Global Daily Tax News, EU Lawmakers Approve Digital Economy VAT Proposals, (Feb 13, 2025)

The European Parliament on February 12, 2025, approved value-added tax law amendments to, among other things, require that VAT be paid for services provided through online platforms, putting an end to an unfair distortion of competition.

During the plenary, MEPs approved the rules with 589 votes in favor, 42 against, and 10 abstentions.

These changes will require that, by 2030, online platforms must pay VAT for services provided through them in most of the cases where the individual service providers do not charge VAT. This will put an end to a distortion of the market because similar services provided in the traditional economy are already subject to VAT – notably in the short-term accommodation rental sector and the road passenger transport sector.

Member states will have the possibility of exempting SMEs from this rule.

The update will also fully digitalize VAT reporting obligations for cross-border transactions by 2030 with businesses issuing e-invoices for cross-border business-to-business transactions and automatically reporting the data to their tax administration. With this, tax authorities should be in a better position to tackle VAT fraud.

To simplify the administrative burden for businesses, online VAT one stop shops will be enhanced so that even more businesses with cross-border activity will be able to meet their VAT obligations through a single online portal and in one language.