EU Council agrees on e-invoicing and real-time VAT reporting

Breakthrough in the EU Council after almost two years of debate: On Wednesday, the ministerial body agreed on a legislative package to adapt VAT regulations in all member states to the digital age. It includes regulations for real-time VAT reporting based on electronic invoices and for transactions carried out via digital platforms such as Uber, Lyft and Airbnb. In addition, one-stop stores are to be set up or expanded so that companies do not have to carry out costly VAT registrations in every member state in which they do business. The main aim of the dossier is to combat tax evasion.

Currently, companies are asked every few months to submit "recapitulative statements" to their national tax authorities about goods and services they have sold or supplied to businesses in other member states. This gives fraudsters the opportunity to exploit the authorities' difficulties in quickly identifying suspicious or fraudulent transactions, the Council points out. The government representatives want to counteract this – with a real-time system as proposed by the EU Commission at the end of 2022 –. This would require companies to issue e-invoices for cross-border transactions and automatically report the data to their tax administration.

According to Brussels, the existing European standards for e-invoicing in the area of public procurement will be used for this purpose. According to the plan, the national tax authorities will then exchange the data via a new IT system that enables suspicious activities to be analyzed. Companies subject to VAT in Germany must be able to receive e-invoices for domestic sales from the start of 2025. The content is presented in a structured, machine-readable XML data set, i.e. not on paper or in an image file such as a PDF. Invoices according to the XStandard and the ZUGFeRD format from version 2.0.1 are particularly recommended.

Platform operators should pay sales tax

The use of other European invoice formats such as FatturaPA (Italy) or Factur-X (France) is also an option. The Council agreed that this EU reporting system should be ready for use by 2030. All existing national procedures must be interoperable with the EU approach by 2035. The German government recently stated that an email inbox is sufficient for e-invoicing. However, the e-invoicing association points out that this only currently meets the minimum requirements. The tax-relevant data contained in these invoices would have to be transmitted to the tax authorities in real time by the end of the decade. The Peppol network is best suited for this.

Currently, many providers of online accommodation rentals and passenger transportation services do not pay VAT, the EU countries complain. This is mainly due to the fact that they are either individual providers, such as a driver or a landlord, or small businesses that do not usually have to register for VAT or are often unaware of their obligations or the tax rules in other member states. According to the new rules, the operators of the platform economy are responsible for collecting and paying VAT if their service providers do not do so themselves. However, the Council has given the EU countries more leeway in this respect. Following the changes, the EU Parliament must be consulted once again. The ministerial body can then formally adopt the directive and the two regulations, which requires unanimity.

(emw)