Key takeaways
- Marketplace VAT responsibility expands: From January 1, 2025, online marketplaces will be responsible for collecting and remitting VAT on B2C sales of goods made by EU-based sellers within the EU.
- Digital platforms face new VAT rules: The ViDA changes extend VAT obligations to platforms facilitating short-term accommodation and passenger transport, requiring them to charge and report VAT when suppliers do not.
- A fairer, more efficient VAT system: These updates aim to boost VAT revenue and ensure fair competition between EU and non-EU sellers, as well as between digital and traditional service providers.
For the third and final part of our series about the impact of VAT in the Digital Age (VIDA), we are going to take a closer look at what the changes mean for the platform economy. These changes are planned to come into effect from January 1, 2025. The changes are important for businesses that operate online marketplaces, but also for all larger or smaller businesses that use such marketplaces – whether as a main sales platform or as an additional sales channel. Two of the main areas within the scope of the changes focus on:
EU businesses selling goods within the EU via online marketplaces
As of January 1, 2025, online marketplaces are to become responsible for the VAT on any B2C sales of goods performed by EU-based sellers where the products are moving within the EU. The scope of the change includes all such sales, regardless of the value of the individual goods or the consignment. These rules would apply to both EU and non-EU online marketplaces.
The purpose of the change is to level the playing field between EU and non-EU sellers. Already as of July 1, 2021, online marketplaces are responsible for the B2C sales of goods within the EU made by non-EU sellers, as well as for the B2C sales of imported goods in the EU up to the value of EUR150.
The change would make the online marketplaces responsible for charging and collecting the VAT on the above sale to the final consumers and will also bring more record-keeping obligations. In view of fulfilling their VAT obligations, the online marketplace can still opt to use the OSS compliance simplification, where the Union scheme would be available to the EU-based marketplaces, and the non-Union scheme to the non-EU-based ones. Another option for the online marketplaces would be to pass the obligations for VAT collection and reporting to postal services and customs agents under the so-called ‘special arrangements’. However, this could impact the overall customer experience.
EU businesses using online marketplaces for their B2C sales within the EU would also need to update their systems with the new rules. Once the changes have entered into force, businesses would be issuing B2B invoices to the online marketplaces with 0% VAT on them. This, of course, would need to be correctly reflected in their VAT reporting as well, whether using internal solutions or external VAT compliance software products.
Businesses offering short-term rentals and passenger transport via digital platforms
The EU ViDA proposal extends the deemed supplier regime to cases where a digital platform facilitates the supply of short-term accommodation and passenger transport services A short-term accommodation is considered a rental for a period of up to 45 days.
This change is also planned to come into force in 2025 and will affect not only digital platforms but also the providers of such short-term accommodation and passenger transport services.
According to the new rules, the digital platforms will be required to collect and remit VAT when the underlying supplier has not done so. The platforms would also have further record-keeping obligations. Under the new rules, the underlying supplier would be making an exempt VAT sale to the digital platform while the platform would be charging the respective VAT to the final consumers.
Conclusion
The reason behind these VAT changes is two-fold. On the one hand, it aims at increasing VAT revenues collected by EU Member States. Based on EU studies, this would result in an estimated €6.6 billion in additional VAT revenues annually. On the other hand, the VAT changes are driven by the desire for a fairer competitive environment – they are expected to address the current distortion of competition between digital (virtual) and offline (real-life) providers of short-term accommodation and passenger transport services.
The new rules also reflect the increasing importance of digital platforms in the above economic sectors as well as in relation to VAT collection efficiency.
For more information on any of the topics covered in this edition of Taxually News please contact: thomas.maas@taxually.com
Frequently asked questions
What is the EU ViDA change for online marketplaces starting in 2025?
From January 1, 2025, online marketplaces will become responsible for charging and collecting VAT on all B2C sales of goods made by EU-based sellers within the EU. This change aligns the rules for EU and non-EU sellers and aims to simplify VAT compliance and improve fairness in cross-border ecommerce.
How will the ViDA changes affect short-term rentals and transport services?
Under the new rules, digital platforms facilitating short-term accommodation (up to 45 days) and passenger transport will be deemed VAT suppliers when the underlying provider does not charge VAT. This means the platform must collect and remit VAT on these services to EU tax authorities.
What should businesses using digital platforms do to stay compliant with ViDA?
EU businesses selling through marketplaces or offering digital services should update their invoicing, reporting, and accounting systems before January 2025. Using VAT automation software like Taxually can help ensure compliance with the new ViDA requirements and avoid penalties.
