On February 12, 2025, the European Parliament approved updates to VAT rules, requiring online platforms to pay VAT by 2030, aiming to eliminate market distortions and combat fraud.
On February 12, 2025, the European Parliament voted to update VAT rules, with 589 in favor, 42 against, and 10 abstentions. This decision mandates that by 2030, online platforms must pay VAT for services they provide, especially when individual providers don't charge VAT. This move aims to level the playing field between digital and traditional services.
The reform targets sectors like short-term accommodation rentals and road passenger transport, where VAT discrepancies have been most significant. By enforcing VAT on online platforms in these areas, the EU seeks to correct market distortions and ensure fair competition. Member states can choose to exempt SMEs from this rule, providing flexibility within the framework.
By 2030, businesses must issue e-invoices for cross-border B2B transactions and automatically report data to tax authorities. This digital shift aims to enhance efficiency and combat VAT fraud. The updated rules also expand the online VAT one-stop-shop, simplifying compliance for businesses operating across EU borders.
The European Commission estimates that member states could recover up to €11 billion annually in lost VAT revenues over the next decade. Additionally, businesses are expected to save €4.1 billion per year in compliance costs and €8.7 billion in registration and administrative costs over ten years. These reforms aim to create a more equitable and efficient tax environment in the EU.
How will the new VAT rules impact your online business operations?
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