VAT in the Digital Age: a single VAT registration in the EU

The EU is introducing a uniform VAT registration system, inspired by the existing One Stop Shop model. This is part of the proposals by the European Commission: VAT in the Digital Age (ViDA). If ViDA is successfully implemented, it is expected to result in an annual increase of €18 billion (!) in VAT revenue for EU countries and a reduction of compliance costs for businesses by €5 billion over a ten-year period. The increase in revenue is expected in part because the proposed changes address VAT fraud.

The One Stop Shop will be expanded to cover more types of sales. Businesses can register in one EU country to trade throughout the entire EU, needing a single VAT registration. The country where businesses need to register is the same as the current One Stop Shop model, which is the country where the business is registered. This is advantageous for businesses that want to store products in other EU countries and later sell directly to consumers. These companies can now manage their VAT obligations through one online platform in one language.

Implications for Businesses

Businesses that trade across borders in the EU and are subject to VAT will notice these changes:

  1. The reverse charge mechanism for VAT will apply to all domestic B2B transactions by non-established companies, transferring the responsibility for VAT payment from the seller to the buyer. This does not apply to transactions under the margin scheme.
  2. The current call-off stock system will be replaced by the new OSS system. This means that no VAT registration is required abroad for certain intra-EU transactions. The OSS system will cover these intra-EU movements, except for the transfer of capital goods.
  3. Companies selling through online platforms should be aware that the supplier model will now apply to all sales within the EU on these platforms, regardless of the seller’s location or customer type.
  4. The Union OSS will now include all B2C sales within the EU, including a range of deliveries. The OSS can also be used for domestic sales under the margin scheme.
  5. The Union OSS will further enable businesses selling on online platforms and not registered for VAT in the transaction’s country to use these platforms to report their domestic B2C sales.
  6. The non-Union OSS will now also cover services provided by non-EU providers to all end users, even if they do not have a fixed address in the EU.
  7. IOSS will become important for remote sales of imported products through platforms using the supplier model.

When Will It Take Effect?

The EU finance ministers (‘Ecofin’) will meet several more times to review the ViDA proposals. On December 8, 2023, the ministers will reconsider the planned implementation of the rules between 2024 and 2028. Several EU member states have already called for a delay, so the exact date when the rules for a single VAT registration will come into effect remains unclear.

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