The EU’s VAT package, the ViDA package (VAT in the Digital Age) could come into force as early as the beginning of next year, for example changes abolishing the rules on call-off stock, if the package of proposals is adopted.
Where does the process stand now?
The ViDA package, aimed at modernising the EU’s VAT system and cutting VAT fraud, was proposed almost two years ago and presented to the Parliament by the European Commission last November. On 24 July 2024 the European Parliament published its legislative opinion, approving the Commission’s proposals with a few amendments. If the Commission agrees with the amendments and makes no further changes, it will forward its position to the European Council and the national parliaments.
The Parliament’s proposals contain minor additions and clarifications to the ViDA package, mainly concerning data security and the handling of personal data. For example, under the proposed amendments, the data collected by the new systems can only be stored within the EU, and the data reporting requirements do not apply to defence and national security contracts. The processing of and access to data on private purchases would also be restricted to protect privacy.
Main objectives of ViDA package
In our previous article we covered the three main objectives of the ViDA package:
- the introduction of digital reporting, mandatory e-invoicing for cross-border transactions;
- updated VAT rules to meet the challenges of the platform economy;
- the introduction of single VAT registration.
Below are some of the other new features expected in relation to the three objectives.
Digital data reporting
The recapitulative statement will be replaced by digital reporting, as this must be forwarded for each transaction carried out by the taxpayer no later than three working days from the posting date in their accounts or from the date on which the invoice should have been issued. So there is now no need for the recapitulative statement.
Member States may allow the issue of e-invoices in other formats in accordance with the Directive, but each Member State must also adopt the single European standard as well. They may require that electronic invoices be issued for domestic transactions too.
The provisions of the ViDA package for digital reporting are expected to apply from the beginning of 2028, and be implemented into national law by the end of 2027.
Single VAT registration
The single VAT registration aims to reduce administrative burdens and eliminate registration obligations between Member States. To this end, the ViDA package removes the call-off stock simplification, which until now allowed a seller established in another Member State to hold call-off stock in Hungary without registering. However, removing the simplification does not mean the permanent abolition of this option, since by extending and amending two existing regulations, the same scheme can still be set up, avoiding the registration obligation.
An existing option would be made compulsory by an amendment to the ViDA package, according to which if a taxpayer without a VAT identification number in the Member State where the VAT is payable supplies a taxable person who has a VAT identification number in that Member State, then it is compulsory to apply the reverse charge mechanism. In other words, for a reverse-charge purchase in Hungary, the buyer would pay the tax instead of the seller, so this system ensures that the supplier does not have to register in the Member State if they don’t have a tax number there. Of course, the taxpayer can still choose to register in that Member State. Since this type of reverse-charge purchase had to be reported in the recapitulative statement so far, the purchaser will soon have to provide such information in the form of digital reporting.
One-stop shop system
The ViDA package expands the one-stop shop system to the transfer of own products to another state. Goods transferred in this way are considered to be tax-exempt acquisitions in the destination Member State. Taxpayers must register in the Member State where they are established, and report any changes to such activities, for instance the start and end of activities. The unique VAT identification numbers previously issued must be used, and VAT returns submitted electronically every month in the Member State that issued the number.
With the extension of the one-stop shop system and the application of reverse charging in Hungary, taxpayers who previously used call-off stock will still be able to avoid registration in the country of destination. The new system could also benefit products with a longer rotation period, as there is no 12-month deadline on sales.
The phasing out of call-off stock is expected to be one of the first steps, with Member States adopting and publishing the laws, regulations and administrative provisions necessary to abolish the call-off stock rules by 31 December 2024 at the latest.
The VAT experts at WTS Klient Hungary with their decades of professional experience can effectively support their clients not only with Hungarian but also international VAT regulation. Do not hesitate to contact us if your company is involved in international, intra-EU transactions, and you have questions about what changes you need to prepare for under the new rules.
