A new system introduces an e-invoicing based real-time digital reporting for VAT purposes for businesses


On 8 December 2022, the European Commission proposed a series of measures to modernise and improve EU's VAT system for businesses, and make it more resilient to fraud, by promoting digitalisation.

According to the latest VAT GAP figures published by the European Commission, EU Member States lost EUR 93 billion in VAT revenues in 2020. One quarter of the loss can be directly attributed to VAT fraud linked to EU-trade. The actions proposed are purposed to help the Members States collect up to EUR 18 billion more in VAT revenue annually.

EU's current VAT system means that companies providing services/goods across Member States must submit a global overview of the goods and services sold in other Member States to their national tax authority. The national tax authority shares the information with other Member State authorities to ensure that VAT is being accounted for and remitted correctly. This system has received critique of being slow, sharing information with other Member States could take up to four months, and not detailed enough, undermining the Members States' possibility to prevent VAT fraud.

In short, the so-called VAT in the Digital Age package proposes the following measures:

Real-time digital reporting

The proposed system includes real-time digital reporting for VAT purposes for business that operate cross-border, based on e-invoicing, to give the Member States information needed to prevent VAT fraud. National tax agencies will share the reported data through a new IT system which ensure that other Member States' authorities are fully informed of transactions in real time, allowing them to detect and address problems of VAT fraud immediately.

VAT rules for passenger transport and short-term accommodation platforms

The package also includes updated VAT rules for passenger transport and short-term accommodation platforms, where the platform economy operators will be responsible for collecting and reporting of VAT when the service providers does not have such a responsibility (e.g., if the service provider is a small business not required to register for VAT).

An EU-wide VAT registration

Lastly, the package is proposed to introduce a single VAT registration across the EU, building on the already existing "One Stop Shop" model. The proposal would allow businesses to sell to consumers in another Member State to register for VAT only once for the entire EU. When a VAT registration has been made in one Member State, the registered company will be able to fulfil its VAT obligations via a single online portal and interact solely with the tax administration of that Member State in one language, even though its sales are EU-wide.

Schjødt's tax lawyers in Sweden and Norway are following the continuous development of the VAT in the Digital Age package closely.

Do you have any questions?