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European Commission Consulting on Initiative for VAT in the Digital Age — Orbitax Tax News & Alerts

On 20 January 2022, the European Commission launched a consultation on its VAT in the Digital Age initiative. This includes a call for evidence for an impact assessment that runs from 20 January to 17 February 2022. The objective of the initiative is to ensure the proper functioning of the single market, to reduce compliance costs for businesses, and to protect the financial and economic interests of the EU and its Member States by combating VAT fraud and ensuring tax equality and neutrality. This will involve:

  • Making compliance with VAT rules easier for EU businesses, particularly those working in the digital economy and those carrying out cross-border trade;
  • Laying down a framework which helps tax administrations to fight VAT fraud, in particular MTIC fraud;
  • Preventing regulatory failure and market fragmentation; and
  • Ensuring fairer treatment of both traditional and platform economies.

The policy options are:

1. Digital reporting requirements, including e-invoicing

The policy options will look at the introduction of partial (limited to cross-border transactions) or fully harmonised (covering domestic and cross-border transactions) digital reporting requirements, including e-invoicing. A further option could be to introduce data storage obligations that will require taxpayers to record transactional data using a pre-determined format and provide information only upon request.

2. VAT treatment of platform economy

The policy responses range from clarifying the existing VAT rules to ensure a more uniform approach to these new business models, to considering whether platforms could play an active role in the collection of VAT.

3. Single VAT registration in the EU

The policy options are to: (i) extend the scope of the one-stop shop (OSS) to include not yet covered business-to-customer supplies; (ii) combine the OSS with simplification measures for intra-EU business-to-business supplies; and (iii) extend/improve the import one-stop shop (e.g., eliminating the EUR 150 threshold and making use of the IOSS mandatory).

Further to the call for evidence, a public consultation has also been launched that runs from 21 January to 15 April 2022. The consultation seeks stakeholders' views on whether the current VAT rules are adapted to the digital age, and on how digital technology can be used both to help Member States fight VAT fraud and to benefit businesses. Views are sought on: (i) VAT reporting obligations and e-invoicing; (ii) the VAT treatment of the platform economy; and (iii) the use of a single EU VAT registration.