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Estonia has again put forward its alternative solution regarding the treatment of VAT for the platform economy, but the proposal did not win support.
The long-running VAT in the Digital Age (ViDA) saga thus rolls on.
Now, no final agreement can be reached until the next ECOFIN meeting taking place in Brussels on November 5 at the earliest.
The European Commission and Hungary, which currently holds the Presidency of the Council of the European Union, are continuously trying to convince Estonia to drop its veto on VAT rules for the platform economy. On September 26, the Working Party on Tax Questions met to find a way out if possible, but the counter-proposal launched by Estonia had no impact at all. Neither did the offer to grant Estonia a temporary derogation create a long-awaited opening. When the matter was examined in more detail, it turned out that such a derogation would be practically unfeasible.
As the situation thus remains deadlocked, the ViDA problem is referred to the next ECOFIN meeting to be held in Brussels on November 5. The Economic and Financial Affairs Council (ECOFIN) is responsible for legislation and other important decisions affecting the Union's financial and budgetary policy. The Council meets regularly and is usually made up of the economy or finance ministers of the Member States.
New timetable
With all the repeated stops in the process, the introduction of the ViDA, i.e. the package that makes up the updated EU VAT Directive, is being pushed further and further into the future. In the latest revised timetable, the plan is for the platform economy regulations to come into force in July 2027 and the digital reporting requirements and e-invoicing to come into force in July 2030.
When ECOFIN reaches an agreement early next month, the proposals will go back to the European Parliament for confirmation. This should go smoothly given the extended timetable. The other elements of the initiative, on digital reporting, e-invoices and a single VAT registration, are in place. They were finalized at the ECOFIN meeting in May.
Belgian compromise
Estonia is concerned that proposed VAT rules for digital platforms - on travel and accommodation - could distort competition. They say the rules risk negatively affecting small businesses and making things more complicated for them.
This view led Belgium to put forward a compromise at the May meeting in which small and medium-sized platforms would not have to bear the same responsibility. This proposal went so far as to leave it up to countries to decide whether to exempt small businesses from the proposed VAT rules. The Belgian invitation also offered a database to keep track of which companies could be exempted.
But the concession in question has not made Estonia change its position.
Estonia has instead pointed to the new reporting rules for digital marketplaces - which entered into force on 1 January 2023 - as a possible solution to some of the problems it currently faces. The said rules, brought within the EU Directive DAC 7, cover all types of transactions and aim to identify traders who do not report VAT correctly as well as to streamline marketplaces' handling of tax authorities' requests.
Sources: vatupdate.com, vatcalc.com and ec.europa.eu
