VAT in the digital age [EU Legislation in Progress]

Written by Pieter Baert (3rd edition, updated on 22.10.2024).

Value added tax (VAT) is one of the key revenue raisers in national budgets, accounting on average for almost a fifth of all tax revenue collected in the EU; and yet, sizeable amounts of VAT revenue are lost to fraud. Moreover, VAT rules place a considerable administrative burden on businesses. On 8 December 2022, to help fight VAT fraud and reduce this burden, the European Commission tabled a three-part proposal for a directive on VAT in the digital age.

The proposal has three main objectives. The first is 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. The second objective involves introducing a harmonised framework for charging VAT in passenger transport and short-term accommodation platforms. The third is to adopt measures lowering VAT compliance costs for businesses operating across borders.

For the proposal to become a directive, the Council must vote unanimously to adopt it, after consulting the European Parliament and the European Economic and Social Committee.

Complete version

• October 2024: VAT in the digital age (3rd edition)