VAT in the Digital EU and the Deemed Supplier Obligations

May 16, 2022

As the public consultation of VAT in the Digital Age has come to an end, some changes regarding the full liability model for flatforms and the deemed supplier obligation remain unclear to the public. Below, you will find our explanations of changes and challenges from 2025.

1. Exemptions for small companies and the deemed supplier.

Currently, the exemptions for small enterprises differ across Europe and may cause additional administrative burdens to SMEs that want to sell internationally. It is planned that in 2025 the VAT registration threshold will be unified in Europe at a total of EUR 100 000, and member countries will be able to have the maximum VAT threshold at EUR 85 000 as a means to prevent large companies from benefitting from the SMEs exemption.

While we all wait for the changes, some other platform economy-related regulations occur. From 2021, online marketplaces are considered the deemed suppliers, and more reforms could be coming their way.

As of now, in some member states, sellers that have not exceeded the VAT threshold provide the marketplace with an administrative VAT number within the ‘EX’ scheme (their number has the prefix ‘EX’). The European Commission is considering dropping the EX scheme and moving towards other types of identification of taxable small enterprises.


2. Finding out the taxation status of the end customer.

Once the changes take place, the online marketplaces might have trouble identifying which foreign customers (especially when they are SMEs) are VAT-registered. Customers will likely be presumed non-taxable, as in the IOSS scheme.


3. Deemed supplier threshold.

The European Commission is expected to agree on a deemed supplier threshold similar to that implemented in Canada. In this case, online marketplaces would have to assess their turnover by calculating the total volume of taxable sales made via their platform.


4. TOMS reforms.
Tour Operators Margin Scheme (TOMS), which has been in place for over 40 years, will be reformed, too. Based on the scheme, tour operators have an advantage compared to other economic activities. They don’t have to register for VAT in countries where they buy and resell travel services. It is proposed that as soon as 2023, a special scheme for travel agents will be created together with new VAT rules for passenger transport and exceptions for services supplied to third-country residents.


5. Accommodation rental exemption.

Even though many platforms for short accommodation rentals work similarly to electronic marketplaces, they won’t be considered equal. Accommodation rental platforms will likely be exempt from the deemed supplier threshold as the deemed supplier is applied to sellers of goods, not to sellers of services like accommodation.