Estonia is taking a firm stand against a proposed VAT in the Digital Age – VAT reform that would impose new liabilities on digital platforms, including companies like Bolt Technology OU and Airbnb Inc.
“We are against taxing any service provider simply because they provide their services via digital platforms,” Estonian Finance Minister Mart Vorklaev exclaimed during the public session of the EU finance ministers’ discussion in Luxembourg today. He emphasized that this new regime would effectively tax small and medium-sized enterprises, adding an unfair burden that distorts competition. Instead of a mandatory tax, Estonia has proposed a voluntary opt-in approach, allowing each country to choose what works best for them.
ViDA Adoption Struggle Goes to Hungary
EU finance ministers have already struggled to reach an agreement on the Value Added Tax in the digital age — or ViDA — during their May meeting. The current proposal aims to eliminate tax avoidance and evasion, which cost member states billions of euros in lost revenue.
Under the new rules, platforms offering short-term accommodation and passenger transport services would become liable for paying VAT in certain situations. Countries like Italy and Spain are pushing for the agreement, keen on collecting VAT revenues from companies like Airbnb and Booking.com. Meanwhile, Bolt has been lobbying the Estonian government to oppose the measure, according to EU diplomats.
“It was clear that 26 member states support it,” Belgian Finance Minister Vincent Van Peteghem told journalists in Luxembourg. “I will try to find a compromise with all 27 member states.”
French Finance Minister Bruno Le Maire also voiced his support, stating, “There is an absolute need to have fair taxation of digital activities.”
This development now moves the ball to the Hungarian EU Presidency to continue to press for consensus and unanimity.
VAT in the Digital Age Background
On 8 December 2022, the European Commission proposed a series of measures to modernize and make the EU’s Value-Added Tax (VAT) system work better for businesses and more resilient to fraud by embracing and promoting digitalization.
Real-time digital reporting based on e-invoicing: The new system introduces real-time digital reporting for VAT purposes based on e-invoicing. This will give Member States valuable information they need to step up the fight against VAT fraud, especially carousel fraud. The move to e-invoicing is expected to help reduce VAT fraud by up to €11 billion a year and bring down administrative and compliance costs for EU traders by over €4.1 billion per year over the next ten years.
Updated VAT rules for passenger transport and short-term accommodation platforms: Under the new rules, platform economy operators in those sectors will become responsible for collecting and remitting VAT to tax authorities when their users do not, for example because they are a small business or individual provider.
Introduction of a single VAT registration across the EU: The proposals would allow businesses selling to consumers in another Member State to register only once for VAT purposes for the entire EU, and to fulfill their VAT obligations via a single online portal in one single language.
These measures are expected to help Member States collect up to €18 billion more in VAT revenues annually
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