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"VAT in the Digital Age" Directive

The European Union announced the ushering of VAT into digital reality, setting the course for an evolution of the union’s VAT system.
Monika Goździewska
Senior VAT Manager

The so-called draft directive “VAT in the Digital Age” introduces a variety of amendments to VAT settlement within the EU. The utilization of new technologies will help minimize the VAT gap, counter tax fraud, as well as limit administrative costs for some entities.

The European Commission’s announcements.

The European Commission’s proposals encompass mandatory, real time e-invoicing via continuous transaction controls (CTC) for intra-Community trade. The definition of an e-invoice will also be determined, specifying it’s format and standard while nullifying the PDF invoice.

Important: It must be remembered that KSeF will become mandatory from 2024.

The directive will also enable European Union member states to introduce e-invoicing for domestic transactions without applying for consent from the Council of the European Union.

The package of planned changes also predicts developing upon the existing VAT OSS procedure. Instead of registering for OSS separately in each country, entities will only have to register once for VAT purposes for B2C transactions with all EU member states. Such facilitation with bring enormous savings to SME’s in registration and administration costs. 

Other amendments may include defining how internet platforms providing transportation or accommodation services will settle the VAT tax. This will include specifying definitions of internet platforms and their role in transactions. Experts predict that some internet platforms will be treated as regular service providers, with an obligation of deducting VAT from transactions.

The implementation of these changes is planned for 2025-2028.

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