ViDA Directive adopted by European Council

While entrepreneurs in Germany currently have to prepare for the introduction of e-invoicing as of January 1, 2025 (we reported), the next milestone for digitalization in the area of VAT was launched at EU level with “ViDA”. On November 5, 2024, the EU Council unanimously adopted the revised draft EU directive on the “ViDA - VAT in the Digital Age” package of measures. In May of this year, the previous draft had been blocked by individual member states (we reported). The upcoming changes once again require the taxpayers to take action. 

Transaction-based digital reporting system and mandatory electronic invoicing

Some member states, including Germany, have already implemented national measures for electronic invoicing in connection with transactions between domestic companies. Furthermore, some countries have already implemented obligations to report VAT-relevant invoice information to the tax authorities in near real time.

With “ViDA”, these requirements are now to be implemented at EU level. In future, the obligation to issue electronic invoices is intended to cover cross-border transactions in the B2B area. Furthermore, e-invoices are to be reported to the national tax authorities through digital real time reporting, which in turn will report the data to an EU system which is supposed to analyze the data in order to combat fraud. The EU system is to be introduced from July 2030. Already existing national systems must be interoperable with such system from 2035. 

German taxpayers will then have to adjust their invoicing processes to the reporting systems’ requirements, which must be regulated in more detail at national level. Among other things, the obligation to issue invoices within ten days and the additionally required invoice details, such as bank details, could be challenging.

When implementing e-invoicing, Germany has refrained from concurrently introducing digital real-time reporting for the time being; therefore, it is likely that it will follow the system specified by the EU and extend the same obligations to domestic transactions, presumably within a similar timeframe (by July 2030).

Mastering the implementation of e-invoicing now will provide a solid basis for fulfilling the upcoming reporting obligations. A positive aspect of the development: due to the digital reporting obligations, the EC sales lists will no longer be necessary.

Tightening in the area of the platform economy

In case of short-term rentals of accommodation as well as passenger transport services supported by digital platforms, such platforms will in future be involved in the supply chain, for example, between the accommodation provider and the tenant, as “fictitious supplier/service provider”. This means that platform operators will have to pay VAT to the tax office for transactions concluded via their platform. However, this obligation only applies if the original accommodation provider is a non-entrepreneur or a small business. However, Member States may provide for exceptions to this rule for small businesses and lay down the respective conditions. If the original provider is an entrepreneur and can provide a valid VAT identification number and declares that they will pay VAT on their own sales, the platform operator is not treated as a fictitious supplier and does not have to pay VAT.

The regulations must be transposed into national law by June 30, 2028, and must be applied by the member states from July 1, 2028 at the earliest and from January 1, 2030 at the latest.

Single VAT registration

In future, companies should only need a single VAT registration in the EU if possible. In order to achieve this goal, the following measures are planned, among others:

• Extension of the „one stop shop” to cover domestic supplies to consumers by suppliers not domiciled in the member state of destination (from July 1, 2028).
• Introduction of a mandatory reverse charge procedure for B2B sales if the supplier is not domiciled or registered for VAT purposes in the member state of destination (from July 1, 2028).
• Introduction of a new regulation in the OSS procedure for the declaration of intra-company transfers of goods from July 1, 2028.
• Gradual abolition of the consignment stock regulation by June 30, 2029.