A Long-Awaited Deal – ECOFIN finally reaches agreement on EU ViDA reforms

On November 5, 2024, the Economic and Financial Affairs Council (ECOFIN), led by Hungary, approved the latest compromise on the "VAT in the Digital Age" (ViDA) package. After several obstacles, including a veto from Estonia, the EU member states have now reached a consensus on the ViDA proposal. Estonia’s concerns about the impact on platforms were addressed by providing more flexibility for member states and introducing a delayed implementation timeline.

Given the substantial adjustments from the original proposal presented by the European Commission on December 8, 2022, further consultation with the European Parliament will be necessary.

One key element of the ViDA package is the removal of the requirement for EU authorization to mandate e-invoicing for domestic transactions. This change enables Belgium, which had already adopted legislation conditional on EU approval, to proceed with its own e-invoicing mandate for domestic B2B transactions, planned for 2026, pending the expected publication of ViDA in the Official Journal in 2025.

Below, we outline the main components of the ViDA reforms and the corresponding adjusted implementation timeline.

Digital Reporting / E-Invoicing (July 2030, full harmonisation by Jan 2035)

This component of the ViDA package is the most impactful for businesses. Currently, companies are required to periodically submit ‘recapitulative statements’ to their national tax authorities, providing an overview of goods and services delivered cross-border to other VAT-registered entities in other EU member states without VAT. However, this periodic reporting facilitates fraud, as authorities lack complete and real-time data to quickly detect suspicious or fraudulent activities.

To address these gaps, e-invoicing combined with a real-time digital reporting system will be introduced.

Starting July 1, 2030, electronic invoices must be issued in compliance with the EU standard (EN 16931), with mandatory digital reporting for various types of cross-border transactions, including:

• Intra-community supplies and acquisitions of goods, excluding transfers of own goods, with an “opt-out” option for member states on intra-community acquisitions/purchases.
• Taxable supplies and purchases of goods and services where the customer is required to account for VAT (application of the reverse charge mechanism), with member states also having an opt-out option for purchases.

The new digital reporting obligation will eliminate the current requirement to submit an intra-EU sles listing but will impose additional reporting elements, including bank account details, to allow tax authorities to track payments.

Compared to the initial proposals, there are some notable changes, including:

• E-invoices for transactions under the EU mandate must be issued within 10 days of the taxable event, a change from the previously proposed requirement of two days, but still much shorter than the existing issuance deadline of the 15th day of the month following the month in which the taxable event occurred.
• For self-billing and purchases under reverse charge in EU (in cases where the recipient is required to report), the reporting deadline is 5 days from the date of issuance (or when the invoice should have been issued).
• Hybrid invoices, which contain both structured and unstructured formats, will be considered "compliant" if they contain all necessary information in a structured format.
• The updated proposal explicitly allows member states to implement 'accreditation schemes' to ensure that electronic invoices meet formal criteria. This means that submitting invoice data to a government platform for prior validation (clearance) is not prohibited.
• Member states will retain the flexibility to request additional data beyond the requirements under the new EU framework (e.g., SAF-T).
• Member states will have the flexibility to mandate the use of a valid electronic invoice as a substantive condition for the exercise of VAT deduction.
• The use of summary invoices remains possible under specific conditions.

Member states with existing domestic systems or systems approved before January 1, 2024, will have a longer period to align with the EU standard. They have until January 1, 2035, to adapt to the new European standard. However, this timeline may be further extended if an assessment by the Commission in 2030 finds unresolved issues in cross-border digital reporting implementation.

Platform Economy (2030; voluntary July 2028)

Currently, many providers of online short-term rental and passenger transport services do not pay VAT. This is primarily because these providers are often individual operators, such as drivers or apartment renters or small businesses. These groups are generally not required to register for VAT or may be unaware of their tax obligations, especially regarding compliance in other member states. As a result, a significant amount of VAT remains uncollected, creating an unfair competitive advantage for online platform services compared to traditional accommodation and transport providers.

From July 1, 2028, platforms facilitating short-term rentals and (road) passenger transport services will assume a greater role in VAT collection. At that point, platforms offering such services through electronic interfaces will be considered as receiving and supplying these services (the so-called “deemed supplier” rule). This applies unless the underlying service provider supplies a VAT identification number (VAT ID) and confirms their responsibility for VAT collection.

The current compromise provides member states with flexibility in applying the “deemed supplier” model. Short-term rental is defined as continuous rental of accommodation to the same person for up to 30 nights. However, to accommodate specific characteristics of the sector in different member states, countries have the option to subject short-term rentals to certain criteria, conditions, and limitations according to their national legislation.

Unlike the original proposal, member states are now permitted to exclude short-term rentals and road passenger transport from the “deemed supplier” model under the special exemption scheme for small enterprises. Additionally, the compromise proposal no longer includes any further extension of the “deemed supplier” rule to all supplies within the EU.

Moreover, countries are allowed to delay the implementation until 2030, at which point the “deemed supplier” rule will become mandatory. These concessions were crucial in securing Estonia’s support, as the country is home to Bolt, a major player in the platform transport sector.

Other changes within the platform economy pillar will take effect on July 1, 2028, including clarification of the VAT treatment of platform-provided services, which will be taxed in the country where the underlying transaction takes place. From this date, platforms holding goods on behalf of third parties (e.g., in a warehouse) will also be required to notify these third parties/owners if the goods are transferred to another country.

Single VAT Registration (updated timeline: July 2028)

The measures proposed for Single VAT registration under the ViDA package were politically agreed upon during a previous ECOFIN meeting. However, the implementation timeline has now been postponed to 1 July 2028—a one-year delay compared to the original proposal.

Currently, the ‘one-stop shop’ (OSS) system allows businesses to declare and remit VAT on cross-border sales of goods and services to consumers in other EU countries through a single member state's tax administration and in one language. However, businesses that wish to sell goods directly to consumers within a different member state (e.g., from a local warehouse) still face the requirement to register for VAT separately in each member state, resulting in additional, costly, VAT registrations.

To address this, the OSS will be expanded to cover the reporting of intracommunity transfers of own goods, aiming to reduce the administrative burdens for e-commerce sellers who currently need separate VAT numbers in each country where they hold inventory. With the OSS covering these cross-border transfers, the call-off stock arrangement will no longer be necessary.

In addition, the OSS will be extended to include all domestic B2C sales of goods by non-established suppliers. This includes installation deliveries, sales on board ships, aircraft, or trains, and transactions related to gas, electricity, heating, and cooling. Notably, this extension for energy supplies will apply starting from 1 January 2027.

Earlier proposals had included transactions under the margin scheme (e.g., second-hand goods and artwork) within the OSS. However, these have been excluded from the final compromise text.

Finally, the ViDA proposal aims to make the application of the reverse charge mechanism mandatory in certain situations, specifically when suppliers are not established or registered in the member state where VAT is due, and the recipient is identified for VAT purposes. Such supplies will need to be reported through the European Sales Listing, although member states retain flexibility in applying the reverse charge mechanism in other contexts.