods to consumers in the Union. Accordingly, taxable persons who opt to register for the IOSS do not need to register for VAT in each Member State in which their eligible imports of goods to consumers take place. Instead, the VAT due on those supplies can be declared and paid in one Member State via the IOSS scheme. To further support and enhance VAT compliance in respect of certain imported goods measures should be adopted to make the use of the IOSS mandatory for electronic interfaces, such as marketplaces and platforms, when they facilitate certain imports of goods to consumers in the Union. However, taxable persons who operate electronic interfaces and who exclusively facilitate domestic supplies in their Member State of establishment should fall outside the scope of the measure.

(36) In order to ensure uniform conditions for the implementation of Directive 2006/112/EC, powers should be conferred on the Commission to better secure the correct use and the verification process of IOSS VAT identification numbers for the purposes of the exemption provided for in that Directive. This empowerment should allow the Commission to adopt an implementing act to introduce special measures to prevent certain forms of tax evasion or avoidance. Such special measures involve, inter alia, linking the unique consignment number with the IOSS VAT identification number. Those powers should be exercised in accordance with the examination procedure referred to in Article 5 of Regulation (EU) No 182/2011 of the European Parliament and of the Council ⁷¹ and for this purpose the committee should be the one established by Article 58 of Regulation (EU) No 904/2010 of the European Parliament and of the Council ⁷² .

(37) The VAT registration of a supplier is required when that supplier is not identified for VAT in the Member State where VAT is due. In particular, the transfer of a taxable person's own goods to another Member State for, inter alia, the purposes of that person’s e-commerce related activity triggers a need to register in the Member States from and to where the goods are transferred. In congruence with the objective of a single VAT registration in the Union, the instances in which multiple VAT registrations are required should be further reduced by providing for the application of a new scheme in the framework of the OSS schemes, which is specifically designed to simplify the VAT compliance obligations associated with certain transfers of own goods.

(38) Directive 2006/112/EC provides for a simplified VAT treatment of goods transferred under call-off stock arrangements where certain prescribed conditions are met. As the 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 under article 17a of that Directive, it is necessary to phase out these arrangements by including an end date prior to the complete removal of the call-off stock provisions in Directive 2006/112/EC. Therefore, an end date of 31 December 2024 should be laid down, after which it will no longer be possible to effect any new call-off stock arrangements. For call-off stock arrangements commencing on or before 31 December 2024, the relevant conditions, including the 12 month time limit for transferring ownership of those goods to the intended purchaser, should continue to apply. In parallel with the inclusion of this new end date, a new paragraph should be inserted in the provisions pertaining to call-off stock arrangements to ensure that those arrangements will cease to apply on 31 December 2025, as they will no longer be required after that date.

(39) The margin scheme operates by allowing taxable dealers to pay VAT on the difference between the sale price and the purchase price of goods covered by the scheme namely second-hand goods, works of art, collectors' items and antiques. To ensure that the taxation of those specific supplies occurs in the Member State where the customer is established, has his or her permanent address or usually resides, Directive 2006/112/EC should be amended to introduce a new place of supply rule. In addition, Directive 2006/112/EC should be amended to specifically exclude supplies of margin scheme goods from the mandatory application of the reverse charge mechanism. However, to support the objective of a single VAT registration in the Union, and to minimise compliance burdens, taxable dealers that operate under the margin scheme can opt to register to use the Union OSS scheme to declare and pay the VAT due on certain supplies of margin scheme goods via that scheme, without the need to register in multiple Member States.

(40) In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents ⁷³ , Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(41) Since the objectives of this Directive, namely bringing the VAT system into the digital era, cannot sufficiently be achieved by the Member States but can rather, by reason of the need to harmonise and encourage the use of Digital Reporting Requirements, improve the VAT treatment of platforms, and reduce the instances in which a business is required to register in other Member States, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

(42) Directive 2006/112/EC should therefore be amended accordingly.