The EU Parliament gave the final go-ahead Wednesday to an update of Europe’s VAT rules, ending unfair distortion of competition by requiring VAT to be paid for services provided through online platforms.
In their vote, MEPs approved changes to the rules that the EU member states indicated in November they wished to make to the VAT Directive.
These changes will require that by 2030 online platforms must pay VAT for services provided through them in most of the cases where the individual service providers do not charge VAT. This will put an end to a distortion of the market because similar services provided in the traditional economy are already subject to VAT. This distortion has been most significant in the short-term accommodation rental sector and the road passenger transport sector. Member states will have the possibility of exempting SMEs from this rule, an idea which Parliament had also pushed
The update will also fully digitalise VAT reporting obligations for cross-border transactions by 2030 with businesses issuing e-invoices for cross-border business-to-business transactions and automatically reporting the data to their tax administration. With this, tax authorities should be in a better position to tackle VAT fraud.
Member States should recoup up to €11 billion in lost VAT revenues every year for the next 10 years, the Commission calculates.
Businesses will save €4.1 billion a year over the next 10 years in compliance costs, and €8.7 billion in registration and administrative costs over a ten year period.
To simplify the administrative burden for businesses, the rules beef-up online VAT one-stop-shops so that even more businesses with cross-border activity will be able to meet their VAT obligations through a single online portal and in one language.
Further information, European Parliament
The adopted text will be available here (click on 12.02.2025)
