On November 5, 2024, after a seemingly endless back and forth, the “VAT in the Digital Age“(ViDA) reform package was officially adopted by the EU’s Economic and Financial Affairs Council (ECOFIN). The aim of the reform is to simplify cross-border trade within the EU and reduce tax evasion. Here is an overview of the most important innovations and effects:
The “single VAT registration” includes measures that are intended to make the VAT registration obligation abroad largely superfluous. To this end, the one-stop store (OSS) procedure will be expanded, as will the rules on the transfer of tax liability for B2B transactions by non-established companies in other EU countries, with gradual introduction on January 1, 2027 and July 1, 2028.
However, as member states have options and certain transactions still require registration, implementation remains complex. From July 1, 2028, a one-stop store for intra-Community transfers is also to be introduced in order to relieve e-commerce companies in particular of registration obligations. This will eliminate registration obligations abroad for Amazon FBA cases, for example. Dropshipping cases, on the other hand, are likely to continue to entail registration in the country of destination, as the actual intra-Community acquisition cannot be reported via the OSS.
The simplification rule for consignment stocks introduced in 2020 will also become superfluous and will only apply to goods stored until June 30, 2028, meaning that it will expire on June 30, 2029. In detail:
Background to the single VAT registration
The “VAT in the The “Digital Age” reform is intended to ease the burden on companies by reducing the need to register for VAT in several EU countries. From 2027 third country companies certain B2B transactions processed via electronic platforms in the EU centrally via the One–Stop-store (OSS). In addition, services to private individuals in the EU can also be reported centrally, regardless of the customer’s country of residence. The threshold value of EUR 10,000 for intra-Community distance sales and cross-border B2C services will be specified.
New regulations from January 1, 2027
With the changes from the beginning of 2027 third country companies process their B2B sales in the EU more easily via the OSS. Services to EU private individuals can be reported centrally in the OSS, which makes things easier for smaller companies in particular, as registration in several EU countries is no longer necessary. In addition, the threshold for intra-Community distance sales now only applies to companies that are based exclusively in one EU country.
New regulations from July 1, 2028
From mid-2028, companies will also be able to process local deliveries and intra-Community shipments via the OSS. This extension simplifies the management of goods stored in fulfillment warehouses in the EU in particular. In addition, corrections to OSS declarations can be made directly up to the respective submission deadline.
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Practical consequences for companies and online retailers
The reform makes things much easier, especially for online retailers, who now rarely need to register separately in EU countries. The central reporting of many services in the OSS saves time and costs. Nevertheless, registration in certain EU countries may still be useful, for example for input tax refunds. However, certain transactions, such as tax-free intra-Community deliveries and export deliveries, remain subject to registration.
Legislation in the OSS and remaining challenges
It is important to note that the tax reported in the OSS is subject to the respective national regulations. Correction and appeal procedures are therefore based on the regulations of the country in which the tax is due. However, the reform has hardly changed the IOSS (Import One-Stop-Shop) procedure, which is important for international online trade. Further improvements are planned here as part of a planned reform of customs law. The reform also does not solve the issue of the registration obligation for dropshipping, which is so widespread.
The author: Sven Sistig
Sven Sistig has been working in national and international tax law for 12 years, with a focus on VAT advice and support for start-ups, (online) retailers and influencers. After holding positions at Deloitte and Flick Gocke Schaumburg, he most recently headed the tax department at ABOUT YOU.
