The European Commission, the EU’s Executive, has three projects that are bound to shake up the VAT affairs of all businesses trading cross-border within the EU.
First is to close the “VAT Gap”. This is the difference between expected and actual VAT revenue. The VAT Gap in intra-EU trade has been widening over the years, thanks in large part to VAT fraud. It needs closing, says the Commission. Closing the VAT Gap is the policy mantra now driving the rest of the reform agenda of the Commission.
Second is the VAT rules needing adaptation to the Digital Economy. With technological and economic shifts, especially in e-commerce, tax rules have struggled to keep pace. Already, e-commerce platform operators have been made liable for VAT, and tax authorities can now catch transactions that used to slip through the cracks. The drive to modernise the VAT rules to combat VAT fraud in this way is set to accelerate.
And third is the single EU-wide VAT registration for all businesses selling to consumers across the EU. They would register in one EU Member State, and this would be valid for the declaration and payment of VAT on all sales of goods and cross-border supplies of services to customers within the EU. This one has been framed since introduction in 2022 as a simplification of VAT for businesses. Also known as the “VAT One Stop Shop”, the Single VAT registration is already the norm for the ‘platform economy’ represented by online sellers and marketplaces both inside and outside the EU. But an expanded EU-wide Single VAT Registration, along with standardised e-invoicing and real-time digital reporting for all intra-EU businesses would be more business-friendly, reduce administration, cut down paperwork, minimise errors, improve VAT collection and ultimately create an EU VAT system that is more resilient to fraud.
The implementation of VAT in the Digital Age (‘ViDA’) is palpably underway and gathering speed. With its requirement for digital platforms, e-invoicing standards and a more harmonised VAT system, ViDA is a sea change with real consequences for yachting and aviation businesses and their VAT service providers.
Are you well placed and prepared for ViDA?
Information in our Blogs is very general in nature and should not be acted upon without first consulting with a tax advisor. Please feel free to contact Y & A Group, LP to schedule a complimentary consultation.
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