Members' Research Service By / March 1, 2023

VAT in the digital age [EU Legislation in Progress]

Every year, about €1 trillion is collected in the EU in VAT revenue alone, making it the third-highest tax revenue raiser in the EU on average, behind social contributions and the personal income tax.

© Andrey Popov / Adobe Stock

Written by Pieter Baert (1st edition).

Value added tax (VAT) is one of the key revenue raisers in national budgets, representing on average almost one-fifth of all tax revenue collected in the European Union (EU). To help strengthen the fight against VAT fraud and reduce the administrative burden for businesses, the European Commission tabled a three-part initiative – VAT in the Digital Age – on 8 December 2022.

As a first objective, the Commission proposes to introduce an EU-wide reporting system on intra-EU business-to-business (B2B) transactions, whereby companies would share, in real-time, data drawn from electronic invoices with the authorities. This would allow Member States to keep a close eye on the trail of VAT collected and to intervene when there is suspicion of fraudulent practices. Second, the European Commission proposes to introduce a harmonised framework for charging VAT in passenger transport and short-term accommodation platforms. Lastly, the initiative proposes measures to lower VAT compliance costs for companies operating across borders.

For the proposal to become a directive, the Council needs to vote on it with unanimity, after having consulted the European Parliament and the European Economic and Social Committee.


Proposal for a Council directive amending Directive 2006/112/EC as regards VAT rules for the digital age
Committee responsible:Economic and Monetary Affairs (ECON)COM(2022) 701
Rapporteur:Olivier Chastel (Renew, Belgium)2022/0407(CNS)
Shadow rapporteurs:Lidia Pereira (EPP, Portugal)
Aurore Lalucq (S&D, France)
Mikuláš Peksa (Greens/EFA, Czechia)
Andżelika Anna Możdżanowska)
Consultation procedure
(CNS) – Parliament
adopts a non-binding
Next steps expected: National parliaments’ opinions

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