New VAT rules enforcement

Non-resident digital economy businesses operating within the EU face heightened scrutiny as the EU strengthens its enforcement of VAT rules. This enforcement specifically targets businesses engaged in the direct selling of:

• “electronically supplied services” to EU final consumers;
• imported goods valued under EUR 150 to EU final consumers;
• goods within the EU-to-EU final consumers; and
• the acting as a platform facilitating the above transactions, subject to specific conditions.

As of 1 January 2025, live-streamed events, currently excluded from the definition of “electronically supplied services”, will also be subject to these rules. Additionally, certain EU Member States may impose VAT compliance requirements on non-EU businesses offering services to local consumers.

To further enforce these rules, the EU has introduced the Central Electronic System of Payment Information (CESOP). Starting 1 January 2024, EU payment service providers must transmit information on cross-border payments originating from Member States, and their recipients. This information will include the payee's name, VAT ID (if available), address (if available), and details of cross-border payments and any related refunds. The information should enable tax authorities to identify potential non-compliant taxpayers and provide an assessment basis. The information will be centralised in a European database, i.e., in the CESOP, and cross-referenced with other European databases, making it accessible to anti-VAT fraud experts of Member States via Eurofisc. Reporting will occur quarterly, starting in the first quarter of 2024, with the first report due by 30 April 2024.

Non-compliant businesses face potential penalties and even criminal proceedings in some Member States. Those already complying should review their data for any discrepancies between VAT returns and payment data acquired through this new system.