The European Commission continues its tax and reporting harmonisation efforts in the EU member states. Among the most recent public consultation sessions held by the EC was one dedicated to this year’s VAT amendments that include changes in electronic invoicing standards.
The main topics of the consultations were focused on whether the EC should fully harmonise invoicing within a centralised system or if it should establish an intra-community invoicing with the opportunity for member states to have their own regimes. It was also discussed if the transactions should be cleared with local tax authorities first and which CDC (Continuous Transaction Controls) methods should be applied in such a case. Finally, the experts touched upon the scope of the amendments, exemptions and issues that might fall upon the taxpayers.
It is expected that the amendments that are part of the VAT in the Digital Age reforms could be implemented by 2024 or 2025. The legislators hope that the VAT directive updates will simplify data sharing between authorities, creating a live transaction information stream and making it possible to identify fraud in real time.
The possible paths of harmonisation
Many questions are still being discussed regarding the harmonisation of the Digital Reporting Requirements in the EU. These include discussions on whether member states’ tax authorities should first validate e-invoices and, if yes, what amount of data should be shared with them.
Another important issue is a possible scenario of partial harmonisation and an establishment of a voluntary standard. Some experts fear that such VAT regime change wouldn’t be effective in reducing fraud. Moreover, partial harmonisation could bring confusion to businesses providing intra-community supplies.
Among other essential questions are e-invoicing standards and whether e-invoices could be accepted before VAT invoices.
Regarding the CDC, the EU needs to decide whether national authorities should be included in the e-invoicing pre-validation.
Finally, it is being decided if reporting threshold should apply to SMEs only and could some taxpayers be exempted. The EC will also choose whether pre-filled VAT returns should be created.