The digital economy and the development of new business models create new problems for tax administrations, which, with the current legislative framework, are unable to address the new digital reality and the resulting fraud. To address these problems , in its proposal document COM(2022) 701 to amend the VAT Directive 2006/11/EC, the European Commission has identified a number of options on VAT including: compulsory invoicing in electronic format; certification of intra-EU transactions with electronic invoices and transmission of digital reports in real time; a single VAT number that can be used throughout the European Union; and VAT obligations placed on operators of online platforms for the sale of transport and accommodation services.
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It is clear from reading the report that the measures adopted by Italy, first and foremost the mandatory introduction of the electronic invoice, are reflected and integrated in the future of VAT, including the reporting of data on cross-border transactions. Indeed, the EU Commission has set itself three main objectives:
- Modernize VAT reporting requirements by introducing the digital format (Digital Reporting Requirements) and by standardizing the information to be submitted by taxable persons to the tax authorities;
- Update VAT rules applicable to e-commerce platforms to address issues related to equal treatment, place of supply applicable to these types of transactions, and strengthen the role of platforms in collecting VAT with a focus on short-term rentals of accommodation and passenger transport;
- Avoid the need for multiple VAT registrations in EU member countries, improve the functioning of the implemented tool to declare and pay the VAT due on distance sales of goods by introducing single VAT registration.
These ambitious goals will be joined, as of January 1, 2024, by the introduction of special measures and new digital tools necessary for the modernization of the VAT regulatory framework, including:
Single VAT number. To avoid the need for multiple VAT registrations in the EU and improve the declaration and payment of tax due on distance sales of goods, the Single VAT Number is introduced. Member states will have to accept the application of the reverse charge mechanism in cases where a supplier not established in a member state where VAT is due, supplies goods to a person identified for VAT purposes in that member state. In this way, the unidentified supplier will not be required to register in that member state.
Electronic invoice. Article 217 of the VAT Directive will contain a new definition of ‘European electronic invoice’ as a document based on a structured format. With the same effective date, member states will be able to impose the exclusive use of the electronic invoice without the need to request any prior authorization from the Union, and in that case, the UBL or CII format will have to be used exclusively. For countries that already have an e-invoicing system in place, including Italy with the xml format, the adaptation to the UBL or CII format will have to be achieved by December 31, 2027, at the latest, in order to be operational from January 1, 2028.
Intra-EU transactions. Vat fraud arising from intra-EU trade will be combated through the introduction of a reporting system that, on a transaction-by-transaction basis, will provide member states with relevant information in almost real time. Unlike Intrastat lists, which are set to be discontinued as of Jan. 1, 2028, the reporting system will provide not only aggregate data for each taxable person, but also those for individual transactions, thus enabling the cross-referencing of supplies with purchases. With this purpose, a common template is also indicated and which registrants will have to follow, allowing taxable persons to always report data on electronic invoices issued according to the European standard established by Directive 2014/55/EU on electronic invoicing in public procurement, and thus in UBL and CII formats. At the same time, this will determine the use of e-invoicing for cross-border transactions, also considering that within two business days of carrying out the transaction, the same will have to be issued and the related data sent within the next two days.
The scale of cross-border transactions of goods and services involving EU member countries increasingly calls for a coordinated solution of VAT issues at the European level that simultaneously ensures the proper functioning of the single market, the reduction of compliance costs for businesses, and protects the interests of member states by combating VAT fraud, thus ensuring equality and tax neutrality.