VAT in the Digital Age: Updates from the Latest ECOFIN Meeting on 14 May 2024

The Three Pillars of the ViDA Project

With the ViDA project, the Commission has formulated several proposals to modify the EU VAT system to adapt it to the challenges of new transactions in the digital age, while simultaneously reducing both the administrative burdens for taxable persons and the VAT gap in the EU budget, making the system more efficient for businesses in intra-EU transactions.

The reform package proposed by the EU Commission aims to address the loss of EU VAT revenue (as an own resource that contributed approximately 20 billion EUR to the EU budget in 2022), estimated in the 2023 VAT Gap report to be a total of 61 billion EUR in VAT revenues in 2021 (93 billion EUR in losses in 2020), a significant portion of which is due to intra-EU fraud.

The proposals of the EU Commission, contained in COM (2022) 701, 703, and 704 and detailed in the respective reports (see https://taxation-customs.ec.europa.eu/value-added-tax-vat/vat-digital-age_enwww), concern the modification and implementation of the VAT Directive 2006/112, Regulation 904/2010 (regarding administrative cooperation arrangements necessary for VAT in the digital age), and Regulation 282/2011 (implementing the VAT Directive), respectively.

The timeline for the reforms (the three pilla...