EU Agrees on New VAT Rules to Tackle Fraud in Digital Transactions
November 5, 2024On November 5, 2024, EU finance ministers convened in Brussels and reached an agreement on a comprehensive legislative package aimed at modernizing Value Added Tax (VAT) rules to combat fraud in electronic transactions.
This package, which requires further consultation with the European Parliament before final approval, includes new VAT regulations designed to align with the digital economy.
The European Commission emphasized that the adoption of these digital measures will make the VAT system more business-friendly and resilient to fraud.
Under the new rules, platform operators will be responsible for collecting and remitting VAT if their service providers fail to comply, providing EU countries with some flexibility in implementation.
Notably, online platforms like Airbnb and Booking.com will be required to collect and remit VAT directly from customers for short-term accommodation and transport services.
Starting in 2030, companies will be mandated to report all cross-border transactions in real-time through electronic invoices, enhancing transparency and reducing opportunities for fraud.
These regulations aim to fully digitize VAT declaration obligations for cross-border transactions by 2030, streamlining compliance for businesses operating across multiple EU member states.
To facilitate this, the package seeks to enhance online VAT one-stop shops, allowing businesses to register once for VAT across the EU, thus avoiding costly registrations in each member state.
The existing European standards for electronic invoicing will be utilized, with national tax authorities exchanging data through a new IT system to identify suspicious activities.
All national procedures must be interoperable with the EU system by 2035, although the German government noted that a simple email inbox could suffice for minimum electronic invoicing requirements.
The agreement consists of three acts: a directive, a regulation, and an implementing regulation, collectively modifying key aspects of the VAT system to better suit the digital landscape.
Before these measures can become law, they must receive formal approval from the Council following consultation with the European Parliament.
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