Veto on ViDA removed!

On 5 November 2024, the Council of the European Union, focusing on Economic and Financial Affairs (ECOFIN), convened in Brussels. The meeting adopted a comprehensive agenda tackling both legislative and non-legislative matters critical to the economic framework of the EU.

One of the key agenda points discussed is the VAT in the Digital Age Package – ViDA.

Earlier this year, on 14 May, the ViDA reform presented to ECOFIN did not achieve full consensus. Although the Digital Reporting Requirements (DRR) and single VAT registration pillars were approved, Estonia, home to ride-hailing company, Bolt, opposed the deemed supplier rules for the ride and accommodation platform economy, leading to an impasse.

The Estonian finance minister argued that the deemed supplier model could compromise VAT neutrality for SMEs collaborating with platforms in the affected sectors. Estonia suggested an opt-in clause for member states, but this proposal faced resistance.

Today, it was announced that a final agreement has been reached regarding one of the three ViDA Pillars - Updated VAT Rules for the Platform Economy.

 The three pillars of ViDA

The “Pillars” consist of the Updated VAT Rules for the Platform Economy; the Digital Reporting and e-invoicing Requirements; and a Single VAT Registration for Businesses selling to customers across the EU.

The latter two pillars were provisionally agreed upon in May, based on a compromise text prepared by the Belgian Council presidency. However, their implementation was delayed due to a deadlock over the treatment of digital platforms.

Hungary’s Role in the Agreement

The Estonian ‘veto’ has been removed in respect of the third pillar and a compromise has been reached. The compromise was facilitated by Hungary. The Estonian Minister of Finance stated that they are in agreement with the first and second pillars from the initial discussion and proceeded to thank the Hungarian Minister of Finance and his team, for their assistance and intervention in facilitating a compromise in respect of the third pillar. The compromise introduces a transitional period, making the rule voluntary from 1 July 2028 and mandatory from 1 January 2030.

The Belgium Minister of Finance further stated that they are in full support of the adoption of ViDA.

The EU Commission speaker thus concluded that further substantial amendments have been made due to the compromise and will be referred to the EU Parliament for final perusal and adoption.  

Minutes of the ECOFIN meeting

The official minutes of today’s meeting have not yet been published or circulated. However, the key points discussed in Brussels include:

• Hungary highlighted that the increasing use of platforms in daily life has raised new VAT-related questions. They emphasized that the package is a significant step towards electronic invoicing for B2B transactions, with real-time reporting enhancing VAT revenue protection. Hungary acknowledged the tough negotiations regarding the platform chapter and thanked all member states for their contributions to reaching a compromise on this pillar.
• The Commission expressed gratitude to the Hungarian presidency, as well as the Belgian, Spanish, and Swedish presidencies, for their hard work on this important file.
• Estonia thanked everyone for their constructive cooperation throughout the discussions and affirmed their satisfaction with the pillar of the platform economy.
• Spain thanked all participants for their efforts to reach a compromise and reiterated their commitment to the reform. They requested that a formal statement from them be included in the meeting minutes, although this statement is not yet publicly available.
• Belgium expressed appreciation to both the previous and current presidencies for their efforts. They stated their satisfaction with the compromise and the current text, emphasizing the importance of the ViDA package.
• Hungary thanked the other speakers for their input and acknowledged the significant efforts over the past two years to facilitate a compromise. The Hungarian Minister of Finance thanked his team and the previous and current presidencies for their contributions, noting that substantial amendments have been made to reach this agreement. These amendments will now be presented to the European Parliament.

 Amendment breakdown and dates:

• Jan 2025: e-invoicing derogation requirement removed
• Jan 2027: e-commerce package updates
• Jul 2028: Single VAT Registration; voluntary Platform Economy
• Jan 2030: mandatory Platform Economy
• Jul 2030: Digital Reporting & e-invoicing
• Jan 2035: harmonising domestic e-invoicing to EU

 Make sure to follow the eezi blog for further updates on the topic.