COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the documents Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC as regards VAT rules for the digital age Proposal for a COUNCIL REGULATION amending Regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age Proposal for a COUNCIL IMPLEMENTING REGULATION amending Implementing Regulation (EU) No 282/2011 as regards information requirements for certain VAT schemes
Date: 2022-12-08
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: VAT, administrative cooperation, distance selling, e-invoicing, electronic government, exchange of information, goods and services, intra-EU trade, provision of services, supply, tax harmonisation

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 8.12.2022  SWD(2022) 393 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT    Accompanying the documents   Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC as regards VAT rules for the digital age     Proposal for a COUNCIL REGULATION amending Regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age     Proposal for a COUNCIL IMPLEMENTING REGULATION amending Implementing Regulation (EU) No 282/2011 as regards information requirements for certain VAT schemes  {COM(2022) 701 final} - {COM(2022) 703 final} - {COM(2022) 704 final} - {SEC(2022) 433 final} - {SWD(2022) 394 final}  
 
 
Table of contents 

1. 

2. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT .............................................................................................9 

PROBLEM DEFINITION...................................................................................................................................... 13 

2.1. 
2.2. 
2.3. 

WHAT ARE THE PROBLEMS? ..................................................................................................................................14 
WHAT ARE THE PROBLEM DRIVERS? .......................................................................................................................25 
HOW LIKELY IS THE PROBLEM TO PERSIST? ...............................................................................................................31 

3.  WHY SHOULD THE EU ACT? .............................................................................................................................. 32 

3.1. 
3.2. 
3.3. 

LEGAL BASIS .......................................................................................................................................................32 
SUBSIDIARITY: NECESSITY OF EU ACTION .................................................................................................................32 
SUBSIDIARITY: ADDED VALUE OF EU ACTION ............................................................................................................32 

4. 

OBJECTIVES: WHAT IS TO BE ACHIEVED?.......................................................................................................... 34 

4.1. 
4.2. 

GENERAL OBJECTIVES ..........................................................................................................................................34 
SPECIFIC OBJECTIVES ............................................................................................................................................34 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? ................................................................................................. 36 

5.1. 
5.2. 
5.3. 

WHAT IS THE BASELINE FROM WHICH OPTIONS ARE ASSESSED? ....................................................................................36 
DESCRIPTION OF THE POLICY OPTIONS .....................................................................................................................42 
OPTIONS DISCARDED AT AN EARLY STAGE .................................................................................................................48 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ........................................................................................ 52 

6.1. 
6.2. 

6.3. 
6.4. 

6.2.1. 
6.2.2. 
6.2.3. 

DESCRIPTION OF IMPACTS.....................................................................................................................................52 
IMPACTS BY VAT AREA ........................................................................................................................................54 
Impacts on SMEs of the digital reporting (SME test) ................................................................................60 
Impacts on SMEs of the platform economy ..............................................................................................64 
Impacts on SMEs of the VAT registration ..................................................................................................67 
STAKEHOLDERS’ VIEWS ON THE OPTIONS .................................................................................................................67 
POLICY INTERVENTION – GRADUAL APPROACH ..........................................................................................................71 

7. 

HOW DO THE OPTIONS COMPARE? ................................................................................................................. 75 

7.1. 
7.2. 

EVALUATION CRITERIA AND THE GRADUAL APPROACH ................................................................................................75 
POLICY COMPARISON ...........................................................................................................................................76 

8. 

PREFERRED OPTION(S) ..................................................................................................................................... 81 

8.1. 

REFIT (SIMPLIFICATION AND IMPROVED EFFICIENCY) .................................................................................................83 

9. 

HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?.................................................................... 85 

9.1. 
9.2. 

MONITORING STRUCTURES ...................................................................................................................................86 
EVALUATION ......................................................................................................................................................86 

10.  FIGURES AND TABLES OVERVIEW .................................................................................................................... 88 

11.  ANNEX 1: PROCEDURAL INFORMATION ........................................................................................................... 90 

11.1. 

LEAD DG, DECIDE PLANNING/CWP REFERENCES .....................................................................................................90 
Organisation and timing ......................................................................................................................90 
Consultation of the RSB ........................................................................................................................90 
Evidence, sources and quality ..............................................................................................................93 

11.1.1. 
11.1.2. 
11.1.3. 

12.  ANNEX 2: STAKEHOLDER CONSULTATION (SYNOPSIS REPORT) ........................................................................ 94 

12.1. 
12.2. 

TARGETED CONSULTATION ....................................................................................................................................94 
CALL FOR EVIDENCE ............................................................................................................................................96 

1 

 
 
 
12.3. 

PUBLIC CONSULTATION ........................................................................................................................................97 
Overview ..............................................................................................................................................97 
About the respondents .........................................................................................................................98 
VAT reporting (Digital Reporting Requirements) .................................................................................99 
VAT treatment of the Platform economy .......................................................................................... 102 
VAT registration ................................................................................................................................ 106 

12.3.1. 
12.3.2. 
12.3.3. 
12.3.4. 
12.3.5. 

13.  ANNEX 3: WHO IS AFFECTED AND HOW? ....................................................................................................... 111 

13.1. 

13.1.1. 
13.1.2. 
13.1.3. 

PRACTICAL IMPLICATIONS OF THE INITIATIVE .......................................................................................................... 111 
Businesses (taxpayers) ...................................................................................................................... 111 
Member States .................................................................................................................................. 111 
Citizens .............................................................................................................................................. 111 
SUMMARY OF COSTS AND BENEFITS ..................................................................................................................... 111 
RELEVANT SUSTAINABLE DEVELOPMENT GOALS ...................................................................................................... 118 

13.2. 
13.3. 

14.  ANNEX 4: ANALYTICAL METHODS .................................................................................................................. 119 

ECONOMETRIC MODEL (ESTIMATE THE DRR IMPACT ON VAT COMPLIANCE)............................................................... 119 
14.1. 
NET IMPACTS ON BUSINESSES’ ADMINISTRATIVE BURDENS BY CATEGORY AND TYPE OF FIRM (TABLE 12) ........................... 129 
14.2. 
VAT LIABILITY SIMULATION MODEL ..................................................................................................................... 130 
14.3. 
STANDARD COST MODEL (SCM) ........................................................................................................................ 131 
14.4. 
COMPARATIVE ANALYSIS ................................................................................................................................... 131 
14.5. 
14.6.  QUALITATIVE ASSESSMENT OF LEGAL CERTAINTY AND OTHER REGULATORY COSTS ......................................................... 131 
14.7.  METHODOLOGY TO ASSESS THE REVENUE SHIFT IN PLATFORM ECONOMY .................................................................... 131 
PARAMETERS, ASSUMPTIONS AND CALCULATIONS .................................................................................................. 132 
14.8. 

15.  ANNEX 5: OTHER INITIATIVES ........................................................................................................................ 142 

16.  ANNEX 6: E-COMMERCE EVALUATION ........................................................................................................... 147 

16.3. 

16.2.1. 
16.2.2. 

16.1. 
INTRODUCTION ............................................................................................................................................... 147 
16.2.  WHAT WAS THE EXPECTED OUTCOME OF THE INTERVENTION? .................................................................................. 148 
Description of the intervention and its objectives ............................................................................. 148 
Point(s) of comparison ...................................................................................................................... 150 
HOW HAS THE SITUATION EVOLVED OVER THE EVALUATION PERIOD? ......................................................................... 153 
Implementation ................................................................................................................................. 153 
Growth and evolution of e-commerce ............................................................................................... 155 
Actions taken ..................................................................................................................................... 158 
Identified issues ................................................................................................................................. 160 
EVALUATION FINDINGS (ANALYTICAL PART) ........................................................................................................... 162 
To what extent was the intervention successful and why? ............................................................... 162 
How did the EU intervention make a difference? .............................................................................. 172 
Is the intervention still relevant? ....................................................................................................... 173 
16.5.  WHAT ARE THE CONCLUSIONS? .......................................................................................................................... 175 

16.3.1. 
16.3.2. 
16.3.3. 
16.3.4. 

16.4.1. 
16.4.2. 
16.4.3. 

16.4. 

2 

 
 
 
 
 
 
Glossary of acronyms 

Term or acronym 

Meaning or definition 

B2B 

B2C 

B2G 

B&B 

CBA 

CTC 

DAC7 

DRR 

EU 

EU27 

ESS 

GDP 

IOSS 

IT 

MNCs 

MS 

Business-to-Business 

Business-to-Consumer 

Business-to-Government 

Bed and Breakfast 

Cost-benefit analysis 

Continuous Transaction Control 

Council Directive 2011/16/EU 

Digital Reporting Requirement 

European Union 

European Union without the United Kingdom 

Electronically Supplied Service 

Gross domestic product 

Import-One-Stop Shop 

Information technology 

Multinational Companies 

Member States 

MTIC fraud 

Missing Trader Intra-Community fraud 

OSS 

PTC 

SAF-T 

SME 

STR 

TA 

TBE 

VAT 

VIES 

One Stop Shop 

Periodic Transaction Control 

Standard Audit File for Tax 

Small and Medium-sized Enterprise(s) 

Short-term accommodation rental services 

Tax Authorities 

Telecommunications, Broadcasting and Electronic 

Value-Added Tax 

VAT Information Exchange System 

3 

 
 
 
4 

 
 
 
 
 
Glossary of Terms 

Chain transactions 

This  is  the  situation  in  which  successive  supplies  of  the  same  goods  are  made  between  different 
businesses, with the goods being transported from the first supplier to the final customer.  

Deemed supplier 

Whereas in most transactions it is the supplier of the goods or services who accounts for the VAT 
due on the transaction, in certain cases another person can be deemed to have received and supplied 
those goods or services themselves, and they would therefore be liable to account for the VAT on 
the  sales.  Under  the  deemed  supplier  regime  option  proposed  in  the  ‘VAT  Treatment  of  the 
Platform Economy’ element of the initiative, where the underlying supplier using a platform does 
not charge VAT (because they are a natural person, for example, or a taxable person using the SME 
scheme)  the  platform  would  account  for  the  VAT  in  their  place.  This  means  that  the  underlying 
supplier would not be required to register and account for the VAT themselves. 

Digital platform 

For the purposes of this exercise, the definition of a digital platform is taken from the ‘VAT in the 
Digital Age’ supporting study1 and is as follows: 

‘Platform economy’ is the term used to describe a multi-sided model of transactions, where there 
are three or more parties involved. In these transactions, the role of the ‘online/digital platform’ is 
to facilitate the connection between two or more distinct but interdependent sets of users (whether 
firms or individuals, whether carrying out an economic activity or not) who interact via electronic 
means. In these interactions, one of the parties to the platform offers access to or transfers assets, 
resources,  time  and/or  skills,  goods  and/or  services  to  the  other  party,  in  return  for  monetary 
consideration or, in certain cases, by barter/non-monetary exchanges. In most of these cases, these 
users could be named as ‘providers’ and ‘consumers’, respectively. A platform usually charges a 
fee for the facilitation of the transaction.’2  

It should be noted that the ‘VAT treatment of the platform economy’ element of this package only 
relates to the supply of services via a platform. Supplies of goods via platforms have their own set 
of e-commerce rules. 

E-invoicing 

‘Electronic  invoice’  means  an  invoice  that  has  been  issued,  transmitted  and  received  in  a 
structured electronic format which allows for its automatic and electronic processing. 

1 VAT in the Digital Age. Final Report (vol. I  – IV). Specific Contract No 07 implementing Framework Contract No 
TAXUD/2019/CC/150 (hereafter ‘supporting study’). 
2 Supporting study, vol. II, Box 1, p. 21. 

5 

 
 
 
 
 
                                                 
Union One-Stop-Shop (Union OSS) and Import-One-Stop-Shop (IOSS) 

The Union One Stop-Shop (OSS) is an optional simplification measure that traders established in 
the  EU  can  use  to  declare  and  pay  the  VAT  due  on  all  their  cross-border  supplies  of  services  to 
non-taxable persons taking place in the EU, as well as all their intra-Community distance sales of 
goods3.  Exceptionally,  Electronic  Interfaces  (EIs)  who  become  the  ‘deemed’  supplier  for  certain 
supplies of goods within the EU can also declare certain domestic supplies of goods in the Union 
OSS. Traders that opt to use this simplification do not need to  register for VAT in  each Member 
State  in  which  their  eligible  supplies  of  goods  and  services  to  consumers  take  place.  Instead,  the 
VAT due on those supplies is declared via a single quarterly electronic VAT OSS return, followed 
by a single quarterly payment, which are submitted to their Member State of identification.  

The  Import  One  Stop-Shop  (IOSS)  is  an  optional  simplification  used  for  the  declaration  and 
payment of VAT due on distance sales of low value goods imported into the EU with an intrinsic 
value  not  exceeding  EUR 150,  excluding  excisable  goods.  Where  a  trader  registers  to  use  IOSS, 
their supplies of eligible goods are effectively taxed at  the time of purchase. Consequently, these 
low  value  goods  are  exempt  from  import  VAT  upon  importation  into  the  EU.  The  VAT  due  on 
eligible supplies of low value imported goods can be declared via a single monthly electronic IOSS 
VAT return, accompanied by a single payment to the Member State of identification. Suppliers and 
electronic interfaces who are not established in the EU need to appoint an intermediary to be able to 
use  the  import  scheme,  unless  they  are  established  in  a  third  country  with  which  the  EU  has 
concluded  a VAT mutual  assistance agreement  which is  similar in  scope  to  EU legal  acts  in  that 
area. 

Place of supply 

The place of supply is the Member State in which the VAT is due. Under that general rules, the 
place of supply of goods is where those goods are located at the time of the supply, or if they are 
transported,  where  the  goods  are  located  when  the  transport  begins.  For  services,  the  place  of 
supply is the Member State of the customer for B2B supplies, and  the supplier for B2C supplies. 
However,  there  are  a  number  of  exceptions  to  these  rules,  for  example  relating  to  services 
connected to immoveable property (where the place of supply is where the property is located), and 
electronically supplied services (where the recipient is established in both B2B and B2C cases). 

Recapitulative statement 

When a business sells goods or services to a business in another Member State, it is obliged to 
submit a recapitulative statement to its Member State detailing the business to whom it has made 
the  supply,  and  the  total  amount  of  supplies  to  that  business.  This  information  is  submitted 
monthly, although Member States may allow for quarterly submission where the value of supplies 
does not exceed EUR 50,000 per quarter. The information is shared between Member States, and is 

3  An  intra-Community  distance  sale  of  goods  occurs  when  goods  are  dispatched  or  transported  by  or  on  behalf  of  a 
supplier in one Member State to certain customers in another Member State. 

6 

 
 
 
                                                 
used  to  help  ensure  compliance  (for  example,  Member  States  can  check  whether  the  business 
acquiring the goods or services has made a domestic supply in their own Member State). 

Reverse charge 

When a business makes certain supplies of services or goods to a business in another Member State 
and  the  place  of  supply  is  the  Member  State  of  the  customer,  that  business  would  be  required  to 
register in the Member State of the customer in order the account for the VAT. In order to avoid 
this,  the  business  can  use  the  reverse  charge.  This  is  a  system  by  which  the  supplier  does  not 
account for the VAT on its invoice, and instead the customer accounts for the VAT in its VAT 
return. The supplier should clearly indicate on its invoice that the reverse charge applies. 

SAF-T 

A  SAF-T  is  a  file  containing  reliable  accounting  data  exportable  from  an  original  accounting 
system, for a specific time period and easily readable by virtue of its standardisation of layout and 
format  that  can  be  used  by  revenue  authority  staff  for  compliance  checking  purposes.  One  of  its 
possible uses is the reporting of transaction data. 

SME scheme 

VAT is, in essence, applied to every taxable transaction by a taxable person. This means that small 
and micro enterprises should account for VAT on every transaction. However, due to the historical 
difficulties  of  a)  ensuring  compliance  on  these  small  businesses,  and  b)  the  relatively  high 
administrative  burdens  VAT  registration  would  impose  on  these  businesses,  the  VAT  Directive4 
contains  an  optional  SME  scheme,  where  Member  States  allow  for  small  businesses  to  eschew 
some  or  all  of  the  burdens  imposed  on  a  business.  In  practice,  this  means  that,  where  the  SME 
scheme applies, businesses are not required to account for VAT on their sales, but neither can they 
deduct VAT on their purchases. The eligibility of a business to use a SME scheme is based on their 
annual  turnover,  with  thresholds  differing  across  Member  States,  ranging  from  EUR 5,000  to 
EUR 88,5005. 

Value Added Tax (VAT) and VAT system 

The Value Added Tax (VAT) is a general  tax on consumption. The term ‘general’ refers to the 
fact  that  the  tax is  paid  on  most  goods  and  services,  with  relatively  few  exceptions  (e.g.  medical 
treatment, teaching). Purchasers pay a percentage-based tax on what they buy, based on the value 
and  the  nature  of  the  product.  VAT  is  collected  fractionally  by  businesses  who  pay  it  on  to  the 
government. The term ‘fractional’ refers to the fact that each business only pays for the added value 
on its turnover, i.e. the difference between its sales (output) and purchases (inputs). In practice this 
is done by charging VAT fully on each sale but granting businesses the right to recover (deduct) the 
VAT they themselves paid  on their purchases. An  exception to that rule is that businesses whose 

4  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common  system  of  value  added  tax  (OJ  L  347, 
11.12.2006, p. 1), as amended. 
5 Currently the average SME exemption threshold is approximately EUR 35.000. The levels of thresholds vary across 
Member States from EUR 0 (i.e. no exemption scheme currently available) in Spain, to EUR 88.500 in Romania. 

7 

 
 
 
                                                 
sales  are  lower  than  a  certain  threshold  are  allowed  to  stay  out  the  system  and  not  pay  VAT; 
however, if they do so they are not entitled to any reimbursement of the VAT (SME scheme). This 
exemption system has the advantage of sparing micro-enterprises from red tape but can create some 
distortions. 

The  VAT  Directive  is  the  main  piece  of  EU  VAT  legislation.  Recitals  4  and  5  of  this  Directive 
provide: 

“A VAT system achieves the highest degree of simplicity and of neutrality when the tax is levied in 
as  general  a  manner  as  possible  and  when  its  scope  covers  all  stages  of  production  and 
distribution,  as  well  as  the  supply  of  services.  (…)  It  is  therefore  necessary  to  achieve  such 
harmonisation of legislation on turnover taxes by means of a system of value added tax (VAT), such 
as will eliminate, as far as possible, factors which may distort conditions of competition, whether at 
national or Community level”.  

In  brief:  in  order  to  work  as  intended,  the  VAT  rules  need  to  be  harmonised  and  applied 
uniformly by the Member States.  

8 

 
 
 
 
1.  INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

VAT is a major source of revenue6 for Member States’ budgets, representing approximately 7% of 
gross  domestic  product  (GDP).  In  2019,  the  VAT  revenue  for  the  27  Member  States  (EU-27) 
amounted  to  over  one  trillion  euro.  Moreover,  VAT  revenues  contribute  to  the  EU  budget,  since 
0.3 percent  of  VAT  collected  at  domestic  level  is  transferred  to  the  EU  as  own  resources, 
representing 12% of the total EU budget. 

However, the VAT system has not kept pace with the digitalisation of the economy, which poses 
new challenges to tax authorities and the VAT system due to, for example, the emergence of new 
business  models  and  the  increasing  amount  of  data  with  which  tax  authorities  need  to  deal. 
Nevertheless, digitalisation also creates opportunities, providing new digital tools and solutions to 
help  tax  authorities  cope  with  their  tasks  while  allowing  for  the  simplification  of  tax  compliance 
and reducing its costs. This initiative thus seeks to adapt the EU VAT framework to the digital era, 
in line with one of the six top priorities of the Commission7, “A Europe fit for the digital age”. 

The  Commission  announced  this  initiative  as  part  of  its  Action  Plan  for  fair  and  simple  taxation 
supporting  the  recovery  (hereafter  “Tax  Action  Plan”)8  and  is  included  in  the  2022  Commission 
work programme9. The objectives of this initiative, as indicated in several actions of the Tax Action 
Plan, are as follows: 

-  Modernising VAT reporting obligations10 (Action A4), 
-  Addressing the challenges of the platform economy11 (Action A23), and 
-  Avoiding the need for multiple VAT registrations in the EU and improving the functioning 
of  the  tool  implemented  to  declare  and  pay  the  VAT  due  for  distance  sales  of  goods 
imported from outside the EU12 (Actions A1 and A5). 

Following  the  announcement  of  the  Commission’s  Tax  Action  Plan,  the  Council  stated  that  it 
“supports  the  Commission’s  suggestion  to  clarify,  simplify  and  modernise  the  EU  VAT  rules”, 
“welcomes  the  initiative  announced  by  the  Commission  to  modernise  reporting  obligations  for 
cross-border  transactions  (…)  and  the  Commission’s  intention  to  examine  the  need  to  adapt  the 
VAT framework to the platform economy”13. The European Parliament resolutions generally support 
initiatives  to  fight  VAT  fraud14.  Further,  the  Parliament  mentioned  its  explicit  support  for  the 

6 
7 
8 
9 
10 

11 

12 
13 

14 

Eurostat: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Tax_revenue_statistics  
https://european-union.europa.eu/priorities-and-actions/eu-priorities_en 
https://ec.europa.eu/taxation_customs/package-fair-and-simple-taxation_en  
COM(2021) 645 final (Annex II, Point 20). 
VAT reporting obligations refer to the obligation of VAT-registered businesses to make periodic declarations of 
their transactions to the tax authority to allow monitoring the collection of VAT. 
In  this  respect,  the  term  ‘platform  economy’  relates  to  supplies  of  services  made  via  a  platform,  i.e.  Airbnb, 
Uber etc. 
https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce_en 
Council conclusions on fair and effective taxation in times of recovery, on tax challenges linked to digitalisation 
and on tax good governance in the EU and beyond (FISC 226 ECOFIN 1097, doc. 13350/20).  
European Parliament resolution of 24 November 2016 on towards a definitive  VAT system and fighting VAT 
fraud  (2016/2033(INI));  European  Parliament  resolution  of  4 October  2018  on  fighting  customs  fraud  and 
protecting EU own resources (2018/2747(RSP)). 

9 

 
 
 
 
                                                 
initiative  in  that  it  “looks  forward  to  the  legislative  proposal  for  modernising  VAT  reporting 
obligations”15. More recently, the European Parliament adopted a resolution16 noting the potential 
of data and digital tools to reduce red tape and simplify various taxpayer obligations, in particular 
in  the  area  of  VAT  returns  and  recapitulative  statements,  (…)  and  welcoming  the  Commission's 
proposal  to  modernise,  simplify  and  harmonise  VAT  requirements,  using  transaction-based  real-
time  reporting  and  e-invoicing.  Moreover,  the  resolution  underlines  that  the  diversity  of  the 
Member States’ tax regulations constitutes a cumbersome challenge and, while endorsing the Union 
One Stop Shop (OSS), asks to broaden its scope to encompass a wider range of services. 

By exploiting digital technologies, the current initiative offers a huge potential in the fight against 
VAT fraud, in particular missing trader intra-Community (MTIC) fraud17, estimated in the range of 
EUR 40-60 billion18,  which  is  a  significant  part  of  the  ‘VAT  Gap’,  which  itself  was  recently 
estimated at  EUR 134 billion in the VAT Gap Study.19  In the same study, the underlying reasons 
for  the  VAT  Gap  were  grouped  into  four  broad  categories  that  include  (i)  VAT  fraud  and  VAT 
evasion,  (ii)  VAT  avoidance  practices  and  optimisation,  (iii)  bankruptcies  and  financial 
insolvencies  and  (iv)  administrative  errors.  Since  VAT  fraud  is  part  of  the  VAT  gap,  even  if  the 
exact size of the VAT fraud is difficult to measure, the VAT gap still offers a useful and unique EU-
wide indicator of the fraud. MTIC fraud is linked to the way cross-border EU transactions are taxed 
under  the  current  VAT  regime20,  which  dates  from  1993  and  was  intended  to  be  a  transitional 
system. While several Member States have made significant technological investments to improve 
risk assessment and tax control processes, the possibilities offered by new technologies have not yet 
been reflected in the VAT Directive, whose mechanism to report intra-Community transactions, the 
recapitulative statements21, is  outdated compared to  the digital  reporting systems  implemented by 
Member States.  

The Commission tabled in 2018 a proposal22 for a definitive VAT system for the taxation of trade 
between Member States, which is still under discussion in Council. This proposal aimed to replace 
the transitional system referred above by treating intra-Community transactions in the same way as 
domestic ones. VAT would be due in the Member State of destination of the goods23 at the rate of 

15 European Parliament resolution of 16 February 2022 on the implementation of the Sixth VAT Directive: what is the 
missing part to reduce the EU VAT gap? (2020/2263(INI)). 
16  European  Parliament  resolution  of  10 March  2022  with  recommendations  to  the  Commission  on  fair  and  simple 
taxation supporting the recovery strategy (P9_TA(2022)0082). 
17  Europol:  https://www.europol.europa.eu/crime-areas-and-statistics/crime-areas/economic-crime/mtic-missing-trader-
intra-community-fraud  
18 European Court of Auditors: 
https://www.eca.europa.eu/Lists/ECADocuments/SR15_24/SR_VAT_FRAUD_EN.pdf 
19 The VAT Gap is the overall difference between the expected VAT revenue based on VAT legislation and ancillary 
regulations and the amount actually collected: https://ec.europa.eu/taxation_customs/business/vat/vat-gap_en 
20 VAT is not charged on cross-border transactions, contrary to domestic ones, allowing taxable persons to buy goods 
free of VAT within the Single Market, breaking the chain of fractioned payment and creating an incentive for fraud. 
21 See Glossary of Terms. 
22 COM(2018) 329 final. 
23 This system would be extended to services at a later stage. 

10 

 
 
 
                                                 
 
that Member State but would be charged and collected by the supplier in its own Member State24. 
The  VAT  in  the  Digital  Age  initiative  has  the  potential  to  strengthen  both  the  current  and  the 
definitive VAT system.  

In addition, over recent  years, issues relating to  the  taxation of the digital economy have become 
the subject of discussions regarding possible changes to fiscal policies25. The growing importance 
of the platform economy in the collection of VAT was recognised, notably the potential for digital 
platforms to significantly enhance the effectiveness of VAT collection given their role in generating 
or  facilitating  online  sales26.  This  is  particularly  relevant  considering  the  large  number  of  natural 
persons and small businesses who operate on these platforms, many of whom are unaware of their 
potential VAT obligations.  

The VAT in the Digital Age initiative runs alongside further Commission initiatives relating to the 
Digital  Economy27,  such  as  the  recently  adopted  Digital  Services  Act28,  the  recent  proposal  for a 
Directive to improve working conditions in platform work29, or the ongoing work relating to Short 
Term  Rental30.  Under  these  initiatives  the  general  direction  of  travel  is  to  make  platforms  more 
responsible and play a greater role in the regulatory framework.  

Furthermore, from 1 July 2021, the VAT rules on cross-border business-to-consumer (B2C) e-
commerce activities changed to address challenges arising from the VAT regimes for distance sales 
of goods and for the importation of low value consignments. Online sellers, including online 
marketplaces/platforms can register in a single Member State using the One Stop Shop (OSS) for 
the declaration and payment of VAT on their distance sales of goods and cross-border supplies of 
services to customers within the EU and the Import One Stop Shop (IOSS) for goods coming from 
outside of EU31. An evaluation of the first six months since the entry into application of these new 
rules can be found in Annex 6. Improvements to the current schemes will be considered in this 
initiative. Moreover, an e-commerce study32 focussing on the import process as well as an 

24 Whereas the current VAT system divides each EU Business-to-Business cross border supply of goods in an exempt 
intra-Community supply in the Member State of departure and a taxable intra-Community acquisition in the Member 
State of arrival of the goods, the definitive regime foresees the introduction of a single taxable supply in  the Member 
State of destination of the goods, called intra-Union supply. 
25  European  Parliament  (2016),  “Tax  challenges  in  the  Digital  Economy”,  Study  for  TAXE  2  Committee, 
IP/A/TAXE2/2016-04;  Report  of 
the  Digital  Economy., 
https://ec.europa.eu/taxation_customs/system/files/2016-09/report_digital_economy.pdf  
26 OECD (2019), “The Role of Digital Platforms in the Collection of VAT/GST on Online Sales”, OECD, Paris. 

the  Commission  Expert  Group  on  Taxation  of 

www.oecd.org/tax/consumption/the-role-of-digital-platforms-in-the-collection-of-vat-gst-on-online-sales.pdf   

27 A detailed list of these initiatives is presented in Annex 5  
28  Regulation  (EU)  …  /…  of  the  European  Parliament  and  of  the  Council  on  a  Single  Market  For  Digital  Services 
(Digital Services Act) and amending Directive 2000/31/EC 
29  The  proposed  Directive  is  expected  to  bring  legal  certainty  on  the  employment  status  of  people  working  through 
digital  labour  platforms,  increase  transparency  in  the  use  of  algorithms  by  digital  labour  platforms  (for  workers  and 
genuine  self-employed),  and  enhance  transparency  and  traceability  in  platform  work,  including  in  cross-border 
situations (https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6605). 
30 See Annex for descriptions of relevant current and ongoing initiatives.  
31 https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce_en 
32 Study on an integrated and innovative overhaul of EU rules governing e-commerce transactions from third countries 
from a customs and taxation perspective, TAXUD/2017/CC/141  

11 

 
 
 
                                                 
 
evaluation of the Union Customs Code is currently being carried out and could impact on the IOSS 
extension.  
The initiative supports the EU’s sustainable growth strategy33 that refers to better tax collection, the 
reduction  of  tax  fraud,  avoidance  and  evasion  and  the  reduction  of  administrative  burdens  and 
compliance  costs  for  business,  individuals,  and  tax  administrations.  Improvement  of  the  taxation 
systems  to  favour  more  sustainable  and  fairer  economic  activity  is  also  included  in  the  EU’s 
competitive sustainability’s agenda.  

33  Member  States’  recovery  and  resilience  plans  envisage  a  wide  set  of  reforms  aimed  at  improving  the  business 
environment and favouring adoption of digital and green technologies. These reforms are complemented by important 
efforts to digitalise tax administrations as a strategic sector of the public administration (COM(2021) 740 final: Annual 
Sustainable Growth Survey 2022). 

12 

 
 
 
 
 
                                                 
2.  PROBLEM DEFINITION 

The  causes  and  consequences  of  the  problems  to  be  tackled  by  the  Commission  initiative  are 
summarised in the Problem Tree.  

Figure 1 – Problem tree 

s
r
e
v
i
r

D

Increasing scale of 
the platform 
economy and  
e-commerce 

Multiplicity and 
complexity of the 
new business 
models driven by 
technological 
changes 

Fragmented 
regulatory 
framework 
(divergent 
requirements) 

Outdated reporting 
mechanism for 
intracommunity 
transactions 

Scope of application 
of the simplification 
schemes* 

s
m
e
l
b
o
r
P

s
t
c
e
f
f
E

  Sub-optimal VAT 
collection and control 

Excessive burdens and 
compliance costs 

Reduced VAT 
revenue and 
high VAT gaps 
indicating fraud 

Un-level 
playing field: 
some business 
models are 
advantaged by 
the VAT rules  

Missed 
opportunities 
linked with the 
IT systems, 
business 
automation 
and 
digitalisation 
of VAT  

Market 
fragmentation 
and associated 
costs  

Multiple 
registration 
costs for some 
types of 
businesses 
operating 
cross-border 

________________ 

*  i)  Some  transactions  are  not  covered  by  the  OSS  and  IOSS  schemes  and  ii)  the  SME  simplification  scheme 
reduces VAT equality and neutrality in the platform economy 

13 

 
 
 
 
 
 
 
 
2.1.What are the problems? 

Two main problems were identified in the supporting study34:  

1.  Sub-optimal VAT collection and control – the EU VAT legislative framework is not fully 

adapted to deal with the new digital reality and is prone to fraud.  

2.  Excessive  burdens  and  compliance  costs  –  the  digital  economy  and  the  development  of 
new  business  models  create  new  challenges  and  costs  for  tax  administrations  and 
businesses. 

The challenges and potential benefits of digitalisation in terms of control/fight against fraud (related 
to problem 1) and burden reduction (related to problem 2) are not  fully seized. The problems  are 
especially visible in three areas:  

  VAT reporting (including digital reporting),  
  VAT administration (treatment) of the platform economy, and 
  VAT registration.  

VAT reporting and digital reporting requirements (DRR) 

The  VAT  Directive  (Directive  2006/112/EC)35,  which  is  the  main  piece  of  EU  legislation  in  the 
field of VAT, dates from the 1970s and, as such, the default reporting requirements are not digital. 
However,  the  Directive  grants  Member  States  a  wide  discretion  to  introduce  the  obligations  they 
deem necessary to ensure the correct collection of the tax and to prevent evasion. 

Taking advantage of this possibility, several Member States have introduced various types of digital 
reporting requirements (DRR)36 which have proven successful in increasing tax collection, thanks 
to  both  the  improvements  to  tax  control  and  the  deterrent  effect  on  non-compliance37.  Different 
types of DRRs are currently in place in several Member States: clearance e-invoicing (Italy), real-
time  reporting  (Hungary,  Spain),  SAF-T  reporting  (Lithuania,  Poland,  Portugal),  VAT  listing 
(Bulgaria, Croatia, Czechia, Estonia, Latvia, Slovak Republic) – see Box 1 and Annex 4: Analytical 
methods. In addition, some Member States have requested a derogation to introduce obligatory e-
invoicing  (France,  Romania,  Poland)  or  announced  upcoming  reporting  requirements  (Greece), 
while  mentioning  in  the  targeted  consultation  that  they  prefer  to  wait  for  an  EU  solution  before 
introducing  a  unilateral  solution.  Other  Member  States  (Belgium  and  Denmark)  have  announced 
their  intention  to  apply  mandatory  e-invoicing,  even  though  they  are  not  linked  to  a  reporting 
obligation  yet.  Germany has also  confirmed its intention  to  implement  mandatory e-invoicing  for 
B2B transactions. This shows the high degree of complexity generated by the lack of EU regulation 

34 Supporting study, vol. I (p. 76 ff.), vol. II (p. 87 ff.), vol III (p.31 ff.). 
35 In particular Article 273. 
36 See Annex 4 for the mapping of digital reporting requirements. 
37 Country factsheets for digital reporting requirements are available in the supporting study (vol. I, Annex A, p. 149 to 
162).  

14 

 
 
 
 
 
 
 
                                                 
in  the  field,  and  how  the  situation,  far  from  being  settled,  continues  to  evolve,  and  requires 
increasing administrative and adaptation costs for businesses.  

An  econometric  model38  based  on  a  panel  regression  method  with  fixed  effects  was  used  to 
estimate the impact on VAT revenue associated with the introduction of DRR solutions. The model 
looked  at  the  development  of  VAT  revenue  in  Member  States  which  had  introduced  DRRs  as 
opposed  to  a  control  group  which  had  not.  The  assessment  of  the  changes  to  VAT  revenues  has 
been done by means of an econometric analysis based on panel-data, to determine whether and to 
what  extent  the  existing  DRRs  have  resulted  in  an  increase  in  VAT  compliance  in  the  Member 
States  concerned.  The  increase  in  VAT  revenue  during  the  2014-2019  period  is  estimated  to  be 
between  EUR 19  and  EUR 28 billion  in  the  Member  States  which  have  introduced  DRRs  in  this 
period, corresponding to an annual increase of VAT revenue of between 2.6% and 3.5%.39  

Several  Member  States  (Belgium,  Denmark,  Germany,  Ireland,  Cyprus,  Luxembourg,  Malta, 
Netherlands, Austria, Slovenia, Finland, and Sweden) have not yet introduced DRRs. The decision 
appears  to  be  mainly  driven  by  their  relative  lower  level  of  VAT  fraud  (the  2016-2019  average 
VAT Gap of the Member States currently having or announcing to adopt DRRs is 15.2% compared 
with an average of 8.6% for the ones who do not yet have DRRs in place). There are other aspects 
that may influence the decision on whether to introduce or not DRRs, such as the IT-related ones 
(e.g.  the  particularities  of  the  national  IT  systems),  the  adoption  of  similar  requirements  in  other 
Member  States  (e.g.  a  neighbouring/important  trade  partner  Member  State  takes  the  decision  to 
introduce DRR), or other local particularities (e.g. the general readiness of the business population 
for  such  measures  or  the  administrative  organisation).  None  of  the  Member  States  that  have 
implemented DRRs had recorded a VAT Gap lower than 10% prior to their introduction, except for 
Spain (where the VAT Gap was 6.5% in 2016)40 and the top Member States constantly registering 
the  highest  VAT  gaps  (Romania,  Greece,  Lithuania,  and  Italy)  are  among  those  that  have 
introduced or announced the introduction of DRRs. 

As can be seen, the DRRs adopted, which provide information to tax authorities on a transaction-
by-transaction basis, vary substantially from one Member State to the other. They can consist in the 
transmission of monthly reports of business transactions, submissions of invoices in real-time, the 
transmission of invoice data in real or quasi-real time, or the submission of tax and accounting data 
or VAT records. Further, other Member States have implemented non-digital tools for reporting of 
transactions, such as listings which do not provide data at transactional level, but only the values of 
sales  or  purchases  per  customer  or  supplier  (listings  of  suppliers  and  customers).  All  these 
requirements are additional to the submission of VAT returns. The global trend shows a move from 
traditional  VAT  compliance  (i.e.  filing  forms  with  periodic  aggregate  data)  towards  real-time 
sharing  of  transaction-based  data  with  the  tax  administration  (generally  based  on  e-invoicing). 

38 Full details of the model specifications and the results are available in Annex 4 and in the supporting study (Vol I., 
Annex C, p. 166 to 181). 
39 Supporting study, vol. I, p. 40.  
40 Supporting study, vol. I, page 83. 

15 

 
 
 
                                                 
However, the VAT Directive41 represents a significant barrier towards the adoption of e-invoicing 
requirements, due to the need for Member States to  obtain an explicit derogation to adopt  digital 
reporting  requirements  based  on  e-invoicing  requirements.  This  has  also  influenced  both  the 
adoption and the design of national digital reporting requirements. 

The importance of this problem and the need to act has been confirmed by stakeholders during the 
public  consultation:  “the  rapid  introduction  of  divergent  digital  VAT  requirements  (…)  since  the 
adoption  of  modifications  to  Article  273  of  the  VAT  Directive  via  Directive  2010/45  have  shown 
that  it  is  important  not  only  that  Member  States  formally  go  along  with  a  consensus,  but  are 
actually committed to harmonization”.42 

The resulting  fragmented regulatory framework  brings additional  compliance costs  for businesses 
operating  in  different  Member  States  that  have  to  comply  with  diverse  local  requirements  and 
creates  barriers  within  the  Single  Market.  With  an  increasing  number  of  Member  States 
implementing  different  models  of  digital  reporting  obligations,  the  costs  of  fragmentation  for 
multinational companies (MNCs)43 are significant, estimated at about EUR 1.6 billion per year EU-
wide, of which 1.2 billion are borne by small-scale and 0.4 billion by large-scale MNCs44.  

Further,  the  current  reporting  system  of  intra-Community  transactions  (referred  to  in  the  VAT 
Directive as “recapitulative statements”) does not allow Member States to effectively tackle  VAT 
fraud linked to these transactions45. It should be noted that the current recapitulative statements date 
from  1993  and  have  not  substantially  changed  since  then.  They  are  ill-prepared  for  the  digital 
economy  and  can  hardly  be  compared  to  the  much  more  modern  digital  reporting  systems 
implemented by the Member States for domestic transactions. 

41 There is no explicit option available for Member States to introduce mandatory e-invoicing requirements as a means 
to  ensure  the  correct  collection  of  VAT  and  to  prevent  VAT  fraud. The  VAT  Directive  makes  the  use  of  e-invoices 
subject to their acceptance by the recipient,  in Article 232; this provision cannot be derogated via Article 273, which 
allows  Member  States  to  introduce  other  obligations  on  taxpayers  to  ensure  the  correct  collection  of  VAT  and  to 
prevent VAT fraud. Hence, if a Member State wishes to introduce mandatory e-invoicing requirements, it must do so 
by requesting a derogation from the Directive under Article 395, which is subject to the unanimous agreement of the 
Council based on a proposal from the Commission. 
42 The text in quotation marks reproduces one of the opinions received during the public consultation.  Generally, the 
respondents  to  the  public  consultation  agreed  the  most  with  the  statements  that  the  wide  discretion  left  to  Member 
States  together  with  the  lack  of  EU  guidance  result  in  a  fragmented  regulatory  framework  for  DRRs,  and  that  this 
fragmented regulatory framework is generating unnecessary costs for EU companies operating cross-border. Across all 
stakeholder  groups,  more  than  80%  of  respondents  agreed  or  partly  agreed  with  those  statements.  Among  business 
federations and economic operators, the rate is even higher with over 90% stating they agree or at least partly agree. 
43  Based  on  Eurostat  estimates,  there  are  about  210,000  multinational  companies  (MNCs)  in  the  EU,  85%  of  which 
have a local headquarters and the rest being controlled by foreign entities. 
44 These mainly result from significant setup costs, especially in countries with more complex DRRs. For compliance, a 
small-scale  MNC  can  be  expected  to  invest  about  EUR 10 000  for  SAF-T  requirements,  EUR  25.000  for  real-time 
requirements  and  more  than  EUR 50 000  in  case  of  e-invoicing.  For  a  large  scale  MNC,  figures  reach  up  to 
EUR 50 000 for SAF-T requirements, EUR 200 000 for real-time requirements and EUR 500 000 for e-invoicing. 
45 A comprehensive retrospective evaluation of the EU VAT system was conducted in 2011 and its findings have been 
used as a  starting point for the examination of the  current transitional VAT system (IFS  et al., 2011, A retrospective 
evaluation  of  elements  of  the  EU  VAT  system);  European  Commission  (2015).  Implementing  the  ‘destination 
principle’ to intra-EU B2B supplies of goods, Feasibility and economic evaluation study, Final Report. 

16 

 
 
 
                                                 
Among  other  shortcomings,  recapitulative  statements  provide  aggregated  data  for  each  taxable 
person, and not transaction-by-transaction data. They do not allow cross-matching of the data from 
supplies  with  that  of  acquisitions,  as  the  VAT  Directive  leaves  optional  for  Member  States  the 
reporting of intra-Community acquisitions  and less  than half Member States have introduced this 
obligation.  Further,  due  to  time-reporting  differences  across  Member  States,  the  data  may  be 
available  to  tax  authorities  in  other  Member  States  too  late,  not  only  because  of  the  filing 
frequency,  but  also  because  of  the  time  it  takes  for  local  tax  authorities  to  upload  data  on  the 
system. Such shortcomings were rightfully noticed by almost two-thirds of informed stakeholders 
publicly consulted (also see Figure 4 specific to tax administrations) who totally or partly agree that 
recapitulative statements would be more effective in fighting intra-EU fraud if data is collected on a 
transaction-by-basis and closer to the moment of the transaction. 

It  is  worth  noting  that  the  reform  of  the  reporting  of  cross-border  transactions  inevitably  entails 
changes to administrative cooperation  and exchange of data between the competent authorities of 
the Member States and the VAT Information Exchange System (VIES)46. The Tax Action Plan also 
mentions the “reinforcement of verifications of cross-border transactions”, and a 2023 proposal for 
VIES 2.0 is expected to complement the current initiative.  

46 In 1993, with the introduction of the Internal Market, the border controls were abolished and replaced by reporting 
obligations  of  intra-Community  supplies  in  form  of  periodical  recapitulative  statements  for  VAT  purposes  (a 
recapitulative statement is a simple form submitted on a monthly/quarterly basis by traders, in addition to their VAT 
return, to declare goods delivered and services provided to traders in other Member States. It contains the VAT number 
of  the  customers  and  the  aggregated  value  of  supplies  per  customer  during  a  given  period).  These  recapitulative 
statements  are  stored  in  national  VAT  databases. These  databases  are  then  connected  through  an  electronic  interface 
called  VIES  (VAT  Information  Exchange  System),  the  Commission  manages  the  communication  links  between  the 
Member States while there are national VIES applications developed by the Member States. Tax administrations access 
VIES  information  for  control  purposes,  while  economic  operators  use  a  module  of  VIES,  called  the  ‘VIES-on-the-
web’(VoW)  to  check  the  validity  of  their  client’s  VAT  numbers  registered  in  the  European  Union  for  cross  border 
transactions on goods or services.  

17 

 
 
 
                                                 
Figure 2 – VAT reporting: stakeholders’ views on current situation 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

Lack of guidance at EU-level results in
fragmented regulatory framework

Agree

Partly Agree

Neither agree nor disagree

Partly disagree

Disagree

159

17

4

2

3

28

47

39

31

14

3

1

0

1

5

0

0

0

2

2

0

0

5

0

1

1

2

1

1

1

Regulatory fragmentation generates
unnecessary costs for companies
operating cross-border

160

18

3

1

3

25

47

39

33

16

6

1

0

1

4

0

1

0

3

1

0

0

4

0

0

1

1

1

0

1

Concerning  the  identified  problem,  stakeholders  in  different  groups  (private  individuals  –  ‘PI’; 
business organisation/federation – ‘BF’; economic operators – ‘EO’; service providers – ‘SP’; and 
others, non-specific – ‘O’) agree on the negative impacts stemming from the current situation with 
regards to DRRs. During targeted interviews, Member States also validated the problem.  

In conclusion, while the EU legislation leaves substantial freedom to Member States to implement 
reporting systems, without providing guidance or a common framework, it still remains difficult for 
Member  States  to  apply  mandatory  e-invoicing.  Consequently,  businesses  operating  cross-border 
are  confronted  with  completely  divergent  systems  which  in  addition  cannot  be  used  to  exchange 
information between tax authorities of different Member States. Therefore, Member States cannot 
address cross border fraud effectively, and in particular MTIC fraud, which is a fraud specifically 
deriving from the way the VAT rules deal with intra-Community trade. That is why it is necessary 
to  reform  the  VAT  framework  right  now  both  to  avoid  the  proliferation  of  divergent  digital 
reporting  systems,  preventing  unnecessary  costs  for  businesses  and  to  have  a  common  digital 
transaction-based reporting of intra-Community transactions to tackle cross-border VAT fraud.  

VAT treatment of the platform economy 

Under  the  VAT  rules  a  taxable  person  means  any  person  (natural  or  legal)  who,  independently, 
carries out any economic activity47. Such a taxable person is normally required to register for VAT 
and  charge  VAT  on  its  sales.  Individuals,  acting  in  their  private  capacity,  i.e.  not  involved  in  an 
independent  economic  activity,  are  not  therefore  considered  as  taxable  persons.    In  addition,  the 
VAT  Directive  allows  for  various  simplification  measures,  in  particular  the  special  scheme  for 

47 According to Article 9 of the VAT Directive and its settled case-law the concept of “economic activity” has a very 
broad meaning. The concept of “independently” however means that employees are not treated as taxable persons. 

18 

 
 
 
 
                                                 
small  enterprises  (see  glossary)  which  was  introduced  in  order  to  a)  remove  the  need  to  tax 
administrations to ensure the compliance of a large number of small businesses, and b) reduce the 
administrative  burdens  on  these  businesses.    In  the  past,  these  businesses  were  not  considered  to 
have any impact on market competition with VAT registered businesses.  

The  platform  economy  has,  however,  introduced  new  business  models  in  which  an  indefinite 
number of private individuals and small businesses can provide their services via a platform.  Here 
the  economies  of  scale  and  network  effect48  means  that  these  providers  are  now  in  direct 
competition with traditional VAT registered suppliers.  For the accommodation sector, for example, 
over  50%  of  users  of  a  particular  accommodation  platform  specifically  access  the  offer  of  the 
platform  over  a  traditional  hotel,  and,  in  Europe,  the  cost  of  accommodation  offered  via  the 
accommodation  platform  can  be,  on  average,  some  8%  to  17%  cheaper  than  a  regional  hotel’s 
average  daily  rate49.    The  traditional  hotel  can  be  competing  with  a  large  number  of  short-term 
accommodation  providers  (for  example,  in  Barcelona,  one  platform  alone  provides  over  15,000 
listings  (rooms/apartments/houses  etc.  for  rent),  which  represents  around  50%  of  the  total  hotel 
rooms in the city)50. 

The information provided by the supporting study indicates that the number of underlying suppliers 
who  are  not  registered  for  VAT,  whilst  varying  depending  on  the  type  of  platform,  can  be  up  to 
70%51.  This  means  that,  for  example,  a  hotel  in  Barcelona  could  be  competing  with  over  10,000 
accommodation listings which do not charge VAT on their services. During the public consultation, 
more than 70% of respondents having an opinion on the issue  said they experience distortions of 
competition with other domestic firms offering the same services via platforms due to very uneven 
or uneven treatment of similar services and providers in their Member States52. This experience was 
reported most strongly by business federations. On another hand, the platforms themselves did not 
see distortions due to uneven treatment at all. 

The transport and accommodation sectors have been explicitly identified by the supporting study53 
as  sectors  in  which  a)  the  VAT  inequality  is  at  its  most  apparent  (in  that  the  accommodation 
platform  model  is  competing  directly  with  the  hotel  sector  direct  distribution  model,  and  the 
transportation  platform  model  is  competing  directly  with  private  taxi  firms);  and  b)  these  are  the 
two  largest  sectors  of  the  platform  economy54,  behind  e-commerce,  which  has  its  own  rules 
regarding the supply of goods.55 The transport and accommodation sectors together are accounting 
for more than half of the total  value of the platform economy  and, by  contrast,  financial services 

48 The capacity to build networks through which any additional user will enhance the experience of all existing users; 
an increased numbers of people or participants improve the value of a good or service.  
49 https://ipropertymanagement.com/research/airbnb-statistics 
50  http://insideairbnb.com/barcelona  and  https://www.statista.com/statistics/743014/annual-hotel-room-numbers-in-
barcelona-spain/ 
51 Supporting study, Vol. II, p. 37.  
52  “Do  you  experience  distortions  of  competition  with  other  domestic  firms  offering  the  same  services  via  ‘non-
platform’ means due to the uneven treatment of similar services/providers in your Member State?” (Yes, it creates very 
uneven treatment (42%); Yes, it creates uneven treatment (29%); No, it does not (30%)) 
53 Supporting study, Vol. II, p. 39. 
54 Having an ecosystem value of EUR 38.2 billion and EUR 43.2 billion per annum (Table 4) 
55 New rules regarding e-commerce came into force in July 2021 and which have been subject to evaluation (see Annex 
6: e-commerce evaluation). 

19 

 
 
 
                                                 
represent a far smaller sector whose supplies are mostly VAT exempt (See Table 4). Other sectors 
include  a  variety  of  areas  which  suffer  less  from  distortions  of  competition  (e.g.  hairdressers, 
swimming instructors), thus the issue of VAT inequality is not that manifest.  

In addressing the distortions of competition in the transport and accommodation sectors, attention 
should be paid  not  to  impose new obligations  on SMEs and natural  persons. A system should be 
found to resolve the existing distortions by looking at the role platforms could play in the collection 
of VAT, while not imposing disproportionate burden on them. 

Furthermore, there are various rules in the VAT Directive which have been applied differently by 
Member States56.  For example, the treatment of the facilitation service charged by the platform – in 
some  Member  States  this  is  regarded  as  an  electronically  supplied  service,  whilst  in  others  it  is 
regarded  as  an  intermediary  service.  This  is  relevant  because  it  can  lead  to  different  places  of 
supply57, which can subsequently lead to  double or non-taxation. Therefore, clarification of these 
rules is necessary. 

Platforms also face difficulties relating to the establishment of the taxable status of the provider of 
the  service.  This  is  because  whether  the  provider  is  a  taxable  person  or  not  influences  how  the 
platform accounts for the VAT on its facilitation service (for example, if the provider is established 
in a different Member State to the platform, the platform could use the One Stop Shop for a non-
taxable  person,  or  the  reverse  charge  for  a  taxable  person58).  Often  the  platform  does  not  have 
sufficient information to establish this tax status. 

Finally,  under  Article  242a  of  the  VAT  Directive,  platforms  are  required  to  keep  certain 
information59  relating  to  supplies  made  via  the  platform  and  to  make  it  available  on  request  to 
Member  States.  Platforms  can  sometimes  find  it  difficult  to  obtain  that  information  from  the 
underlying  supplier60.  In  addition,  they  find  that  they  are  supplying  information  which  they  have 
already  supplied  to  the  tax  authorities  (for  example,  under  DAC  7  regulations  relating  to  direct 
taxes). Therefore, it is necessary to look at the information obligations required by platforms to find 
synergies  with  other  legislation  where  possible,  and  consider  other  means  of  facilitating  record 
keeping obligations, such as standardising the format in which the records should be made available 
to Member States, and the frequency with which the records are made available.  Such an approach 
was strongly suggested and supported by the stakeholders during consultations. 

During the public consultation, a majority of 161 informed respondents (excluding “do not know” 
answers) considers ensuring a level-playing field between traditional and platform economy (equal 

56 Supporting study, Vol II, Table 25, p. 95 shows that 44% of respondents found the different application of the VAT 
rules by Member States to be a problem. 
57 The place of supply of an electronically supplied service to a non-taxable person is the place where the customer is 
established,  whereas  the  place  of  supply  of  intermediary  services  to  a  non-taxable  person  is  where  the  underlying 
transaction is supplied, which, in the case of services relating to immoveable property for example, would be where the 
property is located. 
58 See glossary for explanations of the One Stop Shop and Reverse Charge. 
59 For example, the type of supply, date of supply, taxable amount etc. 
60 As noted in the final report of the Group on the Future of VAT (GFV) / VAT Expert Group (VEG)sub-group on the 
VAT Treatment of Platforms, and discussed during the Fiscalis workshops. 

20 

 
 
 
                                                 
treatment) as very important (107) and important (47) For a minority it is either not important (4) or 
not so important (2). 

In  conclusion,  the  main  issue  with  the  platform  economy  is  the  inadequacy  of  the  current  VAT 
legal  framework  to  ensure  a  level  playing  field  with  traditional  businesses,  specifically  in  the 
transport and accommodation sectors.  Supplies made by small underlying suppliers via a platform 
are  not  taxed  and  the  facilitation  services  made  by  platforms  are  taxed  differently  in  different 
Member  States.  This  leads  to  difficulties  for  the  platforms,  suppliers,  and  Member  States.    The 
business  models  of  the  platform  economy  in  particular  expose  the  legislative  weaknesses  of  the 
VAT Directive with some Member States applying challenging joint and several liability rules on 
platforms, for example, or treating the supply of short-term accommodation differently depending 
on  arbitrary  elements  such  as  the  supply  of  towels  etc.  Uniform  rules  are  therefore  not  only 
required,  but  also  demanded  by  traditional  businesses  which  are  suffering  from  distorted 
competition.  

VAT registration requirements in the EU 

Where businesses perform cross-border transactions which are taxed in other Member States, they 
face considerable compliance burdens and costs, as presented in the table below.  

Table 1 – Minimum VAT-related costs61 of cross-border trade for businesses (EUR) 

Minimum costs of VAT registration (one-off) 

Business type 

Average business 

SME 

Per MS 

1,200 

1,200 

Minimum annual VAT compliance costs of doing cross-border trade - implying VAT registration (ongoing)62 

Average business 

8,000 

SME 
Source:  elaboration  based  on  the  targeted  consultation  and  Deloitte  “VAT  Aspects  of  cross-border  e-commerce 
report” (2015) 

2,400 

From this table, it is to be concluded that the minimum one-off cost of obtaining a VAT registration 
in  another  Member  State  is  EUR 1,200.  The  minimum  ongoing  cost,  on  a  yearly  basis,  for  VAT 
compliance in  another  Member State  is  EUR 8,000 for  an average business  and  EUR 2,400 for a 
SME.  In  fact,  being  registered  in  another  Member  State  entails  ongoing  reporting  and  other 
obligations  in  that  Member  State  (such  as  the  obligation  to  complete  and  submit  VAT  returns  or 

61  The  VAT  registration  bears  one  off  costs  (at  the  time  of  registration)  and  ongoing  costs  (being  registered  entails 
ongoing  reporting  requirements  in  the  Member  State  which  need  to  be  complied  with,  (such  as  the  obligation  to 
complete and file/submit VAT returns and pay VAT due, recovery of credits etc.). 
62 The costs of VAT registration are not only incurred as a one-off, at the time of registration, but also on an ongoing 
basis, as being registered (VAT presence) entails ongoing reporting requirements in the Member State which need to be 
complied with (such as the obligation to complete and file/submit VAT returns and pay VAT due, recovery of credits 
etc.). 

21 

 
 
 
 
                                                 
listings, to  pay  the  VAT due,  or to  request VAT  refunds)  which are included in  the  annual  VAT 
compliance costs. 

The VAT e-commerce package introduced a number of simplification schemes including the One 
Stop  Shop  (OSS)  and  the  Import  One  Stop  Shop  (IOSS),  which  have  alleviated  the  registration 
burden  for  non-established  business  carrying  out  transactions  in  other  Member  States.  These 
optional schemes simplify compliance by avoiding the potential VAT registration obligations of the 
supplier/deemed supplier in each Member State of establishment of the customer. They cover cross-
border  supplies  of  services  and  intra-EU  distance  sales  of  goods  (OSS)  and  the  distance  sales  of 
imported goods to the EU from  a third country/territory in consignments not exceeding  EUR 150 
(IOSS). As expected, minimising the need for taxable persons to hold multiple VAT registrations 
was considered as important/very important by stakeholders participating in the public consultation, 
only less than 2% (3 out 197 answers) seeing it as “not important”. 

The  implementation  of  the  OSS  and  IOSS  has  proven  to  be  a  great  success  as  shown  by  the 
evaluation  of  the  e-commerce  package  (see  Annex 6).  Almost  EUR 8 billion  in  VAT  in  the  first 
6 months of application of the new rules was collected via the OSS and the IOSS. The removal of 
the EUR 22 VAT exemption on imported goods allowed for the collection of a significant amount 
(EUR 0.7  billion)  of  VAT  on  previously  exempted  transactions.  At  the  same  time,  the  costs  of 
implementation  represent  only  0.01%  of  that  EUR 8 billion.  In  addition,  the  common  EU-wide 
threshold  that  replaced  the  previously  disparate  VAT  rules  reduced  the  risk  of  non-compliance 
while new record keeping obligations for traders, including for platforms, support tax audits carried 
out  by  tax  administrations.  The  success  of  the  VAT  e-commerce  package  was  also  confirmed  by 
Member States at the Council Working Party on Taxation in January 2022 and further endorsed by 
the  March  ECOFIN63.  A  large  majority  of  respondents  to  the  public  consultation  (75%) 
acknowledged  the  progress  made  by  the  OSS  in  minimising  the  need  for  taxable  persons  to  hold 
multiple VAT registrations, with only 2% (4 out of 193 answers) seeing “no progress” and 23% not 
expressing their opinion. 

While this success has been recognised, a number of operational improvements (see Annex 6) have 
nevertheless been identified as a result of the evaluation. These improvements will be addressed in 
this initiative.  

There are some remaining B2C transactions which are not covered by these simplification schemes. 
These  include  certain  types  of  supplies  of  goods  that,  even  though  they  may  have  a  cross-border 
aspect, do not fall within the definition of intra-EU distance sales of goods and are not covered by 
the OSS. This is also the case, for instance, in the distance sale of goods imported with an intrinsic 
value exceeding EUR 150, or the supply of goods subject to excise duties (i.e. alcohol, tobacco and 
energy), which are not under the current scope of the IOSS. Certain B2B transactions that are also 
triggering registration in another Member States are also assessed. The type and prevalence of these 
transactions are depicted in the table below.  

63 Council conclusions on the implementation of the VAT e-commerce package (FISC 68 ECOFIN 215, doc. 7104/22). 

22 

 
 
 
                                                 
Table 2 – Transactions requiring non-established businesses to VAT register (1 July 2021) 

Type of transaction  

Prevalence 

Domestic supply 

•  Domestic B2C supplies of goods made by suppliers not 

established in the Member State of taxation, including: 
supplies with installation and assembly; supplies of goods 
made on board means of transport; supplies of gas, 
electricity, heat or cooling energy; supplies of goods on a 
weekly market by a vendor; supplies of goods made by 
vendor when participating in an exhibition, trade fair or 
similar event. 

Second-hand 
goods64 (Margin 
scheme supplies) 

• 

Second-hand movable goods sold by a supplier not 
established in the Member State of the customer, 
including: certain works of art, collectors’ items and 
antiques. 

Specific 
market 
segments 

Specific 
market 
segments 

Distance sales of 
imported goods by 
the supplier from a 
third country/ 
territory 

Domestic supplies 
B2B where the 
reverse charge does 
not apply 

Transfer of own 
goods cross-border 

Domestic supplies 
of services where 
the reverse charge 
does not apply 

•  B2C Distance sales of imported goods by the supplier 
from a third country/territory with an intrinsic value 
exceeding €150, or products subject to excise duties. 

Specific 
market 
segments 

•  Domestic B2B supplies where the reverse charge does 
not apply, including: local supplies of goods after import; 
supplies of fuel; supplies of goods with installation or 
assembly; supplies of goods previously rented or leased in 
the Member State of taxation. 

  Transfer of own goods cross-border: Transfer of own 

stock to be stored and sold in a Member State closer to the 
customer, or the transfer made by an electronic interface 
on behalf of the owner where the goods are being sold 
using the electronic interface . 

•  B2B supplies of services under Articles 47-48, 53, 55-57 
if Article 194 does not apply (Member State and/or 
transaction specific), including: services connected with 
immovable property; passenger transport services; services 
in respect of admission to cultural, artistic, sporting, 
scientific, educational, entertainment or similar events, 
such as fairs and exhibitions, and of ancillary services 
related to the admission; restaurant and catering services; 
short-term hiring of means of transport. 

Specific 
market 
segments 

Widespread 
(representing 
significant 
parts of 
business 
turnover) 

Specific 
market 
segments 

C
2
B

S
D
O
O
G

B
2
B

S
D
O
O
G

S
E
C
I
V
R
E
S

Source: own elaboration 

64 In view of the alignment with the objective of a destination-based VAT system, meeting with the commitment of the 
recently  adopted  VAT  rates  legislation  (Article 4  of  Council  Directive  (EU)  2022/542  of  5 April  2022  amending 
Directives 2006/112/EC and (EU) 2020/285 as regards rates of value added tax, OJ L 107, 6.4.2022, p. 1-12). 

23 

 
 
 
 
 
 
 
 
 
                                                 
With  the  IOSS  being  currently  optional,  its  impact  on  the  need  for  multiple  VAT  registrations  is 
limited and the complexity of import process is not reduced to the optimum level possible. The risk 
of undervaluation of the economic value of goods declared for importation is mitigated where the 
IOSS  is  used  because  the  VAT  is  paid  upfront  at  the  time  of  purchase.  Potential  undervaluation 
remains  a  significant  risk  if  the  IOSS  remains  optional  as  VAT  is  only  collected  at  the  time  of 
import, not at the time of purchase. 

At present, imports of goods in the EU below the threshold of EUR 150 are not subject to customs 
duties.  However,  there  is  no  similar  VAT  exemption65.  As  a  result,  the  declared  value  of  B2C 
shipments  is  frequently  inaccurate,  often  intentionally  falling  under  EUR 150  in  order  to 
fraudulently benefit from the Customs duties exemption. These misdeclarations of value affect not 
only the assessment of customs duties but also the VAT to be collected on those goods66. 

Despite the introduction of the OSS and the IOSS, 124 respondents to the public consultation (90% 
of those providing an opinion on the matter) thought  that the requirement  to  obtain and maintain 
multiple  VAT  registrations  continues  to  be  a  problem,  at  least  to  some  extent.  Over  two-thirds 
thought it is a problem to a large or even very large extent.  

Figure 3 – Current situation: the need of multiple VAT registrations is still an issue 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

59

10

12

12

37

28

11
3
Tot.

4

7

2
0
PI

22

7

5

4
0
BF

13

4
1
2
EO

8

9

3
0
SP

3

5

3

1
1

O

Not at all

To a limited extent

To some extent

To a large extent

To a very large extent

In  general,  regarding  VAT  registration,  the  problem  resides  in  the  scope  of  the  existing  EU  One 
Stop  Shop  mechanism  that  was  recently  expanded  but  is  still  not  covering  specific  transactions. 
Driven by the recognised success of the latest improvements, businesses and Member States have 
strongly  advocated  for  an  immediate  expansion  of  the  simplification  measures  to  include  the 
missing  transactions.  Moreover,  in  order  to  establish  equal  treatment,  stakeholders  suggested 
making the IOSS mandatory for all deemed suppliers.   

65  “Putting  More  Union  in  the  European  Customs”,  Report  by  the  Wise  Persons  Group  on  the  Reform  of  the  EU 
Customs Union – Brussels March 2022 
66  The  conservative  estimate  of  duties  not  collected  on  imports  of  a  declared  value  below  EUR 150  is  close  to 
EUR 1.5 billion. Roughly 1/5 of not collected duties corresponds to lost VAT  

24 

 
 
 
 
                                                 
2.2.What are the problem drivers? 

Some of the drivers generating problems  are exogenous to the VAT framework  (i.e. the evolving 
technology  and  business  models,  value  chains  and  trading  practices),  whilst  others  are  about  the 
VAT  framework  itself  (i.e.  the  complex  and  fragmented  regulatory  environment).  Businesses 
operating  in  multiple  Member  States  are  especially  impacted.  The  drivers  in  both  categories 
combine  exposing  the discrepancy between the 30 year-old  rules  and the  current  digital  reality to 
create  the  two-faceted  problem  regarding  the  sub-optimal  VAT  collection  and  control  and 
administrative burden.  

Table 3 – Overview of the drivers 

EXOGENOUS DRIVERS 
(outside of the VAT framework) 

INTRINSIC DRIVERS 
(related to the VAT rules and their application) 

Increasing scale 
of the platform 
economy and e-
commerce 

Multiplicity and 
complexity of the 
new business 
models driven by 
technological 
changes 

Fragmented 
regulatory 
framework 

Outdated 
reporting 
mechanism for 
intracommunity 
transactions 

Scope of the 
application of the 
simplification 
schemes 

a) VAT reporting 

b)  VAT  treatment  of 
the platform economy 

c) VAT registration 

☒ 

☒ 

☒ 

☒ 

☒ 

☒ 

☒ 

☒ 

☒ 

☒ 

☐ 

☐ 

☐ 

☒ 

☒ 

i.  Increasing scale of the platform economy and e-commerce  
This driver generally affects all three VAT areas. Over 1,500 digital platforms67 have a significant 
presence in the EU27 (about 1,800 including the UK). Overall, in 2019 the revenue of the digital 
platforms  in  the  EU27  market  reached  EUR 66.9 billion.  The  revenue  of  their  providers68  is 
estimated  at  about  three  times  the  platform  revenue,  at  EUR 191.1 billion.  The  value  of  VAT 
revenue from the digital platform ecosystem69 is estimated at about EUR 25.7 billion per year for 
the EU27, i.e. 2.6 percent of total VAT revenue70. 

67 Digital platforms should clearly be distinguished from the other online business models that are not multi-sided and 
do  not  require  one  of  the  transaction  sides  to  play  the  role  of  digital  facilitation.  The  number  of  digital  platforms 
includes both e-commerce (goods) and platform economy (services)  
68 Excluding the facilitation fees and excluding the advertising sector  
69 This figure includes both the VAT paid on the facilitation service, and on the underlying supply. 
70 Excluding advertising. The description on the VAT liability simulation model is available on Annex 4 

25 

 
 
 
 
 
                                                 
Table 4 – Scale of platform economy operation, by sectors (EU27, EUR billion, 2019) 

Sector 

Revenue of digital 

platforms (EU27) 

Revenue of 

platforms’ 
providers (EU27)71 

Ecosystem value 

(EU27) 

Accommodation 

Advertising* 

E-Commerce 

Finance 

Household and Professional Services 

Real Estate 

Transportation 

Other 

6.3 

32.8 

16.6 

0.6 

1.4 

0.7 

7.2 

1.3 

36.9 

n.a. 

93.8 

6.7 

7.1 

3.8 

31.0 

11.8 

43.2 

32.8 

110.4 

7.3 

8.5 

4.5 

38.2 

13.1 

TOTAL 
66.9 
Source:  Targeted  consultation.  *Revenue  of  digital  platforms  only.  The  numbers  may  not  add  up  perfectly  due  to 
rounding.  

258.0 

191.1 

Additionally, and importantly, the scale of the platform economy has increased rapidly over the last 
years.  Considering  the  aggregate  growth  rate  of  the  seven  sectors72  involved,  platforms’  revenue 
grew  three  times,  or  32 percent  per  year  between  2015  and  201973.  The  increasing  scale  and 
prevalence of the platform economy and e-commerce naturally magnifies the consequences of any 
VAT  problem  but  in  particular  those  identified  in  the  three  areas  under  examination.  More 
transactions under the platform economy and in e-commerce means an incremental increase in the 
problems linked to the VAT registration and the administration of the rules and puts also additional 
pressure on the outdated VAT reporting system. 

ii. Multiplicity74 and complexity of the new business models driven by technological changes 

This driver generally affects all three VAT areas. The multi-sided nature (where there are three or 
more parties involved) and complexity of the business models have become a ‘difficult fit’ for the 
VAT  rules  which  were  developed  when  these  business  models  were  unknown.  For  example,  the 
distinction between a consumer and a supplier is becoming blurred, as one party can be both whilst 
operating  via  a  platform.  Also,  the  explosion  in  e-commerce  has  led  to  exponential  increases  in 

71 Exclusive of the facilitation fee (Value of transaction underlying platforms’ facilitation service). 
72 E-Commerce, Transport Services, Accommodation, Real Estate, Finance, Professional and Household Services, and 
Advertising 
73  2020  data  are  severely  affected  by  the  COVID-19  pandemic,  which  led  to  accelerate  the  growth  for  e.g.  the  e-
commerce and finance sector, while significantly depressing the accommodation sector (for which 2020 revenue were 
lower than in 2015 
74  The  platform  business  models  differ  from  each  other  in  several  important  aspects  for  tax  purposes.  The  varying 
elements include: (i) the number of transaction parties/sides, (ii) the roles of each side in value creation, (iii) which side 
bears  responsibility  and  risk,  (iv)  the  organisational  and  the  regulatory  autonomy  of  the  transaction  sides,  (v)  the 
employment relationships, (vi) the direction of information exchange, and (vii) the remuneration mechanism and roles 
in  payment  facilitation.  These  differences  in  business  models  are  determinant  for  defining  appropriate  tax  rules. 
Moreover, the difficulty in assigning proper tax rules is not only related to the multiplicity of criteria differentiating the 
models. In addition, companies often used mixed (or multiple) models, which hinders classification and application of 
proper tax rules. 

26 

 
 
 
                                                 
cross-border  trade  and  an  increased  complexity  of  business  models  of  the  marketplaces  (for 
example goods being sold from fulfilment centres rather than directly from the underlying supplier) 
for  which  the  VAT  system  is  ill-suited.  Again  this  intensifies  the  problems  linked  to  the  VAT 
registration, the administration of the rules and the VAT reporting system. 

iii. Fragmented regulatory framework (divergent requirements) 

The  wide  discretion  afforded  to  Member  States  by  the  VAT  Directive  in  imposing  reporting 
obligations  and  the  need  to  apply  the  existing  VAT  rules  to  new  business  models  has  led  to  a 
divergence  of  the  rules  applicable  within  the  EU  as  well  as  to  differing  interpretations  of  the 
existing rules. This affects differently the VAT areas as follows:  

a) VAT reporting  
There are 12 Member States which have in place digital reporting requirements, while three  more 
are considering or have taken the first steps for their introduction75. These reporting requirements 
differ over several dimensions, including: 

  Frequency.  The  main  distinction  is  between  periodic  and  real-time  reporting.  This  can  be 
further differentiated according to the exact frequency (either jointly with the VAT return or 
monthly), and “how real-time” real-time requirements are (within four days in Spain, daily 
in Hungary and before the invoice is issued in Italy). 

  Scope  –  Taxpayers.  National  rules  can  include  a  turnover  threshold  below  which  VAT-
registered  taxable  persons  are  not  subject  to  the  reporting  obligations,  and  can  exclude 
certain sectors or specific VAT regimes from these obligations. Furthermore, requirements 
can apply to resident entities only or to all registered taxable persons. 

  Scope  –  Transactions.  In  a  number  of  countries,  only  transactions  above  a  certain  value 
threshold are to be reported in detail. Besides, the reporting systems  can differ in whether 
they  cover  (i)  purchase  and/or  sale  transactions;  (ii)  domestic,  intra-EU  or  extra-EU 
transactions; and (iii) B2B, B2G or B2C transactions. 

  Data content and format. The various systems differ in terms of the type and amount of data 
extracted  from  taxpayers,  the  format  of  submission  as  well  as  the  communication 
architecture.  

This  lack  of  harmonisation  of  digital  reporting  requirements  across  the  EU  results  in  legal 
uncertainty  and additional  administrative burdens and  compliance  costs for companies with  fixed 
establishments or VAT registrations in different Member States. 

b) VAT treatment of the platform economy 
Member  States  have  different  views  on  the  treatment  of  the  facilitation  service  of  a  platform  - 
whether to regard this as an electronically supplied service or an intermediary service which in turn 
leads to a different place of supply. 

75 IDEM 37.  

27 

 
 
 
 
                                                 
c) VAT Registration 
The  VAT  Directive  provides  the  rules  for  determining  in  which  Member  State  the  VAT  on  a 
transaction is due, and the person liable to pay and report it. These rules are complex and depend on 
numerous factors, which differ according to the type of transaction, where suppliers and customers 
are  based,  and  the  Member  States  involved.  The  complexity  increases  when  the  taxable  person 
carrying  out  a  supply  is  not  established  in  the  Member  State  where  the  tax  is  due.  Thus,  the 
fragmentation  in  VAT  registration  area  should  actually  read  as  the  need  to  register  in  multiple 
Member States.  

iv. Outdated system for the reporting of intracommunity transactions 

VAT reporting  
This driver specifically affects the area of VAT reporting. The current VAT rules for the taxation of 
cross-border trade between Member States date back to 1993, just after the creation of the Single 
Market and the abolition of “fiscal frontiers”. At the time, they were meant to be transitional, but 
they  are  still  in  place.  The  rules  do  not  take  account  of  the  last  30 years  of  technological 
developments, changes in business models or the globalisation of the economy. These rules divide 
each EU  Business-to-Business cross-border supply of  goods into two  transactions -  a) an exempt 
intra-Community  supply  in  the  Member  State  of  departure  and  b)  a  taxable  intra-Community 
acquisition in the Member State of arrival of the goods. As a result, taxable persons acquire goods 
cross-border without having to pay VAT76. 

The  fact  that  goods  can  be  acquired  free  of  VAT  creates  a  big  incentive  for  fraud.  Fraudsters 
acquire  goods  from  other  Member  States,  without  paying  VAT,  and  sell  them  on  the  domestic 
market  charging  VAT  without  remitting  it  to  the  treasury  (basic  fraud  scheme)  or  pass  them 
through a chain of transactions possibly involving several Member States (more sophisticated and 
typically referred to as MTIC fraud) where in the end no VAT is paid to the treasury. The result is 
that  the  acquirers  of  these  goods  can  deduct  the  VAT  charged  while  the  fraudsters  disappear 
without paying that VAT to the treasury.  

In  order  to  help  detect  and  react  to  this  fraud,  a  mechanism  for  reporting  intra-Community  trade 
flows (the recapitulative statements77) is in place. However, while business and also fraud models 
evolved and became more complex and technologically driven, the recapitulative statements have 
remained basically unchanged since the pre-digital age. They are outdated and not  adapted to the 

76 Unless they do not have the right to fully deduct VAT. 
77 Chapter 6 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax  – as 
amended (OJ L 347, 11.12.2006, p. 1). 

28 

 
 
 
                                                 
current reality, with the relevant data reaching the tax administration between two to four months 
after the transaction date, thus often too late to prevent VAT loss and fraud78. 

Recapitulative statements provide aggregated information to national tax administrations about the 
supplies of  goods  and services made to  their territory  from other Member States. They  allow tax 
administrations  to  follow  the  flow  of  goods  and  services  in  order  to  help  fight  intra-EU  fraud. 
However, they are regarded as rather ineffective by the majority of Member States interviewed on 
this  subject.  During  the  interview  carried  out  as  part  of  the  supporting  study79,  out  of  12  tax 
authorities  that  replied,  eleven  provided  a  negative  assessment  of  this  reporting  mechanism  to 
tackle intra-EU VAT fraud (see Figure 4).  

Figure 4 – Effectiveness of recapitulative statements against MTIC fraud (Member States)  

Don’t know/Missing; 3

To a large extent; 1

Not at all; 1

To a moderate extent; 2

To a minor extent; 8

To a large extent

To a moderate extent

To a minor extent

Not at all

Don’t know/Missing

Source:  elaboration  based  on  the  targeted  consultation;  views  from  tax  authorities  questioned  whether  the 
recapitulative statements are effective to tackle intra-EU Fraud  

The reasons for such a widely held negative assessment are largely coherent across Member States, 
who unanimously criticize:  

  The lack of data granularity, since data are not available at transaction level but aggregated;  
  The  inadequate  timeframe  of  data  exchange,  further  amplified  by  time  reporting  differences 
across Member States, as data can be filed monthly or quarterly and also because of the time it 
takes for local tax authorities to upload the data that will be later exchanged with other Member 
States; 

78 Every taxable person must submit recapitulative statements  for the exempt intra-Community supplies of goods  and 
services ("European Sales List"). Taxable persons who make intra-EU acquisitions of goods are also required to submit 
statements  giving  details  of  such  acquisitions  ("European  Purchases  List").  Member  States  may  even  impose  other 
obligations  which  they  deem  necessary  to  ensure  the  correct  collection  of  VAT  and  prevent  evasion,  such  as  annual 
listings reporting all purchases and sales with local VAT registered companies (Annual Sales & Purchases Lists). The 
recapitulative  statements  must be drawn  up for each calendar month  within a  period not exceeding one  month  or  for 
each calendar quarter within a time limit not exceeding one month from the end of the quarter. Therefore, in practice 
the information is actually available in up to four months after the transaction. 
79 Supporting study, Vol. I, p. 85-86 

29 

 
 
 
  
                                                 
  The partial scope of the tool, which mandatorily covers only intra-Community supplies (data on 
acquisitions are not automatically exchanged between Member States). In this regard, reporting 
of  intra-Community  acquisitions  is  not  required  by  the  VAT  Directive  and  less  than  half 
Member States have introduced this obligation; and 

  The poor quality of the data reported.  

The  shortcomings  of  the  current  system  to  address  intra-Community  VAT  fraud  have  also  been 
stressed by the European Court of Auditors80. 

As  a  result,  crosschecks  of  intra-Community  trade  data  and  VAT  anti-fraud  controls  are  not  as 
comprehensive,  effective  and  as  real-time  as  they  should  be  to  tackle  fraud  linked  to  intra-
Community transactions. 

v.  The scope of the application of the simplification schemes  

This mainly affects the VAT areas as follows:  

a) VAT treatment of platform economy 
SMEs using the SME simplification scheme do not charge VAT whilst enjoying the economies of 
scale  and  network  effects  offered  by  platforms.  As  outlined  in  the  study81,  this  gives  them  a 
competitive  advantage  over  traditional  VAT  registered  businesses  making  similar  or  identical 
supplies. In the past this competitive advantage was minimal because of the limited outreach and 
resources of SMEs, but platforms have allowed SMEs access to global markets, therefore allowing 
them to directly compete with traditional businesses without charging VAT or facing the regulatory 
or compliance burden of being a VAT registered business. 

b) VAT registration  
Some  transactions  are  not  covered  by  OSS  and  IOSS  schemes  -  The  complex  and  fragmented 
regulatory  environment82  creates  costs  and  hassle  for  businesses  operating  in  multiple  Member 
States. The newly introduced One Stop Shop (OSS) helps businesses by reducing the instances in 
which registration in another Member State is required. However, the implementation of the OSS83 
and IOSS84 schemes has not totally addressed the problem. A number of cross-border transactions 
still trigger the need for registration in another Member State forcing the businesses to face costs 
and burden associated with the VAT obligations in different Member States.  Table 2 is providing 
the  typology  of  these  transactions  constituting  the  framework  for  assessing  the  magnitude  of  the 
problem. 

80 On the limits of the current system, cf. European Court of Auditors (2015), Special Report No 24/2015, ”Tackling 
intra-Community VAT fraud: More action needed” 
81 Supporting study, Vol. II, p. 144  
82 Complying  with the VAT can be complex due  to  different  provisions such as registration, payment,  reporting and 
invoice disclosure obligations etc. 
83 https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce/oss_en  
84 https://ec.europa.eu/taxation_customs/ioss_en  

30 

 
 
 
 
                                                 
2.3.How likely is the problem to persist? 

VAT Reporting 

Member  States  will  continue  to  adopt  national  Digital  Reporting  Requirements  (DDR)  over  the 
next  decade,  worsening  the  fragmentation  and  the  administrative  burden.  The  main  trend  is 
represented  by  the  Member  States  considering  the  introduction  of  mandatory  e-invoicing.  The 
problem of intra-EU fraud is not addressed at all, therefore it will persist.  

VAT treatment of the platform economy 

Member  States  are  expected  to  introduce  additional  rules  and  guidelines  concerning  the  status  of 
the  provider  and  the  nature  of  supplies  facilitated  by  platforms,  but  to  do  so  in  an  uncoordinated 
fashion,  as  with  reporting  obligations.  These  additional  rules  and  guidelines  are  expected  to 
increase the administrative burdens and will not solve the level-playing field issue. 

VAT Registration 

Some key sectors, such as the fuel cards sector, and the supply of gas and electricity, construction 
works in another Member State etc. will continue to face the burden of multiple VAT registrations 
when supplying goods and/or services in other Member States.  

31 

 
 
 
 
3.  WHY SHOULD THE EU ACT? 

3.1.Legal basis 

According to the principle of subsidiarity85, action at EU level may only be taken if the envisaged 
aims cannot be achieved sufficiently by the Member States alone and can be better achieved by the 
EU. The VAT rules for cross-border EU trade involve more than one Member State by nature and 
VAT is  a tax harmonised at  EU level.  The problems  identified in Section 2  are embedded in  the 
rules of the VAT Directive. Therefore, any initiative to change the VAT system as regards intra-EU 
trade requires amending the VAT Directive.  

The Treaty on the Functioning of the European Union, Article 113, gives the EU the right to act and 
adopt provisions to harmonise legislation in the area of indirect taxation, including value added tax. 
In  addition,  since  net  VAT  revenue  collected  by  each  Member  State  is  used  to  determine  the 
harmonised base, the loss of VAT impacts both Member States’ revenue and the EU’s VAT own 
resource amounts86. 

3.2.Subsidiarity: Necessity of EU action 

The legislative proposal must be adopted at Union level, as it amends the existing common system 
of  value  added  tax  governed  by  the  VAT  Directive  (Directive  2006/112/EC).  Given  the  need  to 
modify the VAT Directive, the objectives sought by the present initiative cannot be achieved by the 
Member States themselves. Therefore, it is necessary for the Commission, which has responsibility 
for ensuring the smooth functioning of the internal market and for promoting the general interest of 
the European Union, to propose action to improve the situation. Moreover, the VAT rules have the 
potential for distorting intra-EU trade if introduced in an uncoordinated way. 

3.3.Subsidiarity: Added value of EU action 

The  Commission  is  responsible  for  ensuring  the  correct  application  of  the  harmonised  VAT 
assessment base. Each Member State is responsible for the transposition of the VAT provisions into 
national  legislation  and  their  correct  application  within  its  territory.  Member  States  implement 
common  rules  set  out  in  the  VAT  Directive  into  their  national  legislation,  thus  the  practical 
application  and  the  administrative  practices  of  each  Member  State  vary.  However,  the  intra-EU 
dimension of VAT fraud requires EU intervention regarding reporting obligations. In addition, for 
several  Member  States  the  size  of  the  VAT  gap  (and  its  persistence  over  time)  indicates  that 
national instruments are not sufficient to fight cross-border and e-commerce fraud, as shown by the 
estimated  levels  of  MTIC  fraud,  which  can  only  be  fought  efficiently  and  effectively  by 
coordinated action at EU level. 

85 Article 5(3) of the Treaty on European Union (TEU) 
86  C-617/10,  Åkerberg  Fransson,  EU:C:2013:105,  paragraph  26:  “revenue  from  application  of  a  uniform  rate  to  the 
harmonised VAT assessment bases determined according to EU rules, there is thus a direct link between the collection 
of VAT revenue in compliance with the EU law applicable and the availability to the EU budget of the corresponding 
VAT resources, since any lacuna in the collection of the first potentially causes a reduction in the second”. 

32 

 
 
 
                                                 
The harmonised VAT rules are needed to help businesses benefit from the potential of the internal 
market.  In  the  targeted  consultation,  businesses  doing  cross-border  trading  repeatedly  stated  their 
preference to have VAT rules applied uniformly at EU level than to comply with different reporting 
or registration obligations at national level. This can only be ensured by EU action. 

33 

 
 
 
 
 
4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1.General objectives 

The general objectives of the VAT in the Digital Age initiative are related to the modernisation of 
the VAT system. The general objectives address each of the two main identified problems:  

General objective

Problem

Better VAT collection and control

Sub-optimal VAT collection and control

Simplified, modern and legally certain VAT 
system 

Excessive burdens and compliance costs

General objectives are directly linked to the treaty-based goal of establishing a functional internal 
market  and  reflect  the  Commission  priorities  and  EU  strategic  agenda  for  2019-202487.  In  this 
respect,  the  VAT  in  the  Digital  Age  initiative  aims  to  render  the  VAT  rules  more  proportionate, 
effective and efficient by updating the 30-year old VAT system to the current realities of the digital 
age.  

4.2.Specific objectives 

The  two  general  policy  objectives  will  be  achieved  by  pursuing  five  specific  objectives  in  VAT 
reporting, VAT treatment of platform economy and VAT registration: 

1.  Improve reporting requirements to unlock the opportunities provided by digitalisation 

The VAT reporting specific objective intends to improve reporting requirements by optimising the 
use  of  digital  technologies,  notably  by  utilising  digital  reporting  to  fight  VAT  fraud,  and  in 
particular MTIC fraud.  

This specific objective is linked with and supports an effective and fair VAT system (3rd specific 
objective), helping the fight against VAT fraud and reducing the taxpayers’ administrative burden 
and compliance costs (4th specific objective) by allowing tax authorities the provision of additional 
services to taxpayers and the removal of other compliance obligations. 

2.   Promote convergence and interoperability of IT systems 

Besides  the  complications  the  digital  evolution  brings,  it  also  provides  opportunities  linked  to  IT 
systems,  business  automation  and  digitalisation.  Businesses,  Member  States  and  the  Commission 
have up and running IT systems that must be enhanced and at the same time be made compatible 
with  each  other.  Thus,  this  specific  objective,  common  to  both  VAT  registration  and  VAT 
reporting, aims to promote the convergence and interoperability of existing IT systems and support 

87 Article 3 of Treaty on European Union (TEU) and Commission priorities for 2019-24. 

34 

 
 
 
 
 
 
 
 
                                                 
the  necessary  developments.  It  covers  both  adapting  the  Commission’s  IT  environment  (e.g.  for 
exchanges  of  information  between  Member  States  on  cross-borders  transactions,  for  IOSS/OSS 
registration)  and  providing  guidelines  to  Member  States  and  businesses  for  preparing  their  IT 
systems in the short to medium term88. 

3.  Create a level-playing field for businesses, regardless of the business model 

The specific objective aims to provide a level-playing field for EU businesses by imposing similar 
VAT  liabilities  regardless  of  the  traditional  or  digital  business  model,  their  location  or  their 
engagement in domestic or cross-border transactions. 

4.  Reduce burdens, regulatory fragmentation and associated costs 

The specific objective is expected to contribute to the simplification and modernisation of the VAT 
rules  by  reducing  regulatory  fragmentation,  and  to  increase  legal  certainty,  by  reducing  the 
multiplicity of the existing national frameworks. 

5.  Minimise the need for multiple VAT registrations in the EU 

Minimising the need for multiple VAT registrations will not  only reduce the costs for businesses 
but also allow authorities to better focus their control activities. 

88 Even if the detailed technical specifications are not yet available, the general definition of the ‘intervention model’ 
and  corresponding  IT  architecture  type  must  take  place  at  the  moment  of  selecting  the  policy  options,  because  each 
policy  choice  requires  specific  IT  solutions,  hence  the  need  for  appropriate  guidelines.  Moreover,  some  of  the  VAT 
registration options are IT-intensive, notably those related to customs. 

35 

 
 
 
 
 
 
 
 
 
 
                                                 
5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

5.1.What is the baseline from which options are assessed? 

VAT Reporting 

Based  on  the  supporting  study,  the  available  information  regarding  the  existing  and  planned 
introductions of DRRs89 can be summarised as following:  

  as of September 2021, DRRs had been introduced in 12 Member States (Bulgaria, Croatia, 
Czechia, Estonia, Hungary, Italy, Latvia, Lithuania, Poland, Portugal, Slovak Republic and 
Spain); 

  between 2021 and 2023, Greece and France will also introduce DRRs; 
  public  acts  were  adopted  or  official  announcements  were  made  in  Romania  towards  the 
introduction  of  SAF-T  and  in  Bulgaria,  Croatia,  Hungary,  Poland,  Spain  and  the  Slovak 
Republic towards the introduction of mandatory e-invoicing; 

  a study has been launched in Finland on the possible adoption of DRRs, but no public act 

has been adopted by the government; 

  given  the  amount  of  time  necessary  to  deploy  the  national  systems  after  the  decision  to 
introduce them, countries that have not taken steps in that direction so far are unlikely to be 
able to adopt their own DRRs within the next five years. 

If  the  above  information  provides  a  sufficient  degree  of  certainty  for  the  short-term,  i.e.  the  next 
five years, in terms of the countries which are likely to adopt or update domestic DRRs, as well as 
of those which are not going to do so, reasoned probabilistic incremental scenarios need to be built 
for  the  medium  term.  In  the  dynamic  baseline  scenario  underpinning  this  Impact  Assessment, 
Member States will continue to adopt national digital reporting requirements over the next decade.  

Table 5 – Medium-term adoption scenarios90 

Scenario 

Description 

New adopters 

Likelihood 

No adoption 

The adoption of national DRRs has reached its peak 
and  the  remaining  countries  do  not  adopt  any 
national  reporting  mechanism,  except  for  Finland 
where  preparatory  work  has  already  started. 
Czechia  opts  for  e-invoicing,  in  line  with  its 
neighbouring countries. 

Finland 

10% 

Central-
Eastern 

Slovenia, the only Central-Eastern Member State 
without a DRR, adopts one.  

Finland, Slovenia 

20% 

89 Supporting study, Vol I, p. 210 -211; the Study supporting the Impact Assessment was mainly carried on in 2021 and 
the above information reflects the reality at that moment. Meanwhile, the situation in the Member States evolved and 
such  dynamic  is  described  in  the  problem  sections.  Nevertheless,  the  calculations  are  still  based  on  the  initial 
assumptions made in the supporting study.  
90 Supporting Study, Vol. I, Annex H, Table H1, p. 211. For full scenarios and assumptions about the future adoption of 
DRRs see Annex H – of the supporting study, vol. I, p. 210 to 216. 

36 

 
 
 
                                                 
Evolution of 
existing 
obligations 

Belgium, Austria, and Luxembourg, which already 
have annual listing or SAF-T on demand systems, 
adopt a DRR. 

Austria, Belgium, Finland, 
Luxembourg, Slovenia 

Southern 

Malta and Cyprus, the only Southern Member 
States without a DRR, adopt one. 

All 

National DRRs are adopted in all Member States 

Austria, Belgium, Cyprus, 
Finland, Luxembourg, 
Malta, Slovenia 

Austria, Belgium, Cyprus, 
Denmark, Finland, 
Germany, Ireland, 
Luxembourg, Malta, the 
Netherlands, Slovenia, 
Sweden 

40% 

20% 

10% 

Based  on  the  available  information  and  the  above  scenarios,  the  dynamic  baseline  regarding  the 
adoption of DRRs is presented in the table below.   

Table 6 – Dynamic baseline: adoption of Digital Reporting Requirements (2023 – 2028)91 

Year 

Time for the 
analysis 

Number of 
Member States 
with DRR 

2023 

T0 

14 (Domestic) 

2025 

T2 

15 

2028 

T5 

20.1* 

* weighted average across scenarios. 

Type of DRR 

Adopters 

VAT listing 
SAF-T 
Real-time 
E-invoicing 
VAT listing 
SAF-T 
Real-time 
E-invoicing 
VAT listing 
SAF-T 
Real-time 
E-invoicing 

BG, CZ, EE, HR, LV, SK 
LT, PL, PT 
ES, EL, HU 
IT, FR 
CZ, EE, LV 
LT, PT, RO 
EL 
BG, ES, HR, HU, IT, FR, PL, SK 
BE, CY, DE, DK, EE, FI, IE, LV, MT, NL, SE, SI 
AT, LT, LU, PT, RO 
EL 
BG, CZ, ES, HR, HU, IT, FR, PL, SK 

Tax  control  efficiency  and  effectiveness  is  also  expected  to  increase  with  the  introduction  of 
various DRRs, and whilst this will help fight fraud at national level, it will not solve the problem of 
intra-EU  fraud.  Furthermore,  since  no  harmonisation  measure  is  introduced,  fragmentation  costs 
would  grow  as  more  numerous  and  divergent  DRRs  are  introduced.  Confidentiality  risks  will 
increase as a result of more transactional data being exchanged. The current trend of Member States 
considering  the  introduction  of  mandatory  e-invoicing  would  further  spur  business  process 
automation.  

VAT revenue and burdens 

Environment 

Tax control 

Business automation 

Data confidentiality 

91 Supporting Study, Vol. I, Annex H, Table H1, p. 212. 

37 

 
 
 
 
 
                                                 
No impact 

More MS adopt national 
DRRs. This will result 
in overall positive net 
impacts, due to the 
higher base for VAT 
revenues 

Tax control efficiency 
and effectiveness is 
expected to increase 
with the diffusion of 
DRRs.  

The current trend of MS 
considering the 
introduction of e-
invoicing would spur 
further business 
automation  

The diffusion of DRRs 
would mean that more 
data are exchanged; this 
increases confidentiality 
risks 

The sections assessing the current situation regarding Member States and taxpayers (domestic and 
multinational companies) in the supporting study92 are based on both information from the targeted 
consultation  of  public  authorities  and  data  collected  during  targeted  consultation  activities  with 
economic  operators,  VAT  practitioners  and  service  providers,  as  well  as  information  from 
secondary  sources,  VAT  revenue  statistics,  and  studies  at  national  levels.  As  mentioned  in  the 
problem  section,  the  quantification  of  the  DRRs’  outcomes  on  tax  control  activities  and  fraud 
detection is based on the comparison of data before and after the introduction of these requirements. 

Since the VAT Gap  represents  the  difference between the theoretical  VAT liability  and the VAT 
revenues accrued, more revenues are a clear sign of improved compliance where the liability does 
not  change.  The  assessment  of  changes  to  VAT  revenues  has  been  done  by  means  of  an 
econometric analysis based on panel-data (See Annex 4: Analytical methods), to determine whether 
and to what extent the existing DRRs have resulted in increased revenues, thus a decrease in VAT 
non-compliance in the adopting Member States. 

Both  costs  and  benefits  are  expected  to  grow  over  the  2023-2032  period;  however,  benefits  will 
remain  higher  than  costs  (EUR 371 billion  vs.  EUR 121 billion)  and  will  grow  faster,  resulting 
EUR 250.7 billion in positive net impacts: 

Costs 

Benefits 

Administrative 
burden for 
businesses 

Implementation 
cost tax 
authorities 

Fragmentation 
costs 

Environmenta
l benefits 

Savings pre-
filled VAT 
returns 

Removal of 
recapitulative 
statements 
benefits 

E-
invoicing 
benefits 

VAT 
collection/ C-
efficiency 

Max. VAT 
Gap 
reduction  

EUR 79.1 
billion 

EUR 1.7 
billion 

EUR 40.4 
billion 

EUR 0.03 
billion 

EUR 30.7 
billion 

0 

EUR 5.6 
billion 

EUR 335.6 
billion  

-3 p.p. 93 

EUR 121.2 billion total costs 

EUR 371.9 billion total benefits 

Dynamic 
baseline 
(cost and 
benefits) 

EUR 250.7 
billion  net 
benefits 

The VAT collection is measured using the C-efficiency model as the base model. The impacts of 
DRRs are estimated on two dependent variables: the VAT Gap and C-efficiency.94 C-efficiency is 
the ratio of the actual VAT revenue to the theoretical revenue derived from the product of the VAT 
standard rate and the aggregate final consumption. Thus, it measures the departure of a country’s 
actual VAT system from a perfectly enforced tax levied at  a single rate on all consumption. This 

92 Supporting Study, Vol. I, p. 31 to 70. 
93 Corresponding to a VAT Gap reduction from 10.5% to 7.5% over a 10-year period (2023-2032). Calculations were 
made by updating the VAT Gap figure to exclude the UK. The additional revenue obtained under  C-efficiency model 
was used as reference and the 2021 VAT Gap Study (VAT revenue) figures were amended accordingly. 
94 Supporting Study, Vol I, p. 37 Box 5. 

38 

 
 
 
 
 
 
                                                 
ratio takes a value lower than one for various reasons: the  application of VAT  reduced  rates and 
exemptions, as well as less-than-perfect compliance. In other words, the C-efficiency is an intensive 
measure, i.e. expressed in relation to the tax base, of both the level of VAT compliance as well as 
VAT policy choices, such as the adoption of differentiated rates and exemptions. The VAT Gap is 
defined  as  the  difference  between  the  expected  VAT  revenue  (i.e.  the  VAT  Total  Tax  Liability, 
VTTL) and the amount of VAT actually collected over the same period. It includes aspects that are 
directly influenced by the introduction of reporting obligations, such as VAT fraud and evasion, as 
well  as  other  elements  which  are  not  impacted  (e.g.  insolvencies,  bankruptcies,  legal  tax 
optimisation). The VAT Gap directly links with the level of VAT compliance in a country. 

Since the VAT Gap model relies on annual data, while the C-efficiency model relies on quarterly 
data, thus providing larger number of observations and degrees of freedom, the latter was retained 
as the base model and is being used to fundament this impact assessment. Nevertheless, for reasons 
of  transparency,  both  the  base  model  based  on  C-efficiency  and  the  alternative  model  based  on 
VAT Gap data are presented in the Annex 4: Analytical methods. 

In  terms  of  other  ongoing  initiatives  reflected  in  the  baseline,  the  EU  Directive  on  electronic 
invoicing in public procurement (B2G)95 currently in place has the goal of facilitating the use of a 
to  promote 
common  European  Standard  on  electronic 
interoperability  and  convergence  at  EU  level  (See  Annex  5:  other  initiatives).  In  the  baseline 
scenario, the IT platform used to handle B2G transactions is often leveraged by the tax authorities 
for handling and reporting B2B transactions.96  

invoicing  across  Member  States 

In addition, the work on the proposal for a definitive regime97 that is still to be adopted was used as 
a  starting  point  to  identify  the  problems  of  cross-border  VAT  fraud.  It  already  reflected  the 
magnitude of the fraud  derived from the  way intra-Community transactions were taxed, and how 
the  existing  tools,  including  the  recapitulative  statements,  were  not  sufficient  to  tackle  it.  The 
definitive  regime  was  seen  as  a  solution  to  address  the  risk  of  VAT  fraud  (MTIC  fraud)  that  is 
linked  to  the  current  VAT  rules  build  common  ground  for  possible  digital  solutions  such  as  the 
DRRs. 

VAT treatment of the Platform economy 

Under  the  dynamic  baseline  scenario,  the  growth  of  the  platform  economy  will  increase  VAT 
revenue  in  both  absolute  and  relative  terms.  However,  Member  States  are  expected  to  introduce 
additional  rules  and  guidelines  concerning  the  status  of  the  provider  and  the  nature  of  supplies 
facilitated by platforms, but will do so in an uncoordinated fashion, as with reporting obligations. 
These  additional  rules  and  guidelines  are  expected  to  increase  the  administrative  burdens  for 

95  Directive  2014/55/EU  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on  electronic  invoicing  in 
public procurement. 
96 Supporting Study, Vol I, p. 13. 
97 SWD (2017) 325 final. 

39 

 
 
 
                                                 
businesses by EUR 1.9 billion98. The distortion of competition will not be solved and will evolve in 
line with the development of the platform economy. 

VAT revenue 

Legal certainty and administrative burdens 

Competition / Internal Market 

EUR 410 billion 

EUR 1.9 billion 

No change to the tax treatment means no 
effect on market conditions (current 
distortion of competition persists) 

The scale of the platform economy was estimated by using financial data from Crunchbase and Dun 
&  Bradstreet  databases,  web  application  download  statistics  from  SEMrush,  questionnaires  for 
platform operators and tax administrations, previous reports, and Eurostat’s sectoral statistics.99 A 
VAT  liability  simulation  model  with  two  blocks  (for  platforms’  facilitation  services  and  for  the 
underlying  services)  was  used  in  the  sectoral  analysis.  The  model  is  presented  in  Annex  4: 
Analytical methods and in the supporting study.100 

The share of the VAT revenue from the platform economy is expected to increase between 0.19 and 
0.35 percentage points per year reaching 3.7 percent in 2032. As the pace of growth of the platform 
economy will decline in the medium-term, the VAT revenue as a share of overall revenue will start 
stabilising in ca. 10 years’ time. In nominal terms, VAT revenue in the platform economy101 will 
grow to about EUR 57 billion in 2032. In addition to revenue growth resulting from the increase in 
tax  base,  the  availability  of  information  on  transactions  and  providers  in  the  platform  economy 
resulting from reporting and record-keeping obligations is expected to increase the effectiveness of 
control  activities  and,  as  a  result,  VAT  compliance.  Though  it  is  not  possible  to  assess  the 
magnitude of this enhancement102, the improvements in  compliance are expected to  have  a lower 
contribution to the VAT increase than the increase in tax base. 

In  an  increasingly  digitalised  world  in  which  online  platforms  play  a  fundamental  role,  the  P2B 
Regulation103 aims to protect, in this specific case, the business users of such services (See Annex 
5: other initiatives). It contains transparency rules and protection for business users’ accounts. The 

98  Expected  burdens  for  digital  platforms  for  complying  with  reporting  and  record-keeping  obligation  amount  to  ca. 
EUR 1.35  billion  (2023-2032).  The  burdens  related  to  recognising  the  taxable  status  of  providers  sum  up  to  ca. 
EUR 0.52 billion. 
99 For more information on data sources and the exact steps taken for estimating the scale of the platform economy see 
the Supporting Study, vol. II, Annexes A and B, p. 161 to 169. 
100 Supporting Study, vol. II, Annex C, p. 170-171. 
101 Projections of VAT revenue growth in the platform economy (excluding advertising, real estate and e-commerce). 
For the sources and assumptions of the potential development of the platform economy, see supporting study, Vol. II, 
Annex D, p. 172-173. 
102 Very  few data  could be collected on the scale  of VAT non-compliance  in the platform economy, due  to both the 
recent  evolution  of  this  phenomenon  and  the  typical  time  lag  in  audit  activities.  Detailed  audit  information  on  the 
platform  economy  could  be  provided  by  two  Member  States  during  targeted  consultation.  The  value  of  irregularities 
assessed for digital platforms and providers in Country A stood for ca. 0.2 percent and in Country B – for ca. 2 percent 
of  the  estimated  VAT  liability;  the  available  data  points  are  thus  too  few  to  assess  quantitatively  the  level  of  non-
compliance.  
103  Regulation  (EU)  2019/1150  on  promoting  fairness  and  transparency  for  business  users  of  online  intermediation 
services. 

40 

 
 
 
                                                 
‘DAC7’104  extends  the  automatic  exchange  of  information  in  the  field  of  taxation.  It  creates  an 
obligation for platforms to report annually the income earned by sellers and for the Member State 
where reporting takes place, to exchange this information automatically, thus being fully coherent - 
but complementary as an ex-post control tool - with the current initiative.  

In  addition,  the  Digital  Services  Act  (DSA)105  enhances  the  responsibility  and  transparency 
obligations for providers of online intermediary services, including online platforms. For instance, 
online platforms allowing the conclusion of contracts between traders and consumers will have to 
gather  information  on  the  identity  of  traders.  The  Digital  Markets  Act  (DMA)106  will  ensure  fair 
markets  in  the  digital  sectors  across  the  Union  by  addressing  the  unfair  practices  of  certain 
undertakings.  The  DSA  and  the  DMA  covers  services  such  as  online  intermediary  services, 
including  online  marketplaces,  online  search  engines,  social  networking,  video  sharing,  operating 
systems,  and  cloud  services,  thus  having  an  impact  on  the  VAT  in  the  Digital  Age  initiative, 
especially in the accommodation and transport sectors.  

The  proposed  Platform  Workers  Directive107  aims  to  ensure  the  legal  employment  status  for  the 
workers.  This  proposal  may  have  an  impact  on  the  VAT  in  the  Digital  Age  initiative,  in  that,  if 
adopted,  a  number  of  platform  workers  may  become  employees,  and  therefore  taken  out  of  the 
scope of the measure concerning the VAT rules for platforms (because employees are not required 
to charge VAT on their services, instead this responsibility would fall on the platforms).  

VAT Registration 

Some key sectors, such as the fuel cards sector, and the supply of gas and electricity, construction 
works in another Member State etc. will continue to face the burden of multiple VAT registrations 
when supplying goods and/or services in other Member States.  

Some transactions requiring non-established businesses to VAT register (see Table 2), such as the 
transfer of own goods cross-border108 are mostly relevant within the context of distance sales made 
in  the  e-commerce  sector.  An  estimate  of  20,000  ‘average  businesses’  and  280,000  SMEs  are 
experiencing  registration  costs  (see  Table  1)  associated  with  VAT  registration  in  the  EU  in  a 
Member State other than that of establishment109. At the EU level, this translates in up to EUR 0.36 
billion  (one-off)  and  EUR  0.83  billion  yearly  VAT  compliance  costs  of  doing  cross-border  trade 
implying VAT registration.  

104 Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative  cooperation 
in the field of taxation. 
105 Digital Services Act Proposal. 
106 Digital Markets Act Proposal. 
107 Proposal for a Directive on improving the working conditions in platform work - COM(2021) 762 final. 
108 In practice, the transfer of own goods cross-border arises in two situations: (i) companies move their own stocks to 
another Member State (e.g. for storage in a warehouse), which they may then use or sell to local customers or (ii) the 
goods  are  moved  on  behalf  of  the  owner  by  an  intermediary  (typically  an  e-commerce  interface)  for  the  purpose  of 
storage and onward sale. 
109 Supporting Study, Vol III, p. 61-62. Estimates are based on 2015 data obtained from the report on VAT Aspects of 
cross-border  e-commerce,  updated  to  remove  the  UK,  to  exclude  services  from  calculations  and  account  for  the 
observed  growth  of  e-commerce  over  the  period  2015-2020.  For  logistical  reasons  it  was  not  possible  to  include 
Northern Ireland in the analysis, even though it is still de facto part of the Customs Union and the VAT territory.  

41 

 
 
 
                                                 
Administrative burdens 

VAT collection (revenue) and 
fraud 

Level playing field 

Burdens related to VAT registration in 
another Member State: EUR 0.36 billion 
(one-off) and EUR 0.83 billion (recurring 
annual costs)  

No sizable impact 

No change 

Distance sales of goods cross-border were estimated to amount to about EUR 72 billion across the 
EU-27 in 2020 (EUR 43 billion within the EU and EUR 29 billion from outside the EU – distance 
sales of imported goods).110 Moreover, in terms of the number of parcels, although it is difficult to 
estimate  their  volumes  precisely,  the  order  of  magnitude  is  likely  to  be  in  the  billions  of  units 
transferred  cross-border  across  the  EU  every  year.  In  addition  to  the  significance  of  the  scale  of 
these  transactions,  the  continued  growth  of  e-commerce  means  they  will  become  more  so, 
exacerbating the problems if the status quo is left to continue.  

The  existing  burdens  (and  additional  costs)  in  these  specific  sectors  will  persist  if  the  status  quo 
remains in place.  

5.2.Description of the policy options 

An overview of the policy111 sub-options in the three areas can be found in the table below.  

110  Supporting Study, Vol. III, p. 66. 
111 Supporting study includes a more detailed description of the policy options for VAT reporting, VAT treatment of 
Platform economy and VAT registration (Vol. I p. 89-95; vol II p. 99-117; vol III, p.46-54) 

42 

 
 
 
 
                                                 
Table 7 – Description of the policy sub-options by VAT area 

Sub-option 

VAT reporting area 

Sub-option 1 (Baseline) 

  No measure to harmonise the DRRs is introduced at EU level.  
  The introduction of mandatory e-invoicing remains subject to a derogation.  
  Recapitulative statements are not modified. 

Sub-option 2 
(Recommendation & 
Removal) 

  The introduction of DRRs remains optional for Member States.  
  The core elements of the EU design are described in a non-binding Recommendation and their introduction is 

encouraged for those Member States with a significant VAT Gap.  

  The derogation currently needed to introduce mandatory B2B e-invoicing is removed.  
  Recapitulative statements are not modified. 

Sub-option 3 (Keep data 
with the taxpayers) 

  Member States remain free to maintain (or introduce) national DRRs.  
  For the Member States which introduce a DRR, compliance with the reporting mechanism would also ensure 

  Taxpayers  will  be  required  to  record  transactional  data  according  to  a  pre-determined  format.  The  tax 

authority could access such records upon request.  

compliance with the new obligation (hence, no duplication). 

Sub-option 4a (Partial 
harmonisation)112 

  An EU DRR is introduced for intra-EU transactions and the recapitulative statements are abolished.  
  The derogation currently needed to introduce mandatory B2B e-invoicing is removed.  
  DRRs  for  domestic  transactions  remain  optional  for  Member  States.  Member  States  wishing  to  introduce 

such mechanisms shall conform to the system used for intra-EU transactions. 

  Where  DRRs  for  domestic  transactions  are  already  in  place,  ensure  interoperability113  with  EU  system 
already in the short-term; national DRRs to converge to the EU DRR system in the medium-term (i.e. five to 
ten years). 

112  Under  both  options  4a  and  4b,  Member  States  shall  implement  an  EU  DRR  for  intra-EU  transactions.  The  difference  is  that  the  implementation  of  a  DRR  system  for  domestic 
transactions is voluntary in option 4a while it is mandatory under option 4b. More details in the Box 3. 

43 

 
 
 
                                                 
Sub-option 4b (Full 
harmonisation) 

Sub-option A (Baseline) 

Sub-option B1 
(Clarification of the nature 
of the service facilitated by 
the platform) 

Sub-option B2 
(Clarification of the tax 
status of the provider) 

  An EU DRR is introduced for intra-EU and domestic transactions alike.  
  The recapitulative statements are abolished.  
  The derogation currently needed to introduce mandatory B2B e-invoicing is removed.  
  For  Member  States  where  DRRs  for  domestic  transactions  are  already  in  place,  the  interoperability  clause 
applies  in  the  short-term;  then,  national  DRRs  are  required  to  converge  to  the  EU  DRR  system  in  the 
medium-term (i.e. in five to ten years). 

VAT treatment of platform economy 

  Under  this  option,  the  Commission  would  produce  no  legislative  initiatives  in  this  area,  with  the  possible 
result  of  increase  fragmentation  as  Member  States  adopt  unilateral  legislative  measures  to  deal  with  the 
platform economy. 
In order to reduce this risk of fragmentation, the Commission could publish guidelines or recommendations. 

 

  Currently  Member  States  treat  the  facilitation  service  made  by  the  platform  as  either  an  electronically 

supplied service or an intermediary service, with the corresponding impact on the place of supply.  

  A  legislative  amendment  clarifying  the  nature  of  the  services  provided  by  the  platform  (intermediary  or 

electronically-supplied services), and hence their place of supply will be introduced. 

  One of the major difficulties for platforms is establishing the status of the supplier, that is whether they are a 
taxable person or not. This is important for platforms, as it allows them to know whether to apply the reverse 
charge or not on their facilitation services.  

  A rebuttable presumption whereby the platform could regard anyone who does not provide a VAT number as 

not being a taxable person is outlined114.   

113 For e-invoicing systems, this consists in making sure that the taxpayers can either use the domestic format and transmission protocol, or an EU-wide format and protocol. For other 
DRRs,  the  interoperability  requires  that  tax  authorities  can  exchange  a  pre-agreed  dataset  in  a  pre-agreed  format.  It  is  theoretically  possible  to  have  an  EU  DRR  for  intra-EU 
transactions without requiring convergence. The EU system would co-exist with different domestic systems, with no harmonisation of the current legal framework as a result. 
114 In short, if the supplier does not provide a VAT number they are presumed to be a non-taxable person. 

44 

 
 
 
                                                                                                                                                                                                                                                        
Sub-option B3 
(Streamlining of record 
keeping obligations) 

Sub-option C (The narrow 
deemed supplier) 

Sub-option D (The sectoral 
deemed supplier) 
Sub-option E (The 
full/inclusive deemed 
supplier) 

  Amending the Administrative Cooperation Regulation115, which would aim to harmonise the technical means 

by which platforms supply information required by Member States, and the frequency of requests. 

  Where  the  underlying  supplier  does  not  charge  VAT116,  the  platform  will  be  deemed  as  the  supplier  (the 

functioning of the deemed supplier model is explained in the Box 2 below).  

  The platform will charge VAT on the supply.  
  Option  C  applies  to  certain117  accommodation  and  transport  services  (ride  on  demand  and  short  term 
residential  accommodation),  which  were  identified  by  the  study  as  having  the  largest  negative  impact  on 
VAT equality and neutrality. 

  As Option C, but applying to all accommodation and transport services118. 

  As Option C, but applying to all services supplied via platforms. 

VAT registration area – OSS (intra EU) 

Sub-option 1 (Baseline) 

Leave  in  place  the  VAT  system  as  of  1 July  2021,  with  only  minor  refinements  (e.g.  additional  guidance,  quick 
fixes) to improve the implementation and use of the OSS. 

Sub-option 2 (Minimal OSS 
extension) 

Sub-option 3 (Moderate 
OSS extension) 

  Extension of the OSS so that it covers all B2C supplies of goods by non-established suppliers.  
  Additional transactions covered (compared with status quo):  

o  domestic supplies of B2C goods 

Includes sub-option 2. 

 
  Remove the obligation to register in case of transfer of (own) goods.  
  Additional transactions covered (compared with status quo):  

o  domestic supplies of B2C goods, transfers of (own) goods cross-border119  

115 Regulation (EU) No 904/2010.  
116 Because they are, for example, using the special scheme for small enterprises. 
117 Under sub-option C, the deemed supplier role would cover approx. 25 percent of accommodation services and nearly 95 percent of transportation. 
118 These sectors represent a large percentage of the platform economy ecosystem (around 30% between them) but have relatively few platforms operating in the EU (around 300).  

45 

 
 
 
                                                 
Sub-option 4 (Reverse 
charge) 

Introduce a mandatory120 reverse charge for B2B supplies by non-established persons.  

 
  Can accompany any other sub-options121. 

Sub-option 1 (Baseline) 

Sub-option 2122 (removal of 
the current threshold) 

Sub-option 3a (IOSS 
mandatory for deemed 
suppliers) 
Sub-option 3b (IOSS 
mandatory above a 
threshold) 
Sub-option 3c (IOSS 
mandatory - no threshold) 

VAT registration – IOSS (importation) 

  Leave in place the VAT system as of 1 July 2021, no changes regarding the IOSS. 
  Removal of the EUR 150 threshold for use of the IOSS and / or extension to excise goods. 
  Additional transactions covered:  

o  B2C distance sales of goods imported by the supplier from a third country/territory with an intrinsic 

value exceeding EUR 150 and / or excise goods 

  Removal of the optional character of the IOSS for deemed suppliers.  

  Removal of the optional character of the IOSS for taxable persons distance selling into the EU over a certain 

threshold. 

  Removal of the optional character of the IOSS for all taxable persons making eligible distance sales into the 

EU. 

119 A transfer to a warehouse before sending it to the consumer. 
120 The  concept of  “mandatory” should be applied in relation to Member States  that should obligatory provide the possibility  to non-established suppliers to use the reverse  charge 
mechanism. 
121  The  option  of  extending  the  OSS  to  B2B  transactions,  without  or  with  deduction  mechanism,  has  been  analysed  in  the  supporting  study  (Vol.  3,  section  5.3.3)  and  had  to  be 
disregarded  taking  into  account  the  reluctance  of  the  businesses  to  register  for  the  OSS  without  any  deduction  mechanism  and  the  difficulties  for  the  Member  States  to  allow  the 
deduction via the OSS as the deduction rules  vary amongst Member States. The reverse charge  is therefore the retained sub-option for B2B transactions as it allows  the immediate 
compensation of the VAT due (concomitant declaration of the VAT due and its deduction in the VAT return).   
122 The numbering of sub-options was maintained to preserve the consistency with the Vol. III of the supporting study. However, Sub-option 2 should rank above Sub-options 3a, 3b 
and 3c in terms of the intensity of the intervention. 

46 

 
 
 
 
                                                                                                                                                                                                                                                        
Box 1 

Types of DRR (also see the Annex 4: Analytical methods - Mapping of digital reporting requirements) 

Two types of DRR can be distinguished based on the time at which information is to be submitted: 

  Periodic Transaction Controls (PTCs), in which transactional data are reported to tax authorities at regular 

intervals. 

  Continuous  Transaction  Controls  (CTCs),  in  which  transactional  data  are  submitted  electronically  to  tax 

authorities just before, during or shortly after the actual exchange of such data between the parties. 

Among PTCs, the most common models are VAT listing and SAF-T requirements. The former requires the periodic 
transmission of transactional data to be compiled and transmitted according to a nationally defined format, while the 
latter relies on the national specification of an OECD standard, i.e. the Standard Audit File for Tax. 

Among  CTCs,  the  two  possibilities  are  real-time  and  e-invoicing  systems.  Under  a  real-time  system,  the  taxpayer 
should submit certain data shortly after carrying out a transaction but does not need to mandatorily use and share e-
invoices  with  the  tax  administration.  Under  an  e-invoicing  system,  the  taxable  person  is  mandated  to  use  for  his 
transactions  a  structured  e-invoice  according  to  a  pre-determined  and  machine-readable  format,  allowing  them  to 
automatically share the whole invoice or a subset of the data with the tax administration. 

What type of DRR is optimal for VAT reporting? Interoperability, complexity, costs and benefits 

From  a  taxation  point  of  view,  interoperability  would  be  ensured  by  accepting  invoices  issued  according  to  the 
European  e-invoicing  standard  that  is  already  in  place,  and  the  best  solution  is  to  combine  flexibility  with 
standardisation.  Businesses  could  have  the  freedom  to  use  the  electronic  invoice  system  they  prefer,  while  the 
standardisation will refer to the data file to be submitted to the tax administration. That transmission of the data will be 
done directly by the taxpayer or by a service provider on its behalf. Given that the data in the invoice will be machine-
readable,  this  system  will  avoid  interference  with  the  way  invoices  are  exchanged  between  businesses  while 
facilitating the reporting through the automation of the process, avoiding mistakes and  manipulation of the data. This 
approach  strongly  points  out  the  e-invoicing  to  be  the  most  suitable  option  for  digital  reporting.  A  standardised 
reporting  based  on  the  e-invoice,  without  a  central  clearance  that  is  perceived  by  most  MSs  and  business 
representatives as unnecessary and intrusive, is the solution preferred by vast majority of the  Group on the Future of 
VAT  and  the  VAT  Expert  Group.  In  addition,  after  conducting  a  feasibility  study  in  consultation  with  the  Member 
States, a Central System with data fed by Member States  also appears to be the most future-proved solution.  123 The 
main features of such system are:  

- 
- 
- 
- 
- 
- 

the freedom for the taxpayers to adopt the e-invoicing solution that they prefer 
reporting of a subset of the data and not of the whole invoice,  
harmonised subset of data to be reported for intra-Community transactions,  
reporting in real-time and on a transaction-by-transaction basis,  
reporting by the taxpayer or by a third party on his behalf, 
the  possibility  for  the  taxpayer  to  always  use  the  European  standard,  while  Member  States  can  put  at  the 
disposal of the taxpayer additional possibilities for reporting. 

However,  no  final  decision  has  been  taken  yet  and  technical  specifications  for  the  exchange  of  data  between  tax 
administrations will be further analysed and developed.  
The  administrative  burdens  for  businesses  and  implementation  costs  for  tax  administrations  closely  reflect  the 
complexity of the DRRs: costs are higher for real-time requirements, and lower for VAT listing, with SAF-T systems 
in between.124 Since the quantitative analysis did not provide solid findings on the impact of the choice of the type of 

123 The IT services of the European Commission conducted a feasibility study in consultation with the Member States 
to determine the best option to implement such exchange. More details in the impact analysis section. 
124 An assessment of the costs to comply with DRRs is presented in the supporting study, Vol I, p. 41 to 70. 

47 

 
 
                                                 
DRR, a qualitative analysis (See Table 31)125 was performed to indicate e-invoice as a possible choice for an EU DRR. 
Moreover,  since  real-time  reporting  requirements  and  e-invoicing  are  the  most  costly  and  complex  types  of  digital 
reporting requirements, the e-invoicing was further considered in this impact assessment, especially to fundament the 
cost-effectiveness  analysis.  In  addition,  during  the  public  and  targeted  consultation,  businesses  expressed  a  clear 
preference  in  favour  of  an  e-invoicing  solution  because  it  can  easily  be  used  for  their  internal  automation  and  not 
limited to tax-related reporting, as it is the case with VAT listings or SAF-T. Moreover, e-invoicing appears to be the 
most future-proof digital reporting requirement, and Member States have also expressed a preference for e-invoicing 
during the targeted consultation.  This further supports the conservative approach that was taken to consider the costs 
derived from the most complex option, e-invoicing when analysing the impacts of different options in Sections 6 and 
7.     

Box 2 

The deemed supplier model 

The  “deemed  supplier”  model  is  a  simplification  measure  intended  to  facilitate  the  collection  of  VAT  in  specific 
situations. This is typically the case when the intermediary in a transaction (in the envisaged initiative, a platform) is 
for  some  reasons  better  placed  than  the  “real”  supplier  (i.e.  the  underlying  supplier)  to  ensure  the  collection  of  the 
VAT due on this transaction. The reasons are either because it would be too burdensome for this underlying supplier to 
collect the VAT (e.g. when the underlying supplier is a natural person or a taxable person using special schemes for 
small enterprises), or because it is more secure to collect it from this intermediary (when the underlying supplier is not 
established /VAT registered in the EU). 

In a practical sense, when a supplier (the underlying supplier) uses a platform and does not provide the platform with a 
VAT number, the platform will adopt the role of the deemed supplier, and add the VAT to the price of the supply. If 
the customer pays the amount directly to the platform, the platform will pass the VAT amount due on the transaction 
of the supplier onto the tax authority (via their existing VAT return), and the rest (minus their facilitation fee) will be 
passed to the supplier.  Where the customer makes the payment directly to the supplier, that supplier will be required 
to pass the VAT to the platform. 

Where the supplier does provide a VAT number to the platform, the deemed supplier regime will, ordinarily not apply, 
and  the  supplier  will  charge  and  account  for  the  VAT  via  their  VAT  returns.  However,  there  are  certain  situations 
where  the  underlying  supplier  will  have  a  VAT  number,  but  will  not  charge  the  VAT  (for  example,  some  Member 
States allocate VAT numbers to businesses using the special scheme for small enterprises). In such cases, the supplier 
will be required to identify themselves as such to the platform, and the deemed supplier model will apply. 

5.3.Options discarded at an early stage 

Certain options have been discarded at an early stage as inconsistent with the EU legal framework 
or  the  objectives  of  this  initiative.  Other  options  were  discarded  because  of  their  technical 
unfeasibility or considering their clearly inferior impacts.  

125 Supporting Study, vol. I, p. 128 - 131. 

48 

 
 
 
 
 
 
                                                 
1.  VAT reporting 

a.  Adopting different designs for EU and domestic transactions.  

It  would  be  inappropriate  to  design  a  different  DRR  for  domestic  and  intra-EU 
transactions. From the analysis, no evidence emerged suggesting that domestic and 
intra-EU transactions require a different reporting mechanism, and this choice would 
duplicate  costs  without  any  significant  benefit  for  tax  authorities  and  taxpayers. 
However,  the  possibility  of  introducing  a  DRR  only  for  intra-EU  transactions  is 
considered among the policy options. This could, for example, allow substituting the 
ineffective recapitulative statements and thus reducing intra-Community VAT fraud, 
while limiting compliance costs for taxpayers that only operate domestically.  

b.  Harmonising existing DRRs in the short-term.  

Any  policy  proposal  on  an  EU  DRR  does  not  work  on  a  tabula  rasa,  given  that 
national  mechanisms  have  been  introduced  or  adopted  in  a  majority  of  Member 
States. Therefore, any proposal needs to incorporate a strategy for dealing with the 
existing requirements. Expecting to immediately retrofit all these systems into a new 
EU  system  would  be  politically  very  complex,  and,  most  importantly,  would 
generate  duplicated  burdens,  since  the  investment  in  IT  solutions  and  know-how 
borne by tax authorities and taxpayers in these Member States would become sunk 
costs. 

2.  VAT treatment of platform economy 

a.  Adding a common simplified VAT scheme for persons providing their services via 
platforms  by  applying  a  flat  VAT  rate  without  input  tax  deduction.  Under  this 
option, a new special scheme would be introduced for providers supplying services 
using  a  platform,  subjecting  them  to  a  flat  VAT  rate  without  input  tax  deduction. 
The  additional  complexity  in  the  VAT  system  and  the  limited  impact  on  VAT 
equality and neutrality are the main factors for discarding the option. Also, it would 
be  difficult  to  apply,  considering  that  a  number  of  underlying  supplies  may  be 
exempt (e.g. provision of real estate services). Accordingly, the option received little 
support from both platform operators and tax authorities consulted. 

b.  A  system  whereby  the  provider  becomes  a  taxable  person  upon  exceeding  a  set 
turnover  threshold.  The  enforcement  of  such  an  option  presents  significant 
feasibility problems. In particular, it would not be possible for platforms to monitor 
the revenue obtained over other platforms and sub-platforms. Also, it would lead to 
certain problematic characterisations of the provider. E.g. an individual may provide 
occasional supplies in different sectors (for example, short term rental and ride-on-
demand  transport  services),  which,  once  combined,  would  bring  them  over  the 
threshold. Finally, the threshold could hardly be applied to platforms which operate 
in  markets  with  high-value  transactions  (e.g.  sales  of  properties  or  second-hand 
cars), since individuals may risk being considered as a taxable person from the very 
first, occasional, transaction.  

49 

 
 
 
 
 
 
 
3.  VAT registration 

a.  One  possibility  could  be  to  include  also  B2B  transactions  in  the  OSS.  In  practice, 
this  means  that  any  cross-border  sales  made  by  a  business  supplier  to  another 
business  would  fall  within  the  scope  of  the  OSS,  hence  not  require  multiple  VAT 
registrations.  Such  transactions  are  very  prevalent  in  the  Single  Market.  However, 
without  including  a  deduction  mechanism  in  the  OSS,  the  lifting  of  the  VAT 
registration requirement alone may not solve the problem if the burden of claiming 
back  input  VAT  through  the  VAT  refund  mechanism  (Directive  2008/9/EC)  is 
deemed  higher  than  the  burden  of  VAT  registering  and  filing  local  VAT  returns. 
Due  to  the  impossibility  to  deduct  input  VAT  through  the  OSS  mechanism,  the 
uptake of this possibility will be very limited. 

b.  Introducing  the  input  VAT  deduction  mechanism  within  the  OSS  is  expected  to 
make  the  OSS  more  attractive  for  businesses  carrying  out  applicable  B2B 
transactions, as the impossibility to deduct VAT through the OSS was perceived as a 
major  stumbling  block.  However,  the  feasibility  of  this  option  is  questionable  for 
different  reasons.  Because  it  would  entail  the  Member  State  of  establishment 
deciding on the quantum of deductible VAT incurred in another Member State it is 
technically  challenging,  as  VAT  deduction  rules  vary  by  country.  Tax  authorities 
also  discarded  this  solution  both  because  they  would  be  obliged  to  make  financial 
outlays based on decisions made outside their country, and because of the practical 
barriers  to  conducting  audits  and  controls  on  companies  based  in  other  Member 
States.  In  addition,  there  are  obvious  similarities  between  this  option  and  the 
proposal on a definitive VAT system (see Section 1 and Annex 5: other initiatives), 
whose adoption at the Council is presently stalled due to comparable issues. 

50 

 
 
 
 
  
Figure 5 – Intervention logic  

Drivers 

Increasing scale of the 
platform economy and 
e-commerce 

Multiplicity and complexity of 
the new business models driven 
by technological changes  

Fragmented regulatory 
framework (divergent 
requirements) 

Outdated reporting 
mechanism for intra-
Community transactions 

Scope of the application 
of the simplification 
schemes 

Problems 

Sub-optimal VAT collection and control 

Excessive burdens and compliance costs 

General 
objectives 

Better VAT collection, control and fairness 

Simplified, modern and legally certain VAT system 

Specific 
objectives 

Improve reporting 
requirements to unlock 
digital opportunities  

Create level-playing 
field for businesses, 
regardless of the 
business model 

Promote convergence 
and interoperability of 
IT systems 

Reduce burden, 
regulatory 
fragmentation and 
associated costs 

Minimise the need 
for multiple VAT 
registrations in the 
EU 

Policy 
Options 

 “Status-quo” 
I. Sub-option 1 (reporting):  
No DRR harmonisation  
II. Sub-option A (platform 
economy):  No legislative 
intervention  
III. Sub-option 1 (VAT 
registration OSS&IOSS): 
Leave in place the current 
VAT registration system  

 “Minimalistic approach” 

I. Sub-option 2: 
Recommendation & Removal  
II. Sub-option B: Clarifying 
the current VAT treatment of 
the platform economy  
III. OSS Sub-option 2: Small 
extension of OSS to all B2C 
supplies 

 “Moderate approach” 
I. Sub-option 3: Keep data 
with the taxpayers 
II. Sub-option C.  Narrow 
sectoral deemed supplier 
(only some transport and 
accommodation services) 
III. “Minimalistic 
approach” + B2B reverse 
charge (OSS Sub-option 4)  

 “Enhanced approach” 
I. Sub-option 4a:  intra-EU 
DRR introduction  
II. Sub-option D: Sectoral 
deemed supplier regime 
(all Sub-option C sectors)  
III. “Moderate approach” + 
mandatory IOSS for 
deemed suppliers (IOSS 
Sub-option 3a) 

 “Maximal approach” 

I. Sub-option 4b: Full 
harmonisation of DRR 
(including domestic)  
II. Sub-option E: Inclusive 
(all platforms) deemed 
supplier 
III. “Enhanced approach” 
+ threshold removal 
(IOSS sub-option 2) 

51 

 
 
 
 
 
 
 
 
 
6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

6.1.Description of impacts 

The impacts of the VAT in the digital age initiative are described by type and by area (see Table 8): 
VAT reporting, VAT treatment of platform economy, VAT registration. The section will also focus 
on the impact on small and medium enterprises.  

Table 8 – Overview of impact types by VAT area (reporting, platform economy, registration) 

Impact type 

Reporting 

VAT area 

Platform 
economy 

Registration 

Administrative burdens and implementation costs 

Fragmentation and legal certainty 

VAT collection (revenue) and fraud 

Environment 

Social 

Business automation 

Level-playing field (Internal Market) 

Tax control efficiency 

Data confidentiality 

☒ 

☒ 

☒ 

☒ 

☐ 

☒ 

☐ 

☒ 

☒ 

☒ 

☒ 

☒ 

☐ 

☒ 

☐ 

☒ 

☐ 

☐ 

☒ 

☐ 

☒ 

☐ 

☐ 

☐ 

☒ 

☐ 

☐ 

Administrative burdens and implementation costs 

Administrative  burdens  represent  the  largest  impact  for  businesses,  spanning  all  VAT  areas. 
Measures  under  analysis  may  have  a  negative  impact  in  terms  of  administrative  burden  (for 
example the introduction of DRRs generates burdens for businesses due to the need to invest in new 
IT solutions and because of the routine costs of compliance) but also a positive one (the very same 
DRR could reduce burdens by introducing an EU wide harmonised system of reporting   allowing 
for pre-filled VAT returns,  removing the  recapitulative statements and other domestic obligations 
and encouraging business automation. The use of e-invoicing could also provide benefits linked to 
the  dematerialisation  of  paper  invoices  (savings  in  printing  and  postage  costs,  quicker  issuance, 
invoice integrity and security, etc.). 

Both  the  administrative  burdens  and  their  reduction  are  assessed  using  the  Standard  Cost  model 
(SCM)126 based on the findings from the current situation. 

126 See Annex 4. 

52 

 
 
 
 
 
                                                 
Fragmentation and legal certainty 

Fragmentation  is  reduced,  and  legal  certainty  enhanced  for  reporting  obligations  and  the  rules 
regarding the platform economy. For example, the introduction of a standard EU DRR will reduce 
the current fragmentation in the unilateral application of DRRs, and clarifications of the VAT rules 
for  platforms  (i.e.  in  establishing  the  status  of  the  underlying  supplier)  will  improve  the  legal 
certainty.  Fragmentation  costs  due  to  the  diversity  of  the  DRRs  in  place  increase  the  more  (and 
more  diverse)  DRRs  are  introduced  at  national  level  and  decrease  by  harmonising  policy 
interventions;  these  are  quantified  via  the  SCM  based  on  the  findings  from  the  current  situation. 
VAT collection (revenue) and fraud 

Impacts  on  VAT  collection  (which  are  expressed  by  the  evolution  of  VAT  revenue)  and  VAT 
control/fraud  (which  are  measured  by  the  evolution  of  VAT  Gap)  would  be  the  largest  impact 
generated by the introduction of DRRs and are measured via the econometric model (See Annex 4: 
Analytical methods).  

Environment 

The  introduction  of  mandatory  e-invoicing  implies  the  dematerialisation  of  paper  invoices,  thus 
reducing consumption of paper and transport services (for postage) while increasing the costs for IT 
infrastructure  and  energy  consumption.  These  net  savings  are  converted  into  CO2  savings  per 
invoice and monetised by considering the price of EU emission allowances.  

A  second-order  environmental  impact  derives  from  the  savings  associated  with  the  reduction  of 
administrative burden and digitalisation, where taxpayers will interact less with the authorities and 
distance audits will require less resources.  

Social 

The  social  impacts  derive  from  the  increase  of  tax  fairness  and  as  a  second-order  effect  of  the 
impacts  on  competition  (VAT  neutrality  and  equality),  and  the  corresponding  impact  on  those 
working in the relevant sectors (for example those working in the platform economy). The platform 
economy can boost employment not only by creating work opportunities both for unskilled, part-
time and high-skilled individuals, but also by fostering employment opportunities in smaller cities 
and disadvantaged zones. The burden reduction also generates some favourable social impacts, as 
administrative barriers have the greatest negative effect on micro and individual businesses, which 
typically create the most job opportunities for disadvantaged workers.  

Business Automation 

The  VAT  in  the  Digital  Age  initiative  contributes  to  the  digital  transformation127  by  pushing  for 
more  business  automation  and  the  use  of  digital.  The  initiative  supports  digital  transformation  as 

127 On 9 March 2021, the European Commission presented a vision and avenues for Europe’s digital transformation by 
2030.  The  Commission  proposes  a  Digital  Compass  for  the  EU's  digital  decade  that  evolves  around  four  cardinal 
points: skills, infrastructures, digital transformation of businesses, and digitalisation of public services. 

53 

 
 
 
                                                 
VAT digital reporting further incentivises the natural trend of business automation. In this respect, 
the  introduction  of  specific  reporting  obligations  (listings,  SAF-T  etc.)  for  tax  purposes  only  are 
rather  seen  as  an  additional  burden  by  the  stakeholders  consulted.  However,  stakeholders 
unanimously agree that when the reporting obligations are combined with standardized e-invoicing, 
economic  benefits  are  also  expected.  The  introduction  of  mandatory  electronic  invoicing  is  the 
cornerstone in this context and could create benefits such as the use of structured data to  analyse 
and  optimize  value  chains,  quicker  invoicing  processes,  faster  VAT  reimbursement  and  strong 
business automation gains. 

Level playing field (internal market) 

Impacts on the functioning of the Internal Market and competition (level-playing field), are linked 
to  the equality  and neutrality of VAT for different  business  models (digital vs. traditional) in the 
platform  economy  area  and  the  possibility  of  benefiting  from  the  OSS  and  IOSS  for  VAT 
registration (domestic vs. cross-border). 

Tax control and efficiency 

Tax  control  efficiency  for  tax  authorities  is  expressed  by  there  being  better/fewer  audits  and 
requests for information and quicker VAT reimbursement128. 

Data Confidentiality 

Data confidentiality is defined as the protection against the disclosure of information – in this case 
the taxpayers’ transactional data – by ensuring that access to the data is limited only to those who 
are authorised. Confidentiality can be ensured in various ways (e.g. by limiting data collection or 
transmission)  and  is  assessed  based  on  risk  variation  (increase,  decrease),  since  no  IT  system  is 
completely ‘confidential’ (or secure) in absolute terms. 

6.2.Impacts by VAT area 

The  policy  sub-options  in  each  of  the  VAT  areas  were  individually  assessed  by  the  supporting 
study.  Table  9  (VAT  reporting),  Table  13  (platform  economy)  and    Table  14  (VAT  registration) 
present an overview of this assessment.   

128 In both cases, however, no quantitative evidence exists on whether DRRs have been conducive to better/less audits 
(also  due  to  the  intervening  COVID-19  pandemic)  or  quicker  VAT  reimbursement,  since  positive  impacts  were 
identified only in a few Member States or by a too limited number of interviewees. 

54 

 
 
 
                                                 
Table 9 – Impacts in VAT reporting area by policy sub-option (net impacts, 2023-2032) 

Impacts 

VAT revenue, and 
burdens (net 
impacts) 

Environment 

Tax control 

Business 
automation 

Data confidentiality 

N/A 

N/A 

N/A 

N/A 

N/A 

Sub-option 

1 – Baseline 

2 – Recommendation and 
Removal 

3 – Keep the data with the 
taxpayers 

VAT 
reporting 

No impact 

-  Higher VAT revenue 
and burden, due to 
more widespread 
diffusion of DRRs 

+ EUR 16.5 billion  

-  Some savings in 

No impact 

administrative burdens; 
limited effect on VAT 
revenue 

+ EUR 27.5 billion  

-  More widespread 
adoption of DRRs 
leads to better risk 
analysis, and improves 
audit 

-  Adoption of mandatory 
e-invoicing spurs more 
companies to automate 

-  Audits would become 

better; no 
improvements to risk 
analysis possible 

-  Electronic data may 
increase automation; 
benefits from e-
invoicing fail to 
materialise 

4a – Partial harmonisation 
(intra EU) 

-  Increased burdens and 
higher VAT revenue 

-  Domestic DRRs 

adoption increases  
+ EUR 138.9 billion  

Estimated environmental 
benefits up to EUR 0.05 
billion 

-  Better risk analysis, 
and improves audit 
effectiveness and 
efficiency 

-  Electronic handling of 
transactional data may 
increase automation 

4b – Full harmonisation 
(intra EU and domestic) 

-  Highest burdens and 
highest VAT revenue 

+ EUR 231.1 billion 

Estimated environmental 
benefits up to EUR 0.06 
billion 

-  Maximum 

improvements of risk 
analysis and audits due 
to the highest coverage  

-  Electronic handling of 
transactional data may 
significantly increase 
automation 

-  More widespread 
adoption of DRRs 
increases the risks of 
attacks on companies’ 
data 

-  No data transferred 
reduces the surface 
attack; risk at the 
company's premises 
(SMEs especially) 
remains 

-  Risks to data 

confidentiality increase 
significantly the more 
fiscal data are stored 
and exchanged 

-  Highest risks to data 

confidentiality  

55 

 
 
 
 
 
 
 
 
 
 
 
The net impacts on VAT revenue and burdens are composed of the elements detailed below. 

Table 10 – VAT reporting: net impacts on VAT revenue and burdens (2023-2032) 

Costs 

Benefits 

Administrative 
burden for 
businesses 

Implementation 
cost tax 
authorities 

Fragmentation 
costs 
(elimination)129 

Environmental 
benefits 

Savings pre-filled 
VAT returns 

Removal of 
recapitulative 
statements 

E-invoicing 
benefits 

VAT collection/ 
C-efficiency** 

Recommendation and 
removal (Sub-option 2) 

EUR 2.8 billion  EUR 0.1 billion 

 EUR 4.4 billion  

No impacts 

EUR 0.7 billion 

No impacts 

EUR 
0.3billion 

EUR 14.1 
billion  

Max. 
impact on 
VAT 
Gap*** 

- 0.13 p.p. 

Keep the data with the 
taxpayers (Sub-option 3) 

EUR 6.5 billion 

EUR 0.05 
billion cost 
reduction  

EUR 1.1 billion  

No impacts 

No impacts 

No impacts 

No impacts 

EUR 32.8 
billion 

- 0.29 p.p.  

Partial Harmonisation 
(Sub-option 4a) 

Full Harmonisation 
(Sub-option 4b) 

EUR 11.3 
billion* 

EUR 43.5 
billion* 

EUR 2.2 billion  EUR 24.2 billion  

EUR 3.4 billion  EUR 24.2 billion  

EUR 0.01-0.05 
billion 

EUR 0.01-0.06 
billion 

EUR 4.3 billion 

EUR 11 billion 

EUR 7 billion 

EUR 11 billion 

EUR 1.9 
billion 

EUR 111 
billion 

- 0.99 p.p. 

EUR 14.5 
billion 

EUR 221.4 
billion 

- 1.98 p.p. 

* To fundament the cost-effectiveness analysis, the most costly and complex type of digital reporting requirement (e-invoicing) was considered. 
** The impact of the introduction of DRRs on VAT revenue is estimated based on the results of the econometric model (see Annex 4: Analytical methods).The introduction of DRRs is 
estimated to increase C-efficiency by 1.9 percentage points, based on the C-efficiency (quarterly data) model. The alternative methodology using the VAT gap projects a reduction in 
the VAT Gap by 2.6 percentage points. The VAT Gap reduction refers to the models used, not accounting for the dynamic baseline. However, Member States will, if nothing is done on 
an EU level, introduce domestic reporting requirements to deal with their specific problems. Thus, the figures in Table 10 reflect this situation.130 

*** The impact on the VAT Gap mainly comes from the introduction of digital reporting, which is an antifraud measure. Calculations are made by notionally increasing the 2021 VAT 
revenue (VAT Gap Study), amended to exclude the UK with the additional VAT revenue obtained under C-efficiency model  

129 To maintain the comparability with the presentation in the baseline section, the structure of the tables was kept. However, there is a reduction of fragmentation costs compared with 
the baseline, thus the change is reflected corresponding column was moved from costs to benefits 
130 The quantification of the net benefits is done against the baseline scenario which assumes that a certain number of MS will adopt DRRs in the coming years; thus, only additional 
benefits (and costs) are  accounted for. Annex 4: Analytical methods includes relevant assumptions about future adoption of DRRs. Annex H of the supporting study includes a full 
description of the scenarios on which Member States will do so and on which date.  

56 

 
 
 
 
                                                 
DRRs: Cost-benefit comparison against baseline  

Sub-option 2 
Sub-option 3 
Sub-option 4a 

Sub-option 4b 

Costs  
(EUR billion) 

Benefits 
(EUR billion) 

Net impacts 
(EUR billion) 

2.9 

6.4 
13.5 

46.9 

19.4 

33.9 
152.4 

278.1 

16.5 

27.5 
138.9 

231.1 

Tax control and efficiency 

The benefits to tax control would increase with the volume, quality, timeliness and granularity of 
data.  Therefore,  options  which  entail  the  provision  of  data  on  both  domestic  and  cross-border 
transactions provide the highest benefits for tax control.  

Measures which only cover domestic supplies, would provide benefits in this regard (for example, 
through  better  targeted  audits,  or  allowing  faster  processing  of  reimbursements).  However,  these 
benefits would be limited on fight against cross-border fraud, and in particular MTIC fraud, as the 
current  system  of  information  on  intra-EU  supplies  would  remain  in  place  (the  recapitulative 
statements).  

Measures which apply to cross-border transactions would significantly improve the current control 
capabilities  for  these  transactions  which  are  currently  based  on  the  recapitulative  statements, 
allowing a more efficient and effective fight against cross-border fraud.  

Therefore, the optimal option for tax control purposes would be one which applies both to domestic 
and cross border transactions. However, this option would need to be fully interoperable with the 
systems already in place in Member States. 

In  any  case,  any  option  increasing  the  volume,  quality,  timeliness  and/or  granularity  of  the  data 
would  improve  the  abilities  of  Member  States  to  control  their  taxpayers,  leading  to  increased 
efficiency  in  tax  collection,  and  the  ability  to  better  target  fraudulent  traders  and  problematic 
supplies. 

Business Automation 

The  introduction  of  digital  reporting  requirements,  in  particular  through  the  implementation  of 
mandatory  electronic  invoicing,  allows  a  more  efficient  management  of  the  business’  invoicing 
process,  significantly  reducing  the  cost  for  receiving  and  recording  invoices.  Further,  the 
dematerialisation of invoices reduces the costs related to their archiving. 

The  benefits  derived  from  the  business  automation  could  be  significant.  However,  they  unevenly 
distribute among taxpayers. These benefits seem to be more important for large companies, which 
keep accounting and invoicing activities in-house, while they will be reduced for small companies, 
which frequently outsource these activities to external tax advisors. 

57 

 
 
 
 
 
 
The more extended the implementation of digital reporting requirements, especially if they take the 
form  of  electronic  invoicing,  the  bigger  the  benefits  for  taxable  persons  derived  from  the 
automation of their processes. 

Data Confidentiality 

The more data are exchanged, the  greater the risk to  data confidentiality.  In that sense, an option 
which keeps the data with the taxpayers gives the lowest risk to data confidentiality, and that which 
has the most data travelling from taxpayers to tax administrations, and between tax administrations, 
has the highest risk.  

58 

 
 
 
 
Box 3 

Implementation of an EU DRR: difference between options 4a and 4b (Part I) 

Under  both  options  4a  and  4b,  Member  States  shall  implement  an  EU  DRR  for  intra-EU  transactions  and  the 
recapitulative statements are abolished. 

The  difference  between  both  options  is  that  the  implementation  of  a  DRR  system  for  domestic  transactions  is 
voluntary  in  option  4a  while  it  is  mandatory  under  option  4b.  The  impacts  on  Member  States  can  summarised  as 
follows: 

-  All Member States will be obliged to implement the EU DRR for intra-EU transactions under both options. 
-  Member  States  having  in  place  a  DRR  for  domestic  transactions  shall  ensure  interoperability  with  the  EU 
DRR in the short term and shall converge to the EU DRR in the medium term. This will happen under both 
options. 

-  Member  States  that  do  not  have  in  place  a  DRR  for  domestic  transactions,  when  implementing  such  DRR 
shall adopt the EU DRR. The implementation of such a  DRR  for domestic transactions  is obligatory under 
option 4b and voluntary under option 4a. 

The difference between both options is that under option 4a there will be less Member States having in place a DRR 
for domestic transactions in the medium term that under option 4b. The study made the following assumptions:131 

Table 11 – Option 4a: Adoption of Digital Reporting Requirements (2023-2032) 

Year 

Time for the 
analysis 

2023 

T0 

Number of 
Member States 
with DRR 

14 (Domestic) 
27 (intra-EU) 

2025 

T2 

20.1* (Domestic) 
27 (intra-EU) 

Type of DRR 

Adopters 

VAT listing 
SAF-T 
Real-time 
E-invoicing 
VAT listing 
SAF-T 
Real-time 
E-invoicing 

EU DRR 

BG, CZ, EE, HR, LV, SK 
LT, PL, PT 
ES, EL, HU 
IT, FR 
BG, CZ, EE, HR, LV, SK 
LT, PL, PT 
ES, EL, HU 
IT, FR 
AT, BE, CY, DE, DK, FI, IE, LU, MT, NL, RO, SE, 
SI 

2028 

T5 

20.1* (Domestic) 
27(intra-EU) 

EU DRR 

All Member States 

Therefore, even if there is no obligation for Member States to implement a DRR for domestic transactions, it is more 
than likely that all of them will implement such systems in the medium-long term. This assessment is backed by the 
following recent developments: 

- 

Some  Member  States  without  DRR  systems  in  place  have  recently  announced  their  intention  to  adopt 
mandatory e-invoicing as a basis for digital reporting. This is the case for Romania and Belgium. 

-  Other  Member  States  are  studying  the  implementation  of  a  reporting  system  based  on  e-invoicing,  even 
though they have not yet announced if they will adopt it. This is the case of some Nordic Countries, which are 
carrying out the “Real-time economy” project. 

131 For full details about scenarios and assumptions used to fundament the VAT reporting options (including 4a and 4b) 
see Vol. I, Annex H – of the supporting study. 

59 

 
 
 
 
                                                 
6.2.1.  Impacts on SMEs of the digital reporting (SME test) 

The introduction of DRRs will impact  all taxable persons. However, this impact  will be different 
for  each  type  of  business.  In  this  regard,  it  is  worthwhile  providing  an  additional  analysis  on  the 
impacts on SMEs of the introduction of digital reporting at an EU level. Such SME analysis (SME 
test) aim to identify the possible effects of introduction of DRRs on SMEs.  

The table below provides the range of net impacts. The analysis assumes that additional services, 
and  in  particular  pre-filled  VAT  returns,  will  be  provided  by  the  tax  authorities  under  the  new 
digital reporting requirements that are to be introduced.  

Table 12 – Administrative burdens by category and type; net impacts, EUR per year; ranges 

Active only domestically 

Active cross-border 

Micro/Small132 

Medium/Large 

Micro/Small 

Medium/Large 

Per company 
(EUR/year) 

Per company 
(EUR/year) 

100 / 500 

Administrative 
Burdens 
Administrative 
burdens savings* 
Net impacts for 
businesses 
* the analysis does not account for the benefits from business automation 

- 1,400 / 12,300 

600 / 4,400  

- 200 / 100  

0 / 16,700  

0 / 300 

100 / 500 

500 / 700 

300 / 600 

600 / 4,400 

4,900 / 21,600 

3,600 / 17,200 

The  results  show  that  companies  engaged  in  cross-border  transactions  get  a  net  benefit  from  the 
introduction of an EU DRR. These are smaller for micro and small entities, but still positive. This is 
due  to  the  removal  of  the  recapitulative  statements,  which  come  on  top  of  the  other  benefits 
generated by the DRR, and in particular the pre-filled VAT returns. On the contrary, the analysis 
shows  mixed  findings  for  companies  that  are  not  active  cross-border,  which  represent  the  vast 
majority of micro and small entities. For purely domestic micro and small enterprises, net benefits 
may  be  negative;  this  is  because  they  do  not  gain  benefit  from  the  facilitation  of  cross-border 
transactions. About the ranges, in  line  with  the overall cost  analysis, the  costs are higher if more 
complex types of DRRs are selected, such as e-invoicing. The taxpayers made it clear in the public 
consultation that “the VAT reporting should not be planned only to fulfil the information requests of 
tax  administrations  but  also  to  make  real-time  data  available  for  companies,  so  that  they  can 
benefit  from  detailed  financial  data  in  their  own  business”.  Therefore,  appropriate  support 
measures, for instance for the investment in e-invoicing services or the provision of free software 
could be considered, to make sure that the net costs for taxpayers are lowered or compensated. In 
any case, the minimisation of net impacts also depends on the provision of pre-filled VAT returns 

132 Estimates based on the compliance costs and savings experienced by companies in the current situation, according to 
the  Standard  Cost  Model  methodology.  Burdens  include  the  implementation  costs  and  ongoing  compliance  costs 
related to the DRRs. Savings include those due to the pre-filling of VAT returns, e-invoicing benefits (quicker issuance, 
and printing and postage cost savings) and the removal of the recapitulative statements (See Annex 4). 

60 

 
 
 
 
                                                 
by  the  tax  authorities.  Such  support  was  also  requested  by  stakeholders  during  the  public 
consultation, precisely pointing at possible compensation measures.    

However,  it  should  be  underlined  that  the  costs  for  businesses  of  the  implementation  of  DRR 
systems  would  materialise  even  in  the  case  that  no  action  is  taken  at  EU  level.  This  is  because 
under the current status quo, Member States will continue to implement DRR systems to improve 
tax  collection.  According  to  the  technical  study133  carried  out  to  assess  the  different  policy  sub-
options, in the medium term the same number of Member States will have in place DRR systems 
for  domestic  transactions  if  no  action  is  taken  at  EU  level,  regardless  of  whether  systems  for  the 
reporting of domestic transactions are harmonised at EU level or left at the discretion of Member 
States.  Therefore,  the  main  difference  of  the  EU  action  would  be  that  the  process  will  speed  up. 
Therefore,  the  negative  impact  for  certain  businesses  which  are  only  engaged  in  domestic 
transactions are not a consequence of the EU action.  

Table 13 summarises the main impacts in VAT treatment of platform economy area that are visible 
on VAT revenue, legal certainty, administrative burdens, and internal market – level playing field.  

133 Supporting study, Vol. I, Table 33, p. 104. 

61 

 
 
 
                                                 
Table 13 – Main impacts in VAT treatment of platform economy area 

VAT 
treatment 
of platform 
economy 

Impacts 

Sub-option 

A – Baseline 

VAT revenue  

Legal certainty and administrative 
burdens 

Competition / Internal Market  

N/A 

N/A 

N/A 

B – Clarification of VAT 
rules (nature of service, 
provider status, records) 

 + EUR 2.5-2.6 billion (due to increased 
compliance compared to the baseline) 

C – Deemed supplier: 
certain accommodation 
and transport services 

+ EUR 19-45 billion due to increased 
compliance and broader tax base compared 
to the baseline 

+ EUR 0.5 billion savings in administrative 
costs resulting from streamlining and 
clarifications 

+ EUR 0.5 billion savings from inclusion of 
clarifications 
-  Burdens  due  the  administration  of  the 

deemed supplier regime (low) 

-  New legal uncertainties linked to the 
boundaries of the system (high) 

-  More harmonised level-playing field 

across MS 

-  Reduction of distortions between same 
services offered via different channels, 
minor negative impact on competition 
among exempt suppliers 

D – Deemed supplier: all 
accommodation and 
transport services 

+ EUR 24-66 billion due to increased 
compliance and broader tax base compared 
to the baseline 

E – Deemed supplier: all 
services for monetary 
consideration 

+ EUR 63-146 billion due to increased 
compliance and broader tax base compared 
to the baseline 

-  Reduction of distortions between same 
services offered via different channels, 
minor negative impact on competition 
among exempt suppliers 

-  Reduction of distortions between same 
services offered via different channels, 
significant negative impact on 
competition among exempt suppliers  

+ EUR 0.5 billion savings from inclusion of 
clarifications 
-  Burdens  due  the  administration  of  the 
to 

supplier 

regime 

(low 

deemed 
moderate) 

-  New legal uncertainties linked to the 
boundaries of the system (low to 
moderate) 

+ EUR 0.5 billion savings from inclusion of 
clarifications 
-  Burdens  due  the  administration  of  the 

deemed supplier regime (high) 

-  New legal uncertainties linked to the 

boundaries of the system (low) 

62 

 
 
 
 
 
 
 
VAT Revenue 

Whilst VAT revenue will grow in absolute and relative terms if nothing is done, this is due to the 
growth  of  the  platform  economy  and  not  to  any  increase  in  compliance  efficiencies.  The 
inconsistencies  in  the  application  of  the  rules  will  remain,  along  with  the  lost  revenue  collection 
opportunities.  

Clarifying the existing rules to any extent will increase revenue as suppliers become more aware of 
the  rules,  however  the  difficulties  would  remain  in  how  a  tax  authority  would  ensure  the 
compliance  of  a  large  number  of  small  suppliers.  The  clarification  of  the  rules  regarding  the 
treatment  of  the  platforms’  facilitation  services  (whether  they  are  regarded  as  an  electronically 
supplied service or an intermediary service) will lead to a shift in revenue between Member States. 

With the introduction of the deemed supplier regime, VAT revenue increases substantially, because 
it  introduces  an  extension  of  the  tax  base,  and  because  it  shifts  the  compliance  burden  from  the 
small  supplier to  the platform,  which would be also  easier for the Member States to  control. The 
wider the scope of the measure, the higher the additional VAT revenue.  

Legal Certainty and Administrative Burdens  

Currently compliance issues surrounding the determination of the status of the supplier and various 
record  keeping  obligations  generate  burdens  of  around  EUR 1.9 billion.  Any  clarification  of  the 
current rules will reduce this burden and increase the legal certainty. 

In judging the impact of any measure, it is difficult to assess the numbers of individuals providing 
services via platforms. For example, the study ‘VAT in the Digital Age’ assesses 410,000 full time 
employees  deriving  income  from  the  transportation  sector,  and  458,000  in  the  accommodation 
sector.  The  Impact  Assessment  Report  on  the  proposal  for  a  Directive  on  improving  working 
conditions  in  platform  work  estimates  that  28.3 million  people  have  at  least  occasionally  worked 
through digital labour platforms.  

It  should  be  noted,  however,  that  the  impact  due  to  the  administration  of  the  deemed  supplier 
measure  will  fall  not  on  the  underlying  suppliers,  but  on  the  platforms  themselves,  who  will 
account for the VAT on the underlying transactions via their existing VAT accounting procedures.  

In addition, the legal uncertainties due to the boundaries of the system will decrease with the scope 
of the measure. There is less legal uncertainty regarding the scope of a measure which applies to all 
accommodation  and  transport  services  rather  than  certain  accommodation  and  transport  services, 
and indeed if the measure is applied to all services the legal uncertainties would be minimal.  

Level playing field (internal market) 

Whilst  clarification  of  the  existing  rules  will  help  with  legal  certainty,  it  will  not  address  the 
problem of competition, which, of the options listed, can only be addressed by a deemed supplier 
measure.  This  will  eliminate  the  VAT  advantage  of  occasional  and  very  small  suppliers  when 
operating  via  a  platform  and  benefiting  from  the  network  effect  and  follows  a  model  adopted  in 

63 

 
 
 
 
other  countries  when  faced  with  similar  competitive  imbalances  (most  recently  the  Canadian 
deemed supplier model for residential letting134).  

However, the introduction of the deemed supplier rule would create a new impact on competition, 
between very small and occasional suppliers within or outside a platform. Such impact is in direct 
proportion with the scope: minor for more restricted or sectoral deemed supplier options and more 
significant for the inclusive ones.  

6.2.2.  Impacts on SMEs of the platform economy  

The stakeholder consulted asked for a global and reasonable solution, this being valid especially for 
the SMEs.  

Under the deemed supplier regime options, the platform would account for the VAT in the place of 
small  underlying  suppliers.  This  means  that  the  underlying  supplier  would  not  be  required  to 
register and account for the VAT itself, thus bearing no additional burden. 

Table 14 summarises the main impacts in VAT registration area that are visible on administrative 
burdens, VAT collection and fraud and internal market – level playing field. 

134  The  Canadian  government  proposed  a  new  approach  to  the  application  of  Goods  and  Services  Tax  (GST)  –  the 
equivalent  of  VAT  –  to  the  growing  digital  and  sharing  economy  (effective  July  1,  2021).  In  particular,  it  aimed  at 
introducing  a  deemed  supplier  regime  for  platform-based  short-term  accommodation.  The  policy  aims  to  address  the 
same  issues  with  which  the  EU  is  currently  faced,  and  in  particular  the  fact  that  the  local  VAT/GST  regime  is  not 
applied consistently in this sector, putting traditional business models at a comparative disadvantage. 

64 

 
 
 
                                                 
Table 14 – Main impacts in VAT registration area 

Impacts 

Sub-option 

1 – Baseline 

2 – Minimal OSS 
extension 

VAT 
registration 
(OSS) 

3 – Moderate OSS 
extension 

4 – Reverse charge 

Administrative burdens 

VAT collection (revenue) and 
fraud 

Level playing field 

N/A 

N/A 

N/A 

Addresses  the  problem  of  multiple  VAT 
registrations, but only in a limited number of 
market  segments,  such  as  electric  vehicle 
charging, and supplies of goods on a weekly 
market.  

Eliminate  the  need  to  VAT  register  for 
distance  sellers,  and  for  many  businesses 
outside the e-commerce sector.  

impacts  on  non-compliance  and 

Likely 
fraud are assessed as marginal 

Minor  benefits  are  expected  in  terms  of 
functioning  of  the  Single  Market,  that  are 
limited to the market segments involved  

By  making  compliance  easier  for  SMEs,  it 
would also reduce non-compliance. 

Reducing  distortions  to  the  functioning  of 
the  Single  Market  in  line  with  the  wider 
scope 

Positive  impacts  for  businesses  operating 
where  there  is  currently  no  access  OSS 
simplification schemes. 

Adoption of DRRs (4a/4b VAT registration) 
facilitates the implementation and reduce the 
risk of abuse by making it easier for the tax 
authorities to verify the transactions 

Relying pragmatically on the reverse charge 
for  wider  B2B  transactions  improves  the 
functioning of the Single Market 

1 – Baseline 
2  –  Removal  of 
current threshold 

the 

VAT 
registration 
(IOSS) 

3a  –  IOSS  mandatory  for 
deemed suppliers 
3b  –  IOSS  mandatory 
above a threshold 
3c  –  IOSS  mandatory,  no 
threshold 

N/A 
Can be combined with any other sub-option. 
Minor  benefits  expected  for  businesses  that 
would be able to use the IOSS to avoid VAT 
registration.  
Preparing  the  IT  systems  of  Commission 
and Member States takes time and is costly. 
Minor  benefits  expected  for  certain  actors, 
such  as  postal  operators  and  express 
carriers. 
Any  introduction  of  thresholds  complicates 
the schemes and adds complexity. 
While 
the  variations  work 
differently, similar impacts are expected for 
3a, 3b and 3c. 

in  practice 

N/A 

N/A 

reduction 

Some 
materialise 

in 

fraud 

risks  could 

Levelling  of  the  playing  field  in  the  Single 
Market  could  be  expected  by  allowing,  via 
in  any 
the  IOSS,  suppliers 
Member State.  

import 

to 

is  also 
identify 

The  IOSS 
authorities 
compliance. 
However, it is difficult to enforce. 

likely 
fraud  and 

to  help 

the 
increase 

a 

knock-on 

As 
increase 
compliance,  the  level  playing  field  will 
improve. 

effect 

of 

65 

 
 
 
 
 
 
Administrative burdens 

OSS 

The e-commerce sector will continue to grow, and as such, if nothing is done, an increasing number 
of  businesses,  and  in  particular  SMEs,  will  face  the  burden  of  having  to  register  for  VAT  in 
(an)other Member State(s) and comply with the specific VAT obligations of these Member States 
in respect of transactions not yet covered by the OSS. 

Any  measure  which  increases  the  scope  of  the  OSS  will  decrease  the  necessity  of  businesses 
making B2C supplies (and other specific transactions such as own movements of goods) to register 
in other Member States – this could be targeted to specific sectors/problem areas (such as electric 
vehicle charging) where the sectoral burden reduction could be significant, or have a broader scope, 
enabling a wider use of the OSS.  

Similarly, broadening the scope of the reverse charge will reduce the necessity of businesses being 
required to register in other Member States when they have made B2B supplies.  

IOSS 

Removing  the  current  threshold  of  EUR 150  will  mean  that  some  businesses  will  no  longer  be 
required to register in the Member State of destination, thus reducing their burdens. However, it can 
be seen that any of the proposed changes to make the IOSS mandatory will have minimal impact on 
administrative burdens (because the majority of businesses who see a benefit from using the IOSS 
are already doing so).  

VAT collection (revenue) and fraud 

OSS 

The  wider  use  of  the  OSS  is  likely  to  improve  compliance  as  businesses  find  the  OSS  easier  to 
administer,  and  the  wider  use  of  the  reverse  charge  may  help  detect  and  reduce  certain  types  of 
MTIC fraud. 

IOSS 

Increasing  the  scope  of  the  IOSS  will  reduce  the  levels  of  fraud,  particularly  from  non-EU  third 
party suppliers, however, it will not eliminate it completely (i.e. there remain the opportunities for 
the undervaluation of parcels or the misuse of IOSS numbers). 

Level playing field 

OSS 

The  disparity  which  currently  exists  between  SMEs  and  large  businesses  will  continue  to  exist 
(because a large business is more likely to be either a) already established in another Member State 
or b) if not, will face proportionately lower registration costs) and will rise as the value and volume 
of  distance  sales  increases.  To  increase  the  scope  of  the  OSS  will  go  some  way  to  redress  this 
imbalance, reducing the necessity for SMEs to register in other Member States.  

IOSS 

There are ongoing opportunities for fraud, in particular from non-EU based suppliers, which impact 
on the competitiveness of EU businesses. Improvements to the scope and functioning of the IOSS 
will reduce this unfairness by improving the compliance of non-EU based suppliers. 

66 

 
 
 
 
6.2.3.  Impacts on SMEs of the VAT registration  

Approx. 280,000 SMEs will benefit from the extension of the scope of the OSS/IOSS. The number 
of  SMEs  was  extrapolated  from  the  2015  study  (Deloitte’s  VAT  Aspects  of  cross-border  e-
commerce report), which estimates 248,581 companies engaged in B2C cross-border e-commerce, 
among which 232,118 SMEs. These figures were extrapolated by the supporting study to 300,000 
companies in total (and the same proportion of SMEs), resting on the assumption that the growth of 
e-commerce since 2015 not only reflects growth in the number of active e-commerce businesses but 
also in the growth of volumes and values of sales of already existing businesses; hence the growth 
of the number of businesses should be significantly smaller than the  growth of e-commerce sales 
over  the  same  period  (see  Table  1)135.    Conservatively,  for  SMEs  only  this  translates  in  a  cost 
saving up to EUR 0.34 (one-off) and up to EUR 0.67 (recurrent), thus a total of EUR 7 billion for 
the period 2023- 2032. Since the total savings are EUR 8.7 billion, SMEs will benefit the most from 
the measures. 

6.3.Stakeholders’ views on the options 

Regarding  the  VAT  reporting  options  stakeholders  generally  support  the  introduction  of  an  EU 
DRR  for  intra-EU  transactions,  with  or  without  the  inclusion  of  the  domestic  transactions. 
Agreement was  less pronounced for options  referring to  recording data on VAT transactions in  a 
standard digital format, adopting non-binding Commission recommendations providing a common 
design for reporting obligations across the EU, and for no longer requiring Member States to have 
to ask for an explicit derogation for introducing mandatory e-invoicing for B2B transactions.  

Figure 6 – Options for VAT registration (DRRs): stakeholders’ views 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Agree

Partly Agree

Tot. PI BF EO SP O

Tot. PI BF EO SP O

Tot. PI BF EO SP O

Non-binding EC
recommendation with
common design for
reporting obligations across
EU

Remove derogation for MS
to introduce mandatory e-
invoicing for B2B
transactions

Require taxpayers to
record VAT data in
standard digital format

Neither agree nor disagree 15

Partly disagree

11

52 11 19 11

43

5

2

4

16 11

1

4

4

1

5

8

6

2

Disagree

58 10 10 14 17

135  Supporting Study, Vol III, p. 61-62. 

6

3

2

0

7

72 16 19 12 15 10

81 17 16 21 17 10

23

19

14

42

7

0

3

5

5

8

4

6

6

3

5

1

3

10 12 12

0

4

1

3

46

11

20

22

7

1

4

2

13 11 10

7

8

7

2

1

7

1

7

3

5

0

0

3

67 

 
 
 
                                                 
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

EU DRR for intra-EU transactions and
harmonisation of existing domestic
systems

Agree

Partly Agree

Neither agree nor disagree

Partly disagree

Disagree

93

56

8

10

11

17

11

1

1

2

22

16

5

3

2

26

8

1

4

3

18

15

0

2

3

10

6

1

0

1

EU DRR for both intra-EU and
domestic transactions

103

18

42

6

12

14

8

1

2

2

24

10

4

5

5

25

11

0

2

4

24

11

1

1

1

12

2

0

2

2

The need for changes to the VAT rules to ensure proper VAT treatment of the platform economy 
was considered necessary by most stakeholders. On the policy options, stakeholders noted that (1) 
keeping a legal clarification up to date with the business developments and with the exact nature of 
services offered by platforms will be difficult or impossible and it was remarked that the nature of 
the service and distinction between an intermediary and electronic supply of service cannot always 
be clearly defined; (2) to presume the VAT status of the service provider is difficult and may add 
complexity for platforms, thus a simple and secure mechanism should be found; (3) the imposition 
of  new  record-keeping  obligations  could  increase  costs  and  put  platforms  at  a  disadvantage 
compared  to  non-platform  businesses;  and  (4)  while  being  seen  as  a  solution  by  the  majority  of 
respondents,  a  deemed  supplier  role  for  digital  platforms  may  create  difficulties  for  platforms,  a 
burden which might be unreasonable for smaller or purely domestic platforms which may choose to 
shift the burden towards their users by imposing strict conditions and requirements. 

Figure 7 – Options for VAT treatment of platform economy: stakeholders’ views 

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Agree

Partly agree

27

Neither agree nor disagree 10

Partly disagree

Disagree

1

3

Tot. PI BF EO SP O

Tot. PI BF EO SP O

Tot. PI BF EO SP O

Clarification of nature of
services provided by
platform

Rebuttable presumption on
status of platform providers

Streamlining of record-
keeping obligations

111 20 29 24 27 11

70 11 22 13 17

5

3

0

1

7

3

0

0

8

3

0

1

5

0

1

1

2

1

0

0

33

19

5

9

7

5

1

1

1

5

0

5

14

3

2

1

9

3

2

2

68 

7

2

3

0

0

86 13 26 20 18

36

17

2

5

9

7

0

1

7

2

0

1

9

1

0

2

8

5

2

1

9

3

2

0

0

 
  
 
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Tot. PI

BF EO SP O

Tot. PI

BF EO SP O

Tot. PI

BF EO SP O

Deemed supplier regime for
digital platforms for supply of
certain accommodation &
transport services*

Deemed supplier regime for
digital platforms for supply of
all accommodation & transport
services

Deemed supplier regime
for digital platforms for all
services for monetary
consideration

Agree

Partly agree

48 10

32 10

Neither agree nor disagree 22

Partly disagree

Disagree

6

17

4

1

3

9

9

5

2

4

9

6

2

1

5

13

7

8

2

3

7

0

3

0

2

39

7

7

38 12 11

25

6

18

5

1

3

4

3

4

7

8

3

1

5

12

6

10

1

4

6

1

3

0

2

42

6

5

10 15

39 14 10

22

7

25

3

1

4

5

2

9

9

2

1

7

5

9

2

3

6

1

3

1

2

On  the  VAT  registration  proposed  options,  the  strongest  agreement  among  stakeholders  was  to 
extend the OSS to cover all B2C supplies of goods and services by non-established suppliers. Only 
slightly  less  respondents  agreed  or  at  least  partly  agreed  with  extending  the  OSS  to  intra-
Community supplies and acquisitions of goods, and to B2B supplies of goods and services, together 
with  the  introduction  of  a  deduction  mechanism  into  the  OSS.  The  latter  was  in  fact  the  most 
popular option among economic operators. More than half of the answers indicated that they agree 
with  the  options  of  making  reverse  charge  available  for  all  B2B  supplies  carried  out  by  non-
established suppliers, and with removing the EURO 150 threshold for the IOSS. Two more options 
were at least partly agreed by a majority: to extend the OSS to B2B supplies of goods and services 
but  leaving  the  current  VAT  refund  mechanism  in  place  and  making  the  IOSS  mandatory  for  all 
distance sales of imported goods. The former, however, was not supported by economic operators. 
The options of making the IOSS mandatory either for all distance sales of imported goods above a 
certain  threshold  or  for  marketplaces  only  did  not  find  agreement  among  a  majority  of  the 
responding stakeholders. 

69 

 
  
Figure 8 – Options for VAT registration (OSS and IOSS): stakeholders’ views 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

Extension of OSS to cover all B2C
supplies of goods & services by non-
established suppliers

Extension of OSS to enable intra-
Community supplies & acquisitions of
goods

Agree

Partly agree

Neither agree nor disagree

Partly disagree

Disagree

113

18

38

20

27

10

111

19

36

23

24

21

6

4

7

8

0

0

1

3

1

1

0

5

3

1

2

4

2

2

1

1

0

0

3

23

8

6

5

7

0

1

0

1

3

2

0

7

2

1

1

7

2

2

1

9

1

1

0

3

Extension of OSS to B2B
supplies of goods & service but
leaving in place current VAT
refund mechanism

48

32

14

13

39

12

15

6

4

1

2

9

4

4

9

9

5

1

6

11

6

4

2

11

12

1

6

1

0

5

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

Extension of OSS to B2B supplies of goods &
services, while also introducing a deduction
mechanism into the OSS

Reverse charge made available for all B2B
supplies carried out by non-established
suppliers

Agree

Partly agree

Neither agree nor disagree

Partly disagree

Disagree

101

15

26

26

26

21

11

7

7

6

2

2

1

5

6

2

2

2

1

2

1

7

0

1

1

8

1

2

0

2

76

37

15

6

11

10

23

6

2

2

4

9

5

1

0

18

10

3

1

1

18

10

3

1

5

7

2

2

1

1

Removing the €150 threshold for IOSS

80

21

16

4

11

15

22

17

19

5

4

0

3

6

2

1

3

5

2

3

1

3

8

0

2

7

2

0

0

2

70 

 
 
 
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

Tot.

PI

BF

EO

SP

O

Making IOSS mandatory for all
distance sales of imported goods

Making IOSS mandatory for all 
distance sales of imported goods 
above an EU turnover threshold (e.g: 
€10,000)

Agree

Partly agree

Neither agree nor disagree

Partly disagree

Disagree

43

18

24

12

20

8

3

3

0

7

12

3

8

4

3

8

5

3

4

4

12

5

8

4

3

3

2

2

0

3

33

23

24

15

21

7

5

1

4

3

9

7

8

4

3

6

6

5

2

5

9

3

9

3

7

2

2

1

2

3

Making IOSS mandatory for the
marketplaces (deemed supplier)
only

30

15

27

8

28

7

3

4

0

5

9

1

10

3

3

5

5

3

3

8

7

4

7

2

8

2

2

3

0

4

6.4.Policy intervention – gradual approach 

Even if some options were discarded, the total number of remaining valid options in the three areas 
still allows for hundreds of possible combinations.  

Therefore,  the  sub-policy  options  in  each  areas  are  combined  in  five  successive  approaches  for 
further  analysis  of  their  combined  impacts.  These  approaches  are:  status-quo,  minimalistic, 
moderate,  enhanced  and  maximal.  With  the  exception  of  the  status-quo  which  represents  the 
baseline,  each  approach  is  progressively  increasing  the  intensity  of  the  intervention,  thus  also 
helping to strike the right balance in terms of proportionality and subsidiarity. The logic behind the 
grouping was to gradually raise the intensity of the intervention in each of the VAT policy areas: 
reporting,  treatment  of  platform  economy  and  registration  compared  with  the  preceding  choice. 
Since  the  VAT  registration  area  has  two  components,  OSS  (intra-EU)  and  IOSS  (outside  EU/ 
importation), the intervention started with the intra-EU component (OSS), and was then extended to 
the IOSS. 

In addition, combining the various sub-options can produce synergies. For example, the OSS VAT 
registration sub-option 4 requires the use of a reverse charge mechanism. Such a system, where the 
customer accounts for the VAT on its VAT return instead of the supplier, can be enhanced by the 
provision  of operational data to  tax administrations to  reassure them  of  its good functioning.  The 
same data that will be made available by the  introduction of digital  reporting requirements (VAT 
reporting options 4a and 4b) can also be used for that purpose. Therefore, the combination of such 
sub-options in VAT registration and VAT reporting areas generates greater impacts than the sum of 
their separate effects. 

71 

 
 
 
“Status-quo”  

VAT reporting Sub-option 1: 
No  measure  to  harmonise  the  DRRs  is  introduced  at  EU  level.  The  introduction  of  mandatory  e-
invoicing remains subject to a derogation, and recapitulative statements are not modified. 

VAT treatment of platform economy Sub-option A: 
No  legislative  intervention  to  revise  the  VAT  Directive  and  Implementing  Regulation  will  be 
proposed to address the problems identified regarding the platform economy.  

VAT registration Sub-option 1 (OSS) and Sub-option 1 (IOSS): 
This  would  leave  in  place  the  VAT  system  as  of  1 July  2021,  with  only  minor  refinements  (e.g. 
additional guidance, quick fixes) to improve the implementation of the OSS and IOSS.  

 “Minimalistic approach”  

VAT reporting Sub-option 2:  
Under this sub-option, the introduction of DRRs remain optional  for Member States whilst  being 
encouraged  for  those  Member  States  with  a  significant  VAT  Gap  or  evidence  of  VAT  frauds136, 
provided  that  the  new  system  conforms  to  the  EU  design.  The  core  elements  of  the  EU  design 
which  Member  States  are  invited  to  consider  are  described  in  a  non-binding  recommendation.  In 
parallel, the requirement for a derogation to introduce mandatory e-invoicing is removed. Member 
States  can  thus  choose  any  reporting  mechanism  they  deem  fit.  Recapitulative  statements  are  not 
modified.  

VAT treatment of platform economy Sub-option B: 
Clarifying the current VAT treatment of the platform economy. The nature of the services provided 
by the platform and their place of supply will be clarified and a rebuttable presumption on the status 
of providers of services using a platform will be introduced.  

VAT registration Sub-option 2 (OSS): 
An extension of the OSS so that it covers all B2C supplies of goods and services by non-established 
suppliers.  This  option  would  address  the  problem  of  multiple  VAT  registration,  but  only  in  a 
limited number of market sectors, particularly electric vehicle charging, supplies of goods made on 
board  means  of  transport  and  certain  companies  operating  in  border  regions.  This  would  entail  a 
minor increase in the scope of the OSS. The IOSS will remain unchanged. 

 “Moderate approach” 

VAT reporting Sub-option 3:  
Under this option, no EU DRR is imposed; rather, a new provision would be included in the VAT 
Directive requiring taxpayers to record transactional data according to a pre-determined format.  

VAT treatment of platform economy Sub-option C:  
Under the deemed supplier options, the platform would be deemed to be the supplier, and liable to 
collect and charge the VAT in cases where the provider does not charge VAT. A narrow deemed 
supplier  regime  would  apply  to  the  supply  of  certain  accommodation  and  transport  services  (i.e. 
short term residence renting, ride-on-demand) for monetary consideration. 

136 Possibly via the European Semester, and supported by the Commission (e.g. via DG REFORM programmes) 

72 

 
                                                 
Certain  elements  from  the  Sub-option  B  regarding  clarification  of  the  existent  VAT  treatment 
should also be included or adapted, for example, new rules for the place of supply of the platform’s 
facilitation services and a presumption determining the status of the provider using the platform.  

VAT registration the “Minimalistic approach” + Sub-option 4 (OSS):  
It will add that Member States shall provide for the possibility of reverse charge for B2B supplies 
by non-established persons. The IOSS will remain unchanged. 

“Enhanced approach” 

VAT reporting Sub-option 4a: 
A DRR is  introduced for intra-EU transactions  and the recapitulative statements  are  abolished137. 
The introduction of a DRR for domestic transactions remains optional for Member States. Member 
States wishing to introduce such a mechanism shall ensure that it conforms to the system used for 
intra-EU  transactions.  For  Member  States  where  a  DRR  for  domestic  transactions  is  already  in 
place,  interoperability138  with  the  intra-EU  digital  reporting  is  required  in  the  short-term,  and 
national DRRs are required to converge to the EU system in the medium-term. 

VAT treatment of platform economy Sub-option D: 
A sectoral deemed supplier regime would apply to the supply of all accommodation and transport 
services for monetary consideration. This also includes those elements from sub-option B described 
in the moderate approach.  

VAT registration “Moderate approach” + Sub-option 3 (OSS) + Sub-option 3a (IOSS):  
Extension of the OSS so that it covers all B2C supplies of goods and services by non-established 
suppliers and the transfer of own goods  cross-border combined with the introduction of a  reverse 
charge  for  B2B  supplies  by  non-established  persons.  The  optional  character  of  the  IOSS  will  be 
removed for the deemed suppliers combined with additional data exchange prior the importation.  

“Maximal approach” 

VAT reporting Sub-option 4b: 
A DRR is introduced for intra-EU and domestic transactions alike, and the recapitulative statements 
are  abolished.  For  Member  States  where  DRR  for  domestic  transactions  are  already  in  place, 
interoperability with the intra-EU digital reporting is required in the short-term, and national DRRs 
are required to converge to the EU system in the medium-term. 

VAT treatment of platform economy Sub-option E: 
Under  this  option,  the  deemed  supplier  regime  would  apply  to  all  services  for  monetary 
consideration.  This  also  includes  those  elements  from  sub-option B  described  in  the  moderate 
approach 

137    The  change  in  the  data  reported  on  intra-EU  transactions  will  consequently  change  the  way  these  data  are 
exchanged  between  Member  States.  The  IT  services  of  the  European  Commission  conducted  a  feasibility  study  in 
consultation  with  the  Member  States  to  determine  the  best  option  to  implement  such  exchange.  Three  main  options 
were assessed (i) a Central System with data fed by economic operators (ii) a Central System with data fed by Member 
States and (iii) a Distributed System (an enhanced VIES system). The Central System with data fed by Member States 
appears to be the most future-proved solution. The implementation would require minimum 18 months but on average 
25 months. 
138 Interoperability is the capacity to extract and exchange among Member States a pre-defined set of basic transactional 
data in a common format. 

73 

 
                                                 
VAT registration “Enhanced approach” + Sub-option 2 (IOSS): 
Extension of the OSS so that it covers all B2C supplies of goods and services by non-established 
suppliers and the transfer of own goods  cross-border combined with the introduction of a reverse 
charge  for  B2B  supplies  by  non-established  persons.  Both,  the  EUR 150  threshold  for  use  of  the 
IOSS and its optional character will be removed combined with additional data exchange prior the 
importation. 

74 

 
 
 
7.  HOW DO THE OPTIONS COMPARE? 

7.1.Evaluation criteria and the gradual approach 

The  options  are  assessed  and  compared  with  regard  to  their  effectiveness,  efficiency  and 
coherence.  Because  the  approaches  include  a  mix  of  policy  options  in  three  areas  of  VAT 
(reporting, platform economy and registration), the synergies are also mentioned, where applicable. 
In addition, the proportionality and subsidiary are also taken into account for the full evaluation 
(see Table 17):  

Effectiveness 

The  specific  objectives  against  which  the  effectiveness  is  evaluated  are  (1)  to  improve  reporting 
requirements to unlock the opportunities provided by digitalisation; (2) to promote convergence and 
interoperability  of  IT  systems;  (3)  to  create  a  level-playing  field  for  businesses,  regardless  of  the 
business  model;  (4)  to  reduce  burdens,  regulatory  fragmentation  and  associated  costs;  and  (5)  to 
minimise the need for multiple VAT registrations in the EU.  

Table 15 – Effectiveness table 

Effectiveness (specific objectives) 

Improve reporting 
requirements 

Convergence and 
interoperability of 
IT systems 

Create a level-
playing field 

Reduce burdens 
and fragmentation 
costs 

Minimise multiple 
VAT registrations 

Minimalistic 
approach 

Moderate 
approach 

Enhanced 
approach 

+ 

0/+ 

++ 

Maximal approach 

+++ 

Efficiency 

0/+ 

0 

+++ 

++ 

0/+ 

+ 

++ 

++ 

+ 

+ 

++ 

++ 

0/+ 

+ 

++ 

++ 

To measure the efficiency (cost-effectiveness) of policy sub-options in each area, a combination of 
net benefits and scoring system was used to denote the nature and scale of impacts in comparison to 
the  continuation  of  the  status  quo  for  all  policy  sub-options  in  the  areas  of  VAT  reporting,  VAT 
treatment of platform economy and VAT registration. A score of 0 indicates no or only marginal 
change. The scale ranges from ‘much worse’ (---) to ‘much better’ (+++). 

Table 16 – Efficiency table (against baseline) 

Impacts 

Sub-option 

VAT revenue, and burdens (net 
impacts compared to the 
baseline) 

Sub-option 2 

0/+ (EUR 16.5 billion) 

Sub-option 3 

+ (EUR 27.5 billion) 

Sub-option 4a 

++ (EUR 139 billion)  

Sub-option 4b 

+++ (EUR 231.1 billion ) 

VAT reporting 

Environment 

Tax control 

Business 
automation 

Data 
confidentiality 

+ 

0/+ 

++ 

+++ 

0/+ 

+ 

+ 

++ 

–  

+ 

– – 

– – – 

0 

0 

+ 

+ 

75 

 
 
 
 
 
 
Impacts 

Sub-option 

VAT revenue139 

Legal certainty and 
administrative burdens 

Competition / Internal Market 

Sub-option B 

0/+ (EUR 2.5 - 2.6 billion) 

VAT treatment 
of platform 
economy 

Sub-option C 

+ (EUR 19 - 45 billion) 

Sub-option D 

++ (EUR 24 - 66 billion) 

Sub-option E 

+++ (EUR 63 - 146 billion) 

++ 

+ 

+ 

0/+ 

+ 

+ 

+ 

0 

Impacts 

Sub-option 

Sub-option 2 

Sub-option 3a 

Sub-option 3b 

Sub-option 3c 

Sub-option 2 

Sub-option 3 

VAT 
Registration 
(OSS) 

(IOSS) 

Coherence 

Administrative burdens 

VAT fraud and compliance 
levels 

Functioning of the Single 
Market 

+ 

++ 

0/+ 

++ 

+ 

0/+ 

0/+ 

+ 

0 

+ 

0/+ 

+ 

+ 

++ 

0/+ 

++ 

0/+ 

+ 

Other Commission initiatives (see Annex 5) either do not impact the coherence or translate into a 
minimal impact on the VAT in the Digital Age initiative. Therefore, the coherence with EU policy 
objectives  is  assessed  against  the  provisions  of  the  Tax  Action  Plan,  more  specifically  against 
Actions A1, A4, A5, and A23 (see the Introduction). 

The comparison of the options is made using the aforementioned five gradual approaches in policy 
intervention: status-quo as a baseline, minimalistic, moderate, enhanced and maximal. The gradual 
approach  is  used  to  ensure  the  intervention  does  not  go  beyond  what  is  necessary  to  achieve  the 
objective. 

7.2.Policy comparison 

“Status-quo”  

The “status-quo” approach is analogous to no intervention. This approach fails to meet all specific 
objectives. It also fails the coherence objectives, since it is not aligned with the Tax Action Plan. 

“Minimalistic approach”  

Effectiveness in meeting the specific objectives 

The  minimalistic  approach  does  not  improve  reporting  requirements  in  a  systematic  way.  The 
recapitulative  statements  that  are  the  main  source  of  the  ineffective  reporting  system  are  not 
modified. Some positive impacts are possible due the non-binding recommendations addressed to 
Member States  with  significant  VAT Gap levels. The  IT systems  are already running  and  do not 
need further preparation, since also the scope of OSS changes is limited and can be easily absorbed 
by  the  current  system.  Clarifications  in  the  platform  economy  add  some  certainty  and  reduce 
burden  but  fail  in  addressing  the  distortion  of  competition.  An  extension  of  the  OSS  so  that  it 
covers  all  B2C  supplies  of  goods  and  services  by  non-established  suppliers  would  address  the 

139  An  alternative  approach  of  calculating  net  present  value  for  the  costs  related  to  the  VAT  treatment  of  Platform 
economy would require additional assumptions regarding the time of bearing the costs, as well as assuming the pace of 
their depreciation. In the light of many uncertainties regarding the development of the platform economy, to limit the 
number of assumptions, a simpler approach has been retained. 

76 

 
 
 
                                                 
problem of multiple VAT registration, but only in a limited number of market sectors. No synergies 
and/or multiplication factors manifest.  

Coherence and efficiency  

The  approach  is  only  partly  coherent  with  the  Tax  Action  Plan,  since  it falls  short  in  four  action 
areas  of  the  Plan:  A1,  A4,  A5,  and  A23.  The  cumulative  impact  in  efficiency  (see  Table  17)  is 
minimal,  however  marginally  positive  in  all  areas,  bringing  EUR 16.5  billion  net  benefits  from 
VAT reporting, approx. EUR 2.5 billion in platform economy area 

“Moderate approach” 

Effectiveness in meeting the specific objectives 

The moderate approach still limits the ambition levels in all areas. However, the approach has the 
merit  of  allowing  convergence  and  interoperability  of  IT  systems  and  it  is  the  first  one  to  score 
more consistently across all specific objectives. Thus, some savings in administrative burdens are 
expected, however they will be combined with a more limited effect on VAT revenue as the DRRs 
are  still  optional  for  the  Member  States.  The  approach  reduces  the  distortions  between  the  same 
services offered via different channels in platform economy area, thus creating a more level-playing 
field, but adds new legal uncertainties linked to the limits of its application, since only part of the 
accommodation  and  transport  sectors  are  in  the  scope.    The  combination  of  VAT  registration 
minimalistic  approach  with  the  reverse  charge  (including  the  chain  transactions  into  the  scope) 
helps  generating  positive  impacts  for  more  business  that  will  not  have  to  register  in  multiple 
Member States.  

Synergy factor 

Because the moderate approach combines clarification elements from platform economy sub-option 
B  with  the  deemed  supplier  regime  and  also  combines  multiple  sub-options  in  area  of  VAT 
registration, it punches above the added impacts by integrating some synergies. However, because 
the digital reporting obligations are not introduced which would complement the reverse charge, the 
synergies are more limited.  

Coherence and efficiency  

The moderate approach achieves the minimum operational efficiency in all areas of the Tax Action 
Plan, except A4140. It streamlines the mechanisms that can be applied for domestic transaction using 
a  pre-determined  format,  but  does  not  provide  a  quicker,  possibly  real-time,  and  more  detailed 
exchange  of  information  on  VAT  intra-EU  transactions.  However,  the  cumulative  impact  in 
efficiency is largely positive compared with the previous approach  and it is mainly driven by the 
introduction  of  a  limited  deemed  supplier  role  in  platform  economy  area  that  increases  the  VAT 
revenue  several  times  (EUR 19-45 billion).  The  net  benefits  almost  double  compared  with  the 
previous approach in the VAT reporting area and amounts to EUR 27.5 billion.  

140 “(…) it should ensure a quicker, possibly real-time, and more detailed exchange of information on VAT intra-EU 
transactions and at the same time streamline the mechanisms that can be applied for domestic transactions. (…)”. 

77 

 
                                                 
“Enhanced approach”  

Effectiveness in meeting the specific objectives 

The enhanced approach further increases the ambition level and the intensity of intervention in all 
areas.  With  the  introduction  of  intra-EU  digital  reporting  (VAT  reporting  Sub-option 4a),  over 
2 billion intra-EU transactions per year141 are to be considered.  

The  convergence  and  interoperability  of  IT  systems  specific  objective  is  met  by  introducing  the 
short-term  interoperability  and  medium-term  convergence  of  the  domestic  reporting  obligations 
with the EU DRR system. The interoperability and convergence combine with the non-inclusion of 
the  removal  of  EUR 150  threshold  for  the  use  of  IOSS  that  would  further  complicate  the  IT 
environment  and  lead  to  a  maximum  score  regarding  the  IT-specific  objective.  The  IT  specific 
objective also has an inherent time-related component: this enhanced approach will reach the fastest 
the full convergence and interoperability for the Member States who have domestic DRRs in place 
or  planned.  Because  of  the  introduction  of  an  intra-EU  digital  reporting  obligation,  the  enhanced 
approach is the first one to fulfil the improvement of reporting requirements using the opportunities 
provided  by  digitalisation  specific  objective.  The  benefits  are  driven  mostly  by  higher  VAT 
revenue, but the savings for businesses due to reduced burdens and improved business automation 
also  contribute  to  the  positive  impacts.  The  introduction  of  an  EU  DRR  and  the  wider  and  more 
targeted use of DRR for domestic transactions  (being optional,  it is  expected that Member States 
with high VAT Gap or with specific fraud issues will be the first ones to use it) will also positively 
impact tax controls and business automation, especially if an e-invoicing solution is adopted, while 
the increased storage and exchange of fiscal data increases risks to data confidentiality.  

In the platform economy field, the enhanced approach addresses the distortion of competition in the 
accommodation and transport sectors where the problems where identified. In addition, it achieves 
a  good  balance  in  dealing  with  burdens  related  to  (1)  the  administration  of  the  deemed  supplier 
regime  (2)  legal  uncertainties  linked  to  the  boundaries  of  the  new  system  and  (3)  limiting  the 
possible new distortion between very small and occasional suppliers within or outside a platform to 
these two sectors.  

In the VAT registration area, combining the OSS sub-option 4 with 3a would maximise the likely 
positive  impacts,  by  extending  the  OSS  to  transfers  of  own  goods  cross-border,  and  relying 
pragmatically  on  the  reverse  charge  for  wider  B2B  transactions.  In  addition,  the  removal  of  the 
optional  character  of  IOSS  for  deemed  suppliers  will  remove  administrative  burdens  for  certain 
actors, such as postal operators and express carriers, helping the authorities identify fraud, increase 
compliance and, as a consequence, improve the level playing field.  

Synergy factor 

The enhanced approach helps create greater synergies not only inside the VAT areas (mixing parts 
of and sub-options in reporting, platform economy and registration), but the multiplication effect is 
visible across the areas, by combining the reverse charge with the reporting obligations that are now 
in the scope. Thus, the synergy score is significantly improved. 

141 Estimate based on figures from the study on evaluation of invoicing:  
https://ec.europa.eu/taxation_customs/system/files/2019-07/report_evaluation_invoicing_rules_vol1_en.pdf 

78 

 
                                                 
 
Coherence and efficiency  

The enhanced approached is better balanced to achieve the coherence in all areas of the Tax Action 
Plan, without exception. It provides a quicker and more detailed exchange of information on VAT 
intra-EU  transactions  and  offers  a  very  important  and  targeted  incentive  for  Member  States  to 
introduce domestic reporting. 

Additional EUR 139 billion net benefits in VAT reporting area are expected, and VAT revenue will 
increase by EUR 24-66 billion due to increased compliance and a broader tax base in the platform 
economy. Driven mainly by the introduction of digital reporting obligations, the cumulative impact 
in efficiency increases several times compared with the previous approach. 

 “Maximal approach”  

Effectiveness in meeting the specific objectives 

The maximal approach increases the intervention to the maximum extent possible. The majority of 
the specific objectives are fully met, with the exception of the IT-related one. The extension of the 
digital  reporting  requirements  to  include  domestic  transactions  dramatically  increases  the  number 
of  transactions  and  the  IT-related  burdens  for  tax  authorities  and  businesses.  In  principle,  IT 
demand regarding the introduction of a DRR for intra-EU transactions should be lower than those 
necessary  to  apply  the  requirements  to  both  intra-EU  and  domestic  transactions.  This  may  be 
especially  true  for  operating  costs,  which  are  more  closely  linked  to  the  number  of  transactions 
processed, but less so for investment costs.  

Moreover, the maximal approach includes the elimination of the EUR 150 threshold for the use of 
the IOSS (VAT registration IOSS sub-option 2) wich also has a significant impact on customs, even 
more  prominent  when  linked  with  the  abolition  of  the  threshold  also  for  the  customs  duties.  The 
inclusion  has  an  additional  negative  impact  on  the  IT-related  specific  objective  that  adds  to  a 
similar  negative  impact  on  the  same  specific  objective  linked  with  the  possible  adoption  of  the 
domestic digital reporting obligations 

The  benefits  are  driven  mostly  by  higher  VAT  revenue,  but  the  savings  for  businesses  due  to 
reduced  burdens  and  improved  business  automation  also  contribute  to  the  positive  impacts.  The 
introduction of an EU DRR and the wider use of DRR for domestic transactions will also positively 
impact tax controls and business automation, especially if an e-invoicing solution is adopted, while 
the increased storage and exchange of fiscal data increases risks to data confidentiality.  

In  the  platform  economy  field,  the  maximal  approach  solves  the  identified  distortion  of 
competition.  It  deals  better  with  the  burdens  related  to  the  legal  uncertainties  linked  to  the 
boundaries of the new system but worsens the burdens related to the administration of the deemed 
supplier regime. It is increasing the possible distortion among very small and occasional suppliers 
within or outside a platform.  

In  the  VAT  registration  area,  the  maximal  approach  further  expands  the  scope  by  including  the 
removal of the EUR 150 threshold, thus adding marginal benefits. 

The synergy score is similar with the enhanced option. 

79 

 
Coherence and efficiency  

The  maximal  approach  has  the  highest  cost  and  also  displays  superior  net  benefits.  In  VAT 
reporting area the benefits amount to EUR 231 billion. VAT revenue will also increase by EUR 63-
146 billion due to  the extension  of the scope of deemed supplier broadening the base in  platform 
economy. Driven by the introduction of domestic digital reporting obligations and the extension of 
the scope in platform economy, the cumulative impact in efficiency takes a step further compared 
with the previous approach. 

Proportionality and subsidiarity 

Under  the  minimalistic  approach  the  action  taken  are  subpar  and  they  do  not  meet  the  minimum 
needs  to  achieve  the  goals.  The  moderate  approach  observes  better  the  proportionality  and 
subsidiarity, however it still falls short. The enhanced approach is the better balanced one, while the 
maximal  approach  is  pushing  the  limits  of  proportionality  and  subsidiarity.  The  stakeholder 
consultation  pointed  to  the  fact  that  the  maximal  approach  is  more  uncertain  from  a  political 
feasibility point of view, having in mind the general rule in the European treaties that EU Member 
States  must  agree  tax  proposals  unanimously  before  they  can  be  adopted.  The  stakeholder 
consultation  indicates  that  at  least  in  the  area  of  VAT  reporting,  where  some  Member  States 
strongly  expressed  their  preference  for  optional  domestic  DRRs,  and  in  the  platform  economy, 
where the possible distortion and network effects manifest in specific areas,  reaching the level of 
ambition required by the maximal approach could be challenging.  

To summarise, the minimal and moderate approaches  are the lowest hanging fruits, the enhanced 
approach is balanced, although cautious, and the maximal approach is very ambitious. 

 Table 17 – Comparison of gradual policy intervention  

Effectiveness 

Efficiency 

Coherence 

Synergy factor 

Proportionality 
and subsidiarity  

Minimalistic approach 

Moderate approach 

Enhanced approach 

Maximal approach 

0/+ 

0/+ 

++ 

++ 

0/+ 

+ 

++ 

+++ 

 – 

0/– 

++ 

++ 

0 

0/+ 

++ 

++ 

0/+ 

+ 

+++ 

++ 

Table 18 – Comparison of policy intervention: total net benefits (2023-2032) 

Costs 
(EUR billion) 

Benefits 
(EUR billion) 

Net benefits 
(EUR billion) 

Average 
benefit/cost 
ratio 

Average benefit/cost 
(proportionality 
factor included) * 

Minimalistic approach 

Moderate approach 

2.9 

6.4 

31.1 – 31.2 

28.2 – 28.3 

10,6 

62.1 – 88.1 

55.7 – 81.7 

11,7 

Enhanced approach 

13.5 

185.6 – 227.6  172.1 – 214.1 

15,4 

10.6 

11.7 

46.1 

80 

 
 
 
 
Maximal approach 

46.9 

350.3 – 433.3  303.3 – 386.3 

8,3 

16.7 

*  A  multiplication  factor  of  1,  2,  and 3  (see  corresponding  column  in  Table  17)  was  used  to  amend  the  benefit/cost 
ratios to better account for proportionality and subsidiarity  

8.  PREFERRED OPTION(S) 

From the comparison, it can be concluded that the best policy choice results from the introduction 
of  digital  reporting  requirements  (EU  DRR),  combined  with  a  deemed  supplier  provision  and  an 
extension of the scope in VAT registration. This points to the maximal and enhanced approaches.  

The  enhanced  approach  introduces  an  EU  DRR  for  intra-EU  transactions  with  an  option  for 
Member States to introduce this system for domestic transactions and a deemed supplier regime in 
the accommodation and transport sectors in the platform economy. It also entails the modification 
of VAT registration by extending the coverage of OSS to all B2C supplies, extending the reverse 
charge  to  B2B  supplies  and  making  the  IOSS  mandatory.  The  maximal  approach  goes  one  step 
further  by  including  mandatory  domestic  DRR,  a  deemed  supplier  regime  in  all  sectors  of  the 
platform economy and also removes the EUR 150 threshold for the use of IOSS.  

The maximal and the enhanced approaches are effectively addressing all specific objectives of 
improving  reporting  requirements  to  include  digital  opportunities;  providing  a  level  playing  field 
for  businesses;  ensuring  convergence  and  interoperability  of  IT  systems;  reducing  burdens, 
regulatory  fragmentation  and  associated  costs;  and  minimising  the  need  for  multiple  VAT 
registrations.  

The  most  significant  expected  benefits  are  from  the  options  that  cover  the  greatest  proportion  of 
these  situations.  Both  the  maximal  and  enhanced  approaches  have  a  wide  coverage,  hence  the 
greatest potential benefits. For example, in the VAT registration area where the focus is more on 
the issue of ‘high administrative and compliance costs’, the sub-options for OSS and IOSS mainly 
differ  in  terms  of  the  scope  of  the  situations  currently  triggering  multiple  VAT  registrations  that 
would be addressed. However, for a business to benefit from any change, it would need to avoid all 
situations  that  still  require  additional  VAT  registrations.  In  other  words:  even  if  99%  of  the 
transactions of a business currently requiring VAT registration could be dealt with using the OSS or 
via the reverse charge, it would still need to register for VAT for the remaining 1%, meaning that 
the availability of the OSS would hardly affect its administrative burdens. Having this in mind, the 
greatest coverage of the enhanced and maximal approaches address the issue. 

There is no clear single preferred option for the following reasons:  

1.  The  maximal  approach  scores  highest  in  efficiency:  between  2023  and  2032  it  will  bring 
between  EUR  303  billion  and  EUR  386  billion142  (net  impacts  against  baseline),  compared  to 

142 EUR 231 billion (VAT reporting), EUR 63 to 146 (VAT treatment of platform economy) and EUR 9 billion (VAT 
registration) 

81 

 
 
                                                 
between EUR 172 billion and EUR 214 billion143 for the enhanced approach. The difference will 
certainly be lower due the fastest adoption of domestic DRRs by the Member States.144 From the 
cost-benefit  analysis  without  including  any  potential  risks,  the  maximal  approach  should  be  the 
obvious choice.   

2.  If  in  terms  of  efficiency  the  maximal  approach  is  a  clear  winner,  adding  the  effectiveness  and 
especially proportionality and subsidiarity criteria tips the balance towards the enhanced approach. 
More precisely, the enhanced approach respects to a greater degree the principles of subsidiarity 
and proportionality. For example, Member States will have the possibility to decide at a national 
level  whether 
the 
to 
interoperability with the EU solutions).  

introduce  domestic  reporting  requirements, 

(whilst  ensuring 

Box 3 (cont.) 

Implementation of an EU DRR: difference between options 4a and 4b (Part II) 

In the VAT reporting, the enhanced approach is restricted to the introduction of a  mandatory EU DRR for intra-EU 
transactions, leaving the domestic DRR optional, while the maximal approach foresees the introduction of mandatory 
DRRs for both intra-EU and domestic transactions (Table 11). It should be noted that the mandatory implementation 
of  the  EU  DRR  for  intra-EU  transactions  (this  affects  both  option  4a  and  4b)  would  make  much  easier  the  future 
adoption of a DRR system for domestic transactions, given that all Member States will have already in place the IT 
developments necessary to receive and process the data from the taxpayers. Therefore, the extension of the EU DRR 
to domestic transactions would be a logical following step. 

Another  factor  is  that  certain  Member  States  drew  the  attention  to  the  possibility  that  the  adoption  of  DRRs  by  a 
majority  of  Member  States  could  create  an  incentive  for  fraudsters  to  target  those  Member  States  which  have  not 
adopted such systems. That would push for a generalised adoption of a DRR system for domestic transactions. 

Therefore, it can be concluded that the difference between options 4a and 4b relies more in the pace of adoption of 
DRRs for domestic transactions than on the number of Member States that will adopt such systems. The trend points 
to a scenario where, in the medium-long term, all Member States will have an EU DRR for domestic and intra-EU 
transactions, irrespective of the choice made between options 4a and 4b. 

3. The enhanced approach follows the targeted consultation more closely, therefore making any 
gains  politically  feasible.  Member  States  strongly  indicated  during  targeted  consultations  and  in 
various forums that they value a higher degree of freedom regarding the introduction of domestic 
digital  reporting  obligations  and  manifested  the  strong  support  for  a  more  moderate  intervention. 
Moreover, they were equally concerned about the impacts of a wide deemed supplier regime on the 
sector as a whole, and indicated that it should begin with a more targeted approach, approving the 
Commission’s suggestion of introducing it into the transport and accommodation sectors.  

143 EUR 139 billion (VAT reporting), EUR 24 to 66 (VAT treatment of platform economy) and EUR 9 billion (VAT 
registration) 
144 Between the moment of the VAT in the Digital Age supporting study and the publication of the Impact Assessment, 
the conservative assumptions made regarding the  Member States having in place a DRR for domestic transactions in 
the medium term under VAT reporting option 4a compared with option 4b (Table 11) are changing as Member States 
are either publicly announcing their intention to introduce domestic DRRs or asking for the derogation currently needed 
to introduce digital reporting requirements. 

82 

 
                                                 
A final word should be said on the compatibility of the enhanced and maximal approaches. If 
the maximal approach is a best case scenario, the enhanced approach is a self-standing viable set of 
measures that can be extended in scope in the future depending on aspects such as (1) the further 
evolution  of  the  drivers,  e.g.  platforms  that  may  become  dominant  and  impose  their  specific 
business model, and (2) the evolution of IT solutions, thus being ready for the VAT in the digital 
age  now  and  fit-for-future.  For  instance,  Member  States  that  do  not  adopt  a  DRR  for  domestic 
transactions  immediately,  could  implement  it  once  the  DRR  for  intra-Community  transactions  is 
consolidated  and  businesses  progress  towards  automation,  fully  achieving  in  the  long  term  the 
benefits on VAT fraud reduction estimated for the maximal approach.  

8.1.REFIT (simplification and improved efficiency) 

VAT  in  the  Digital  initiative  will  fully  compensate  the  costs  of  its  implementation;  however,  the 
different parts of the initiative act differently in this regard: VAT reporting comes with additional 
costs  and  possible  cost  reductions,  platform  economy  and  VAT  registration  are  mainly  reducing 
costs. The Fit for Future Platform included VAT in the Digital Age in its annual work programme 
for  2022,  recognising  its  potential  for  reducing  the  administrative  burden  in  the  policy  field.  The 
evidence produced by the Platform informed the impact assessment, as explained below. 

The Platform’s evidence pointed out to the need of avoiding additional registration through change 
of VAT rules on processing in another Member State before exporting and extension of the VAT 
One-Stop-Shop to the transfer of own goods. The need to minimise the number of instances where 
a  business  has  to  register  in  other  Member  States  than  its  Member  State  of  establishment  is 
accounted for in the preferred options under the VAT registration. Also, the aspect of e-invoicing 
features in the preferred options on VAT reporting. From a taxation point of view, interoperability 
would be ensured by accepting invoices issued according to the European e-invoicing standard that 
is already in place, and the best solution is to combine flexibility with standardisation. 

While  the  registration  process  is  under  national  responsibility,  the  preferred  option  on  VAT 
registration  (OSS,  IOSS)  addresses  as  well  the  Platform’s  call  for  a  more  efficient  registration 
process by proposing solutions for VAT registration in a way that will limit the number of instances 
where businesses have to register and deal with tax administrations of other Member States.  

By  removing  the  optional  character  of  the  IOSS  for  deemed  suppliers,  one  of  the  measures 
proposed  will  indirectly  limit  the  number  of  mistakes  made  by  businesses.  This  is  done  by 
transferring certain responsibilities towards the platforms and hence lowering the risk of businesses 
receiving heavy penalties. This is also an aspect brought up by the Fit for Future Platform evidence 
pointing out to changing rules on VAT exemptions for services related to the importation of goods. 

The introduction of a DRR could generate net costs for businesses, especially for those operating 
purely domestically, these could be partly compensated by the introduction of additional services, 
such as the pre-filling of VAT return, as well as by the removal of recapitulative statements. 

The removal of recapitulative statements alone does not compensate for the higher costs associated 
with the introduction of digital reporting in the maximal approach. Therefore, to fully compensate 
the remaining costs, possible solutions would be:  

83 

 
 
 

 

Introducing  or  promoting  the  introduction  of  support  measures  for  investments  in  IT 
systems,  such  as  support  to  the  purchase  of  e-services  for  complying  with  the  new 
requirement145, and/or 
Introducing other simplification measures. For instance, once the tax authority receives all 
transactional data from the digital reporting, it may consider that VAT returns are no longer 
necessary,  thus,  in  the  medium-to-long-term,  VAT  returns  could  become  an  optional 
obligation, at least for Member States which have implemented a DRR for all transactions.  

In  the  platform  economy  area,  the  disparate  reporting  obligations  introduced  by  several  Member 
States at national level  will certainly  be removed, because a deemed supplier regime makes them 
obsolete and transforms them in a redundant burden for businesses and tax administration alike. 

In the VAT registration area, the costs generated by the  need to VAT register for distance sellers 
will be eliminated almost completely.   

Under the one-in-one-out (OIOO) principle, the Commission committed to offset new burdens from 
legislative proposals by reducing existing burdens in the same policy area, so that negative impacts 
for  businesses  are  limited.  The  offset  concerns  administrative  burdens  and  not  necessarily 
adjustment costs (e.g. the investment needed to upgrading production lines, reducing damage to the 
environment, improving public health or raising the level of consumer or worker protection), and 
the  one-in-one-out  table  below  includes  adjustment  costs  (which  do  not  need  to  be  off-set  and 
administrative costs (that will have to be off-set) and are more of recurrent nature. 

Table 19 – One-in-one-out comparison table (enhanced/maximal approach) 

ADMINISTRATIVE COSTS – IN 
(2023-2032, EUR billion) 

ADMINISTRATIVE COSTS – OUT 
(2023-2032, EUR billion) 

One-off 

Recurrent 

One-off 

Recurrent 

Costs related to the 
introduction of DRRs 

3.77 / 14.5 

Reduction of costs 
generated by 
fragmentation   
Environmental benefits 
from the introduction of 
DRRs 
Savings from pre-filled 
VAT returns 
Removal of 
recapitulative 
statements 

24.2 

0.01 / 0.02 

4.3 / 7 

11 

E-invoicing benefits 

1.9 / 14.5 

Compliance and the 
status of providers 
determination 

0.5 

VAT 
reporting 
(DRRs) 

Platform 
economy 

VAT 
registration 
Reflecting  the  high  and  growing  level  of  automation,  most  of  the  costs  of  digital  reporting 
requirements fall in the one-off (set-up) category. Unlike other DRRs such as the listings or SAF-T, 

VAT registration in 
another Member State 

0.4 

8.3 

145 This could for instance be done as a support to business digitalisation within the National Plans for Resilience and 
Recovery, as already anticipated by Spain to support the switch to mandatory e-invoicing. 

84 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
the  e-invoice  does  do  not  serve  exclusively  for  the  purpose  of  reporting  obligations  i.e.  the  e-
invoicing is largely used today without any obligation as a measure of automation/efficiency gain; 
thus, they are generally adjustment costs. The one-off costs represent approx. two-thirds of the total 
costs. The costs are higher for larger companies than for smaller ones due to the complexity of their 
internal systems and the number of transactions and their diversity. There is also an inverse relation 
between  one-off  and  recurring  implementation  costs,  so  that  companies  that  invest  more  upfront 
have lower recurring expenses, and vice versa.146 

Finally, since the digital reporting obligations and the deemed supplier regime introduced at the EU 
level  are  harmonised,  it  will  reduce  the  administrative  burden  derived  from  multiple  divergent 
domestic obligations created by national authorities. However, the Commission cannot control the 
removal of national obligations, but is contra intuitive to think such obligations will be maintained. 
Moreover,  in  the  targeted  consultation  the  Member  States  having  in  place  similar  obligations 
declared  they  are  in  favour  of  an  EU  already  indicated  that  on  one  hand,  they  are  thinking  to 
remove similar national obligations. 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

In line with the Tax Action Plan and following, inter alia, the views of stakeholders, the measures 
grouped  under  VAT  in  the  digital  age  initiative  are  to  be  introduced  progressively  via  legislative 
steps  by  amending  the  VAT  Directive  2006/112/EC,  supplementing  the  Council  Implementing 
Regulation  (EU)  No 282/2011  and  Council  Regulation  (EU)  No 904/2010  on  administrative 
cooperation.  The  measures  are  expected  to  contribute  to  better  VAT  collection  and  control,  to 
improve fairness and reduce burdens.  

Table 20 – Monitoring and evaluation framework 

Objectives 

Indicator 

Measurement tool 

Operational objectives 

Better VAT collection, 

control and fairness 

- VAT revenue (VAT 

- VAT revenue data 

- Improved efficiency in VAT 

collection) 

- VAT gap 

(Eurostat) 

compliance: min. EUR 134 billion / 

- VAT gap study and 

EUR 284 billion (enhanced 

- MTIC fraud 

other specific studies 

approach/maximal approach) net 

(e.g. ‘MTIC/e-

positive impact on EU VAT revenues 

commerce fraud VAT 

(2023-2032) 

gap’ studies currently 

-  Positive trend in VAT Gap – up to 

under consideration) 

4 percentage points decrease, (to 

- Data provided by the 

approx. 6.5% including the baseline) 

Member States 

until 2032 

- Substantial decrease of MTIC fraud 

(approx. 80% decrease at EU level) 

Excessive burdens and 

- Compliance costs 

- Study to estimate the 

- Min. 20% reduction of compliance 

146 Supporting study, Vol. I, p. 43-44, p. 54 

85 

 
 
 
                                                 
compliance costs 

for businesses 

compliance costs 

costs in cross-border trade for 

- Data and feedback 

businesses subject to the measures 

provided by the 
business via VEG147 

Implementation 

Indicator 

Measurement tool 

Operational objectives 

DRR 

- DRR health check  

- Number, frequency 

- Reducing the reporting time from 

and completeness  

up to 2-4 months to less than 5 days  

Platform Economy 

- Platform Economy 

- Data from platform 

- Platforms managing VAT 

providers (provided 

obligations for their users 

by VEG and Member 

States) 

VAT registration 

statistics (flow of 

OSS and IOSS 

revenues between Member States 

- OSS/IOSS 

- Real time reports in 

- Better re-distribution of VAT 

revenue) 

9.1.Monitoring structures 

The  VAT  Committee,  an  advisory  committee  on  VAT  issues  in  which  representatives  of  all 
Member States participate and which is chaired by Commission officials from Directorate General 
Taxation and  Customs Union  (DG TAXUD), will monitor the implementation  of the VAT in  the 
Digital  Age  initiative,  discuss  and  clarify  possible  interpretation  issues  between  Member  States 
regarding the new legislation. It is also envisaged that the Standing Committee on  Administrative 
Cooperation  (SCAC)  will  deal  with  all  possible  issues  regarding  administrative  co-operation 
between Member States resulting from the new rules on the taxation of intra-EU trade. In case new 
legislative developments are required, the Group on the Future of VAT (GFV) and the VAT Expert 
Group (VEG)148 might be further consulted. 

9.2.Evaluation 

Member States and the Commission shall examine and evaluate the functioning of the VAT rules 
provided  for  in  the  new  legislation.  To  that  purpose,  Member  States  shall  communicate  to  the 
Commission any relevant information as regards the level and the evolution of the administrative 
costs,  MTIC  fraud  and  the  OSS  and  IOSS  data  necessary  for  the  evaluation  of  the  effectiveness, 
efficiency, coherence with other interventions with similar objectives, and continued relevance of 
the  new  legislation.  The  evaluation  should  also  seek  to  collect  input  from  all  relevant  business 
stakeholders as regards the level and the evolution of their compliance costs. The Commission will 
prepare a retrospective evaluation of the functioning of the new legislation five years after its entry 
into force.  

147 VAT Expert Group – see explanation in Annex 1. 
148 For more explanation on GFV and VEG see Annex 1: Procedural information. 

86 

 
 
 
 
                                                 
87 

 
 
 
10. FIGURES AND TABLES OVERVIEW  

Figure 1 – Problem tree .................................................................................................................... 13 
Figure 2 – VAT reporting: stakeholders’ views on current situation ............................................... 18 
Figure 3 – Current situation: the need of multiple VAT registrations is still an issue ..................... 24 
Figure 4 – Effectiveness of recapitulative statements against MTIC fraud (Member States) ........... 29 
Figure 5 – Intervention logic ............................................................................................................. 51 
Figure 6 – Options for VAT registration (DRRs): stakeholders’ views ............................................ 67 
Figure 7 – Options for VAT treatment of platform economy: stakeholders’ views........................... 68 
Figure 8 – Options for VAT registration (OSS and IOSS): stakeholders’ views .............................. 70 
Figure 9 – Targeted consultation – stakeholder coverage ................................................................ 95 
Figure 10 – Type of Respondent (Call for Evidence) ........................................................................ 97 
Figure 11 – Type of Respondent (public consultation) ..................................................................... 98 
Figure 12 – Digital Reporting Requirements in the EU .................................................................. 142 
Figure 13 – Problem tree (VAT registration).................................................................................. 149 
Figure 14 – Linking the objectives to the problem .......................................................................... 149 
Figure 15 – E-commerce deployment map of 23 March 2022 ........................................................ 155 
Figure 16 – Estimated number of (cross-border) e-commerce consumers in the EU, 2014-2029 . 157 
Figure 17 – Estimated volume of cross-border e-commerce in the EU, 2014-2029 ....................... 158 
Figure 18 – MOSS Total Revenues 2015-2020 ............................................................................... 159 
Figure 19 – VAT revenue collected in the OSS between 1 July 2021 and 31 December 2021 ....... 163 
Figure 20 – Total of VAT amounts declared via OSS/IOSS (1/07/2021 to 31/12/2021) ................. 166 

Table 1 – Minimum VAT-related costs of cross-border trade for businesses (EUR) ........................ 21 
Table 2 – Transactions requiring non-established businesses to VAT register (1 July 2021) .......... 23 
Table 3 – Overview of the drivers ..................................................................................................... 25 
Table 4 – Scale of platform economy operation, by sectors (EU27, EUR billion, 2019) ................. 26 
Table 5 – Medium-term adoption scenarios ...................................................................................... 36 
Table 6 – Dynamic baseline: adoption of Digital Reporting Requirements (2023 – 2028).............. 37 
Table 7 – Description of the policy sub-options by VAT area .......................................................... 43 
Table 8 – Overview of impact types by VAT area (reporting, platform economy, registration) ....... 52 
Table 9 – Impacts in VAT reporting area by policy sub-option (net impacts, 2023-2032) ............... 55 
Table 10 – VAT reporting: net impacts on VAT revenue and burdens (2023-2032) ........................ 56 
Table 11 – Option 4a: Adoption of Digital Reporting Requirements (2023-2032) .......................... 59 
Table 12 – Administrative burdens by category and type; net impacts, EUR per year; ranges ....... 60 
Table 13 – Main impacts in VAT treatment of platform economy area ............................................ 62 
Table 14 – Main impacts in VAT registration area ........................................................................... 65 
Table 15 – Effectiveness table ........................................................................................................... 75 
Table 16 – Efficiency table (against baseline) .................................................................................. 75 
Table 17 – Comparison of gradual policy intervention .................................................................... 80 
Table 18 – Comparison of policy intervention: total net benefits (2023-2032) ................................ 80 
Table 19 – One-in-one-out comparison table (enhanced/maximal approach) ................................. 84 
Table 20 – Monitoring and evaluation framework ............................................................................ 85 
Table 21 – Sample for the targeted consultation............................................................................... 93 
Table 22 – Consultation strategy ...................................................................................................... 93 
Table 23 – Targeted consultation – geographical coverage ............................................................. 95 
Table 24 – Country of residence or main headquarter (Call for Evidence) ..................................... 95 
Table 25 – Country of residence or main headquarter (public consultation) ................................... 98 

88 

 
 
 
Table 26 – Variables and Descriptive Statistics (econometric model) ........................................... 122 
Table  27  –  Baseline  approach  model  estimates:  C-efficiency  quarterly  data  (econometric  model)
 ......................................................................................................................................................... 124 
Table 28 – Alternative approach model estimates: VAT Gap annual data (econometric model) .. 125 
Table 29 – Baseline approach model estimates with lags and leads: C-efficiency quarterly data . 126 
Table  30  –  Baseline  approach  model  estimates  with  lags  and  leads  of  distinguished  types  of 
reporting obligations: C-efficiency quarterly data ......................................................................... 127 
Table 31 – Type of DRRs: multi-criteria analysis ........................................................................... 132 
Table  32  –  VAT  digital  reporting  obligations:  annual  administrative  burdens  per  company 
(EUR/year) ...................................................................................................................................... 132 
Table 33 – VAT digital reporting obligations: implementation costs for tax authorities ............... 133 
Table 34 – Administrative burdens from recapitulative statements ................................................ 136 
Table  35  –  Share  of  companies  active  in  intra-EU  trade  and  annual  burden  from  recapitulative 
statements ........................................................................................................................................ 136 
Table 36 – Burden savings from pre-filled VAT return ................................................................... 136 
Table 37 – Number of invoices issued in the EU (million per year) ............................................... 137 
Table 38 – Parameters to estimate the benefits from e-invoicing (per e-invoice issued) ............... 137 
Table 39 – Estimated amount of taxable persons potentially covered by the EU DRR (domestic and 
intra-EU transactions)..................................................................................................................... 138 
Table 40 – Annual administrative burdens per multinational subsidiary (EUR/year) ................... 139 
Table 41 – Number of registrations in OSS/IOSS on 1 February 2022 .......................................... 167 
Table 42 – OSS/MOSS – Comparison of the number of registrations ............................................ 168 
Table 43 – OSS/MOSS – Comparison of the VAT declared on an annual basis............................. 168 

89 

 
 
 
11. ANNEX 1: PROCEDURAL INFORMATION 

11.1. 

Lead DG, Decide Planning/CWP references 

Lead Directorate-General: Taxation and Customs Union (TAXUD) 

Decide Planning Reference: PLAN/2021/11943  

CWP references: The initiative is included in the Commission Work Programme 2022 (listed under 
No 20 in CWP Annex)149  

11.1.1. Organisation and timing 

Organisation  and  timing  of  Inter  Service  Steering  Group’s  meetings:  the  Inter  Service  Steering 
Group  included  representatives  of  the  Directorates  General  BUDG,  COMP,  CNECT,  DIGIT, 
ECFIN,  EMPL,  ESTAT,  FISMA,  GROW,  JRC,  JUST,  MOVE,  OLAF,    REFORM,  TAXUD, 
TRADE, the Legal Service (SJ) and the Secretariat General (SG and SG-RECOVER). 

  1st Meeting on 3 December 2021: to discuss the Consultation strategy, the Call for evidence 

and Questionnaire for the Public Consultation 

  2nd  Meeting  on  31 March  2022:  to  discuss  the  first  draft  impact  assessment  related  to  the 

problem and objectives 

  3rd Meeting on 5 May 2022: to discuss the impact assessment including the impacts and the 

chosen solution.  

11.1.2. Consultation of the RSB 

The draft Impact Assessment was submitted to the Regulatory Scrutiny Board on 25 May 2022, for 
consideration  at  a  meeting  on  22 June  2022.  The  Regulatory  Scrutiny  Board  issued  a  positive 
opinion with reservations on 24 June 2022 (ARES(2022) 4634471). 

The board gave a positive opinion with reservations because it expects the following rectifications 
to be made:  

(1)  To  provide  sufficient  evidence  and  detail  of  the  identified  problems,  in  particular  in  terms  of 
Member State and sectoral perspectives. 

(2) To better set out the evidence base behind the expected impacts. To provide a clear description 
of the modelling behind the VAT revenue estimates and of the methodology used for estimation of 
costs and benefits in the scope of the One In, One Out approach. 

(3)  To  sufficiently  explain  the  future  configuration  of  the  options,  in  particular  the  expected 
structure  of  the  EU  digital  reporting  requirements  and  the  degree  of  flexibility  envisaged  for 
Member States. 

What to improve 

What was improved 

149 https://eur-lex.europa.eu/resource.html?uri=cellar%3A9fb5131e-30e9-11ec-bd8e-
01aa75ed71a1.0001.02/DOC_2&format=PDF  

90 

 
 
 
 
                                                 
(RSB suggestions) 

digital 

(DRR) 

(1)  The  problem  section  should 
more clearly outline the reasoning 
behind the problem scope as well 
as the urgency to act. It should set 
out  clearly  why  Member  States 
reporting 
with 
requirements 
apply 
different  methods  and  better 
explain why some Member States 
have  not  yet  introduced  DRR. 
the  VAT 
When 
platform 
treatment 
should 
economy, 
explain 
the 
identified problems are significant 
beyond 
for 
accommodation 
transport 
(such as finance, and professional 
services).  It  should  also  clarify 
what  drives  the  VAT  Gap  and 
how 
level 
quantitative 
provided was calculated.  

discussing 
of 
the 

to  what  extent 

the 
report 

sectors 

and 

the 

(2)  The  report  should  explain 
better  how  the  baseline  reflects 
the  other  ongoing  and  existing 
related  initiatives.  It  should  be 
to  what  extent  Member 
clear 
to 
expected 
States 
can  be 
similar 
introduce  DRR 
(and 
the 
in 
solutions)  domestically 
absence of further EU measures.  

on 

information 

(3)  The  report  should  provide 
more 
the 
methodology, 
underlying 
assumptions  and  sources  used  in 
the  impact  analysis.  It  should 
summarise  in  the  main  report  the 
aspects, 
key  methodological 
assumptions,  and  limitations.  It 

The reasoning was better outlined and the urgency to act was 
added  in  the  reasoning.  Additional  evidence  from  the 
supporting study was added, the link with the VAT Gap Study 
clarified.  More  evidence  from  previous  impact  assessments 
such as the one on definitive regime was included.  

A section explaining which Member States introduced DRRs 
was  added,  different  types  of  DRRs  explained  and  a  figure 
illustrating  the  distribution  of  DRRs in  the  EU was  added  in 
the  in  the  Annex  4:  Analytical  methods.  An  explanation  of 
why  some Member States have not  yet  introduced DRR was 
also provided. 

It  was  underlined  that  in  the  area  of  platform  economy  the 
problem  is  not  pregnant  for  some  sectors,  especially  for 
specific sectors such as finance and professional services. 

It was explained how the VAT Gap and VAT fraud are linked 
and why the VAT Gap was used as a proxy for fraud.  

The  econometric  model  based  on  panel  regression  method 
with  fixed  effects  was  described,  as  it  was  used  for  the 
estimation  of  VAT  revenues.  It  was  made  clearer  the 
distinction  between  the  theoretical  models  used  to  estimate 
VAT  revenues  (C-efficiency  and  VAT  Gap).  The  dynamic 
baseline  (attempting  to  anticipate  the  domestic  actions  and 
business  patterns  going  into  the  future)  was  also  accounted 
for.  

Apart  from  the  Annex  5:  other  initiatives,  a  specific  part 
related to other ongoing and existing initiatives was included 
in the main report. The link with the VAT in the Digital age 
was made clearer.    

A specific table referring to the adoption of Digital Reporting 
Requirements  was  introduced  for  baseline  (status  quo), 
together with the adoption scenarios used. 

 More  information  on  methodology  from  the  Supporting 
Study  and  Annex  4:  Analytical  methods  was  added  in  the 
main  report.  The  assumptions  and  sources  are  explicitly 
mentioned, or a reference to the supporting study was added. 
It  was  made  clear  that  the  C-efficiency  is  the  used  model 
(base model).  

A  presentation  of  the  VAT  Gap  and  C-efficiency  concepts 
(Box 5, Volume I, p. 37 of the supporting study) was added, 

91 

 
 
 
a 

provide 

should 
stronger 
connection  between  the  impacts 
presented  and 
the  underlying 
methodology.  It  should  be  clear 
how  the  two  econometric  models 
(C-efficiency  and  VAT  Gap)  are 
applied  across  the  analysis.  The 
same  metrics  should  be  used  to 
enable  better  comparison  of 
impacts.  The  report  should  better 
explain how different options will 
reduce the estimated VAT Gap.  

the  scale  of 

(4)  Given 
the 
presented  estimates  in  scope  of 
the  One  In,  One  Out  approach, 
the  report  should  provide  a  more 
detailed description of the method 
behind  the  estimates  and  clearly 
outline  the  metrics  (in  particular 
one-off versus recurrent costs). 

(5)  The  report  should  present  a 
more  final  outline  of  the  options 
and  the  sub-option  elements.  It 
should  clarify  to  what  extent  a 
future  harmonised  EU  DRR 
system is tied to a specific type of 
digital 
requirement, 
such  as  SAF-T  or  e-invoicing.  It 
should  also  be  clear  about  the 
future degree of flexibility for the 
Member  States.  It  should  clarify 
what  political  choices  exist  and 
present  their  differences  in  terms 
of costs and benefits. 

reporting 

(6)  The  report  should  strengthen 
the  comparison  of  options.  It 
should  present  the  net  benefits 
and  benefit  cost 
ratios  and 
compare  them  across  the  option 
packages,  including  in  terms  of 
proportionality. 

clarifying 
that 
explaining why.  

the  C-efficiency  model  was  used  and 

An explanation of what is the VAT Gap and how it works was 
added. The influence of the introduction of DRRs on the VAT 
Gap was determined by imputing the additional VAT revenue 
in  the  corresponding  figures  from  latest  VAT  Gap  Study:  an 
increase of revenues implies a reduction of the VAT gap if the 
VAT liability does not change.   

An  indicative  calculation  of  the  VAT  gap  reduction  was 
added in the baseline as well as in Table 10. 

The  methods  behind 
quantitative impacts under the description of impacts area.  

the  estimates  were  detailed  for 

The figures for One In, One Out and especially the one-off vs. 
recurrent were reviewed in the Section 8.1, a table was added 
in the same section. In addition, the Annex 3 was aligned and 
clarified.  

It was clarified in Box 1 why we chose the e-invoicing for the 
IA and what are the benefits of such approach.  

Moreover, the Box 1 also offers more details on what type of 
reporting will be implemented and an overview of the features 
of such system. 

A  table  presenting  net  benefits  and  cost  ratios  was  added  to 
strengthen the comparison of options. Moreover, the table also 
accounts  for  proportionality,  amending  the  ratios  by  using  a 
proportionality  factor  between,  1  and  3  on  the  basis  of  a 
proportionality score determined before.  

92 

 
 
 
 
 
 
 
(7)  The 
report  should  better 
present  the  views  of  different 
stakeholder  groups  in  the  main 
report,  for  example,  stakeholder 
views  on  VAT  treatment  of  the 
platform economy. It should more 
systematically 
the 
divergent  views  of  different 
the 
stakeholder 
groups 
their 
problems,  options 
impacts. 

on 
and 

present 

Stakeholders’ views were included in the report, especially on 
the problem  and  options and their impacts. Explanations and 
visuals  (graphs  and  figures)  were  added  in  the  main  report 
using  more  data  from  the  stakeholders’  consultation  (public 
and targeted).  On the options, a specific section (5.3) named 
‘Stakeholders’ views on the options’ was added.  

In addition, in the report (including in the new section added), 
the  views  of  different  stakeholder  are  presented  in  five  main 
individuals,  business  federations, 
groups,  as  suggested: 
economic  operators,  service  providers  and  others  (non-
specific, such as academia). 

11.1.3. Evidence, sources and quality 

Evidence used in the impact assessment came from a variety of sources, including:  

-  Targeted consultation with stakeholders and Member States. 
-  Public consultation and Call for Evidence150. Feedback period: 20 January to 5 May 2022. 
-  Meetings  of  the  Group  on  the  Future  of  VAT  (GFV)151  on  6 December  2021,  9 February 

2022 and 6 May 2022. 

-  Meetings of the VAT Expert Group (VEG)152 on 29 November 2021 and 10 June 2022.  
-  Nine  meetings  (between  January  and  July  2021)  of  the  GFV  and  VEG  subgroups  on  the 

“VAT aspects of the platform economy”.  

-  Technical  Study  “VAT  in  the  Digital  Age”  by  ‘Economisti  Associati’.  Final  Report 

Impact assessment for the VAT definitive regime154 
Implementing the ‘destination principle’ to intra-EU B2B supplies of goods155 

submitted on 1 April 2022. 
-  VAT Gap Study (2021)153 
- 
- 
-  Fiscalis events in May and October 2021 with Member States, businesses and stakeholders 
to discuss the Interim Report and the draft Final Report prepared by the external consultant.  
-  Eurofisc  meeting  with  Member  States  on  18  and  19 November  2021  to  discuss  the 
objectives and findings of the VAT in the Digital Age package, with special focus on DRR. 
-  Heads  of  CLO  (Central  Liaison  Office)  meeting  with  Member  States  on 28 April  2022  to 
discuss  and  deepen  the  reflection  of  the  Commission  on  the  DRR  part  of  the  VAT  in  the 
Digital Age package and its impact on exchange of information between the member States. 

-  Evaluation of the e-commerce package. 

150 https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13186-VAT-in-the-digital-age_en 
151 Taxud expert group composed of representatives from Member States https://ec.europa.eu/transparency/expert-
groups-register/screen/expert-groups/consult?lang=en&groupId=2609&fromMeetings=true&meetingId=24314 
152 Taxud expert group composed of businesses and tax practitioners https://ec.europa.eu/taxation_customs/news/vat-
expert-group-2016-05-23_en 
153  European  Commission,  Directorate-General  for  Taxation  and  Customs  Union,  Poniatowski,  G.,  Bonch-
report  2021,  Publications  Office,  2021, 
Osmolovskiy,  M.,  Śmietanka,  A.,  VAT  gap 
https://data.europa.eu/doi/10.2778/447556  
154 SWD(2017) 325 final  
155 European Commission, Directorate-General for Taxation and Customs Union, Jaras, T., Whittle, E., Patel, K., et al., 
Implementing the ‘destination principle’ to intra-EU B2B supplies of goods  feasibility and economic evaluation study : 
final report, Publications Office, 2015, https://data.europa.eu/doi/10.2778/216975  

the  EU: 

in 

93 

 
 
                                                 
12. ANNEX 2: STAKEHOLDER CONSULTATION (SYNOPSIS REPORT) 

12.1. 

Targeted consultation 

In  total  about  272  stakeholders  participated  to  consultation  activities,  including  25  during  the 
familiarisation  interviews  and  247  during  the  targeted  consultation.  The  Targeted  Consultation 
spanned  over  15  Member  States.  More  in  detail,  for  Part  1  and  Part  2,  the  sample  consists  of  12 
Member States each, resulting in nine core Member States, relevant to both Parts, as well as three 
Part-specific-countries. For Part 3, the sample is smaller, as it consists of ten Member States. The 
sample is shown in the table below. 

Table 21 – Sample for the targeted consultation 

Region 

Size 

VAT reporting 

Platform 
economy 

VAT registration  

1  Czechia 
2  Estonia156 
3  France 
4  Germany 
5  Hungary 
6 
Italy 
7  The Netherlands 
8  Poland 
9  Spain 
10  Portugal 
11  Greece 
12  Finland  
13  Austria 
14  Denmark 
15   Sweden 

CE 
CE 
NW 
NW 
CE 
S 
NW 
CE 
S 
S 
S 
NW 
NW 
NW 
NW 

M 
S 
L 
L 
S 
L 
M 
L 
L 
M 
M 
S 
S 
S 
M 

Notes.  NW:  North-Western;  CE:  Central-Eastern;  S:  Southern.  S:  Small;  M:  Medium;  L:  Large.  In  green:  Member 
States included in the part-specific samples; in dark blue: Member States not included in the part-specific samples. 

Given the multi-faceted nature of the Study, the consultation  strategy (shown in Table 22) had to 
identify  which  category  of  stakeholders  was  relevant  for  each  part  of  the  Study.  This  was  done, 
first,  to  ensure  that  the  necessary  primary  information  could  be  collected;  secondly,  to  limit  the 
burden on interviewees, by focusing the exchange on the themes that were most relevant to them.  

Table 22 – Consultation strategy 

VAT reporting 

Business Federations 

VAT treatment of Platform 
economy 
Business Federations 

VAT registration  

Business Federations 

156  Despite  contacting  a  very  large  number  of  local  business  federations  and  VAT  practitioners,  and  activating 
additional contacts within the Study team, it was not possible to enrol in the targeted consultation for Part 1 – Reporting 
requirements Estonian businesses. The businesses contacted provided several reasons, in particular the lack of sufficient 
resources  and  expertise.  Also,  differently  from  other  Member  States,  local  business  federations  could  provide  no 
support in reaching out to businesses, mostly due to their limited available resources and lack of specific expertise on 
the  subject  matter.    As  a  consequence,  no  data  could  be  obtained  on  the  costs  and  benefits  of  the  local  VAT  listing 
system.  To  address  this  data  gap,  the  Study  team  collected  primary  information  from  other  countries  (in  particular 
Czechia), multinational companies and services providers. As other sources pointed out that the costs and benefits of 
transactional  VAT  listing  systems  are  quite  similar  across  countries,  this  data  gap  did  not  affect  the  quality  of  the 
estimates. 

94 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
  General BFs 
  SME BFs 

  Digital BFs 

  General BFs 
  SME BFs (including local 

associations) 

Companies (only in Member States 
with digital reporting requirements) 
  Large 
  SMEs 
  MNCs 

VAT experts 

  Practitioners 
  Tax advisors 

Service providers 

  Pan-European 
  National (in Member States 
with reporting requirements) 
Tax Authorities 

  Via interviews in all EU-27 
(including non-sampled 
Member States) 

Platform operators 

Companies 

  E-commerce 
  Other industries 

VAT experts  
  Practitioners (lighter 

involvement, given legal 
mapping) 

  MNCs 
  Cross-border operators 
(including SMEs) 
VAT experts 

  Practitioners 
  Tax advisors 

Others 
  Customs authorities, brokers 

Tax Authorities 

Tax Authorities 

  Via interviews in all EU-27 
(including non-sampled 
Member States) 

  Via interviews in all EU-27 
(including non-sampled 
Member States) 

In total, 247 stakeholders participated in the targeted consultation.  

The Figure 9 provides an overview of the distribution per stakeholder groups. Businesses represent 
the most important category with 157 stakeholders, of which 15 platform operators and 15 service 
providers.  Company  interviews  were  complemented  with  those  with  business  federations  (27, 
including  7  SME  associations  and  7  digital  industry  federations)  and  VAT  practitioners  (33 
interviews). Among tax authorities, 15 interviews were carried out in the fieldwork Member States, 
and 12 written replies were received, therefore covering all  Member States. 

Figure 9 – Targeted consultation – stakeholder coverage 

BF - SME 7

BF -
Digital 7

Other 3

BF - General
13

Platform 
Operators 15

Service 
providers 15

Tax authorities
27

General 
businesses 127

VAT 
practitioners
33

In  terms  of  geographical  distribution  (shown  in  Table  23),  the  bulk  of  stakeholders  obviously 
originate  from  fieldwork  Member  States  (185).  This  figure  includes  71  stakeholders  from  Italy, 
where a business survey on the costs and benefits of the only e-invoicing system currently in place 
in  the  EU  was  carried  out  with  the  support  of  the  local  business  federation,  Confindustria.  In 
addition, 14 stakeholders came from non-sample Member States (mostly the local tax authorities) 

95 

 
 
 
 
 
 
and  another  interview  was  carried  out  with  the  Commission  services;  finally,  47  interviews 
involved multinational operators, including a number of non-EU based entities. 

Table 23 – Targeted consultation – geographical coverage  

MS 
AT 
CZ 
DE 
DK 
EE 
EL 

# Stakeholders 
5 
15 
12 
4 
4 
5 

MS 
ES 
FI 
FR 
HU 
IT 
NL 

# Stakeholders 
13 
6 
7 
9 
71 
4 

MS 
PL 
PT 
SE 
MNC 
Other 

# Stakeholders 
15 
10 
5 
47 
15 

Familiarisation  interviews.  An  initial  round  of  interviews  was  conducted  between  October  and 
December  2020  to  identify  the  most  important  issues  for  subsequent  examination  and  collecting 
broad insights on the topics covered by the three Parts of the Study, as well as to gather opinions on 
the likely impacts of possible policy interventions. Moreover, these interviews were functional for 
the  collection  of  suggestions  on  available  data  sources,  as  well  as  for  securing  support  by  EU 
umbrella organisations representing national-level stakeholders, which have been contacted during 
the targeted consultation. 

A total of 25 interviews were organised with public institutions and private stakeholders, following 
a  tailored  semi-structured  list  of  themes  and  questions  to  allow  sufficient  flexibility  during  the 
discussion.  The  Study  Team  also  took  part  in  two  focus  group  discussions,  namely:  (i)  one 
organised  within  the  framework  of  Business  Europe’s  VAT  Group  meeting;  and  (ii)  one  with 
certain  members  from  the  European  E-invoicing  Service  Providers  Association.  The  interviews 
conducted involved different categories of stakeholders, namely 10 EU-level business federations; 
six  institutional  stakeholders  (including  five  Commission  services  and  the  OECD),  three  VAT 
Practitioners or federations thereof; four providers of eVAT services or federation thereof, and two 
Economic Operators.  

12.2. 

Call for Evidence 

A  Call  for  Evidence  was  launched  on  20.01.2022,  together  with  the  Public  Consultation  and  it 
remained open until 05.05 2022, for a total of 15 weeks. A total of 322  responses were received, 
from 22 Member States and 7 non-EU countries.  

Table 24 – Country of residence or main headquarter (Call for Evidence) 

Geographical origin of 
respondent 

Germany  
Slovakia  
Austria  
Italy  
Slovenia 
Netherlands 
Czechia 
France 
Lithuania 
Poland 
Belgium 
Hungary 

Geographical origin of 
respondent 

Switzerland 
Croatia 
United States 
Canada 
Luxembourg 
Bulgaria 
Denmark 
Portugal 
Norway 
Romania 
United Kingdom 
Russia 

Number of 
respondents 
113 
62 
25 
22 
13 
13 
10 
10 
10 
8 
7 
3 

96 

Number of 
respondents 
2 
2 
2 
2 
1 
1 
1 
1 
1 
1 
1 
1 

 
 
 
Greece 
Latvia 
Sweden 

3 
3 
2 

Finland 
Philippines 
Total 

1 
1 
322 

The  vast  majority  (86%)  of  responses  came  from  citizens,  as  businesses  and  tax  administration 
preferred to answer via more structured channels: targeted and public consultation.  

Figure 10 – Type of Respondent (Call for Evidence) 

4

2

1 1

1

7

14

15

277

EU citizen

Company/business organisation

Business association

Other

Non-EU citizen

Public authority

Non-governmental organisation

Academic/research Institution

Consumer organisation

In  their  answers,  the  277  citizens  responding  to  the  Call  for  Evidence  were  almost  unanimously 
against the initiative. The reasons for rejection are (one or a combination of) the following:  

-  Respondents were rejecting any intervention  because they are generally against European 

Union;  

-  Respondents  are  against  any  form  of  digitalisation;  notably  and  out  of  the  scope  of  the 

consultation many declared themselves against the digital vaccination certificate 

-  Citizens are against taxation in general and VAT in particular, as they would prefer fewer or 
no taxes and especially consumption taxes such as VAT which they have to pay rather than 
being taken at source 

The businesses are generally welcoming the initiative. As mentioned, they generally preferred the 
more structured public consultation questionnaire for their feedback.   

12.3. 

Public consultation 

12.3.1. Overview 

The Public Consultation was launched together with the Call for Evidence. The Public Consultation 
was  structured  using  a  dedicated  questionnaire  consisting  of  71  questions157,  divided  into  four 
sections: one introductory section about the respondent’s profile, and three thematic ones dedicated 

157 This is not the number of questions posed to each respondent, as it includes duplications and filtered questions for 
respondents replying in different capacities.  

97 

 
 
                                                 
to  VAT  reporting,  VAT  treatment  of  Platform  economy  and  VAT  registration.  A  total  of  193 
responses were received, from 22 Member States and 5 non-EU countries. Questions targeted 
stakeholders’ views on the adaption of VAT rules to the digital age, the use of digital technology to 
fight fraud and to benefit businesses.  

The stakeholders could upload additional documents at the end of the PC, and 55 respondents did 
so. A total of 62 documents were uploaded, of which 24 addressed VAT reporting, 9 added to their 
responses  on  the  VAT  treatment  of  the  platform  economy,  and  14  delved  further  into  the  VAT 
registration. 18 stakeholders noted further  comments  on all three parts of the  public consultation. 
Belgian  and  German  stakeholders  were  the  most  active  in  uploading  further  documents,  with  18 
and  11  respondents  from  the  countries  doing  so,  respectively.  An  additional  10  documents  were 
added by stakeholders to the Call for Evidence.   

12.3.2. About the respondents 

The public consultation resulted in a total of 193 valid responses. The vast majority – 159 – of 
respondents  replied  to  the  public  consultation  in  their  professional  capacity  or  on  behalf  of 
their organisation, while 34 private individuals (PI) answered in their personal capacity. Among 
professional respondents, business organisation/federation was the largest category with 58 replies, 
followed by the categories of company  and VAT practitioner /  VAT expert /  tax advisor with  34 
and 30 responses respectively. A lower number of participants was recorded for the categories of 
company  –  platform  operator  (9),  self-employed  person  (1),  provider  of  IT  or  tax  compliance 
services (8), academic institution / think tank (2), public authority (5).  

For the most part of the following analysis, professionals have been grouped into four categories: 
(i) Business Federations (BF), (ii) Economic Operators158 (EO), Service Providers of Tax-Related 
Services159 (SP), and Others160 (O).  In certain instances, the distinction will be limited to PIs and 
Business Stakeholders (BS), the latter combining BFs, EOs, and SPs.  

Figure 11 – Type of Respondent (public consultation) 

70

60

50

40

30

20

10

0

Private
individuals

Business
federations

Economic
operators

Service
providers

Others

158  Combining  the  following  sub-groups:  (i)  company,  (ii)  company  –  platform  operators,  and  (iii)  self-employed 
person.  
159 Combining the following sub-groups: (i) VAT practitioner / VAT expert / tax advisor, and (ii) provider of IT or tax 
compliance services.  
160 Combining the following sub-groups: (i) academic institution / think tank, (ii) public authority, and (iii) others.  

98 

 
 
                                                 
Across all respondents, 22 Member States are represented in the PC. While private individuals 
answering  come  from  16  Member  States,  those  replying  in  their  professional  capacity  present  17 
different Member States. Overall,  the country with the highest number of replies is  Germany 
with a total of 54, followed by Belgium with 29 respondents (due to the fact that a number of pan-
EU organisation have their seat there). A considerable number of replies have also been registered 
from Italy (18), France (12), and Ireland (11). Non-EU countries are also prominently represented 
with 22 replies coming from outside the EU, namely from Brazil, Panama, Switzerland, the United 
Kingdom, and the United States. Among those, the United Kingdom shows the highest number of 
participants with 9. 

Table 25 – Country of residence or main headquarter (public consultation) 

Geographical origin of 
respondent 

Germany 
Belgium 
Italy 
France 
Ireland 
Netherlands 
Finland 
Sweden 
Poland 
Spain 
Czechia 
Greece 
Denmark 

Number of 
respondents 
54 
29 
18 
12 
11 
8 
6 
6 
5 
4 
3 
3 
2 

Geographical origin of 
respondent 

Malta 
Austria 
Bulgaria 
Croatia 
Cyprus 
Hungary 
Luxembourg 
Romania 
Slovak Republic 
Non-EU countries 
Total 

Number of 
respondents 
2 
1 
1 
1 
1 
1 
1 
1 
1 
22 
193 

Concerning  the  size  of  participating  companies,  respondents  represented  predominantly  large 
companies  with  250  employees  or  more  (33  replies,  i.e.  more  than  three  quarters  of  company 
respondents). Among the remaining companies, 3 responses were from micro companies with less 
than 10 employees, 5 from small-sized companies with 10 to 49 employees, and 2 from medium-
sized ones with 50 to 249 employees. 

12.3.3. VAT reporting (Digital Reporting Requirements) 

The first thematic part of the questionnaire deals with Digital Reporting Requirements (DRRs). It 
was open to all respondents, although certain questions were filtered according to the status of the 
respondent  or  preceding  questions.  The  section  deals  with  the  various  types  of  reporting  and  e-
invoicing requirements.  

Concerning the current situation, a majority of all stakeholders view negative impacts stemming 
from  the  current  situation  with  regards  to  DRRs.  Respondents  agreed  the  most  with  the 
statements  that  the  wide  discretion  left  to  Member  States  together  with  the  lack  of  EU  guidance 
result  in  a  fragmented  regulatory  framework  for  DRRs,  and  that  this  fragmented  regulatory 
framework  is  generating  unnecessary  costs  for  EU  companies  operating  cross-border.  Across  all 
stakeholder groups, more than 80% of respondents agreed or partly agreed with those statements. 
Among business federations and economic operators, the rate is even higher with over 90% stating 
they agree or at least partly agree. At a lower rate (65-70% agree or partly agree), respondents also 
agreed to the statements that the optional nature of DRRs for Member States have a negative impact 
on  the  fight  against  VAT  fraud  intra-EU  and  domestically,  respectively.  Here,  the  agreement  is 

99 

 
 
 
 
 
strongest  among  private  individuals,  economic  operators,  and  other  stakeholders,  while  business 
federations and service providers had ‘neither agree nor disagree’ as the most common single reply.  

As  for  recapitulative  statements  for  intra-EU  transactions,  around  half  of  the  respondents 
considered  them  at  least  partially  effective  in  fighting  intra-EU  fraud,  but  also  think  their 
effectiveness could be improved. Business federations found them less effective. Respondents did 
not  consider  recapitulative  statements  as  effective  in  fighting  VAT  fraud  as  domestic  DRRs.  A 
clear majority of stakeholders agreed or partly agreed that recapitulative statements would be more 
effective in fighting intra-EU fraud if data is collected on a transaction-by-transaction (rather than 
per  customer)  basis  and  closer  to  the  moment  of  the  transaction.  This  statement  generated 
marginally more disagreement from business federations and economic operators than from other 
groups.     

The  role  of  the  EU  in  fostering  the  adoption  of  reporting  and  e-invoicing  requirements  was 
considered  crucial  by  stakeholders.  Over  two-thirds  of  respondent  perceived  to  a  large  extent 
that  EU  action  is  necessary  in  ensuring  a  more  widespread  adoption  of  reporting  and  e-
invoicing requirements. This opinion was shared by a majority of respondents across all groups of 
stakeholders (only service providers perceived this to a more limited extent).    

When  asked  whether  the  EU  should  promote  uniform  DRRs  for  domestic  transactions  or  rather 
leave  Member  States  free  to  adapt  requirements  to  their  local  needs,  stakeholders  expressed  a 
strong  preference  for  the  EU  to  promote  uniform  DRRs  for  domestic  transactions.  Across 
both  private  individuals  and  business  stakeholders,  the  distribution  was  leaning  towards  DRRs 
being promoted at the EU-level, but private individuals showed a less pronounced preference in this 
direction compared to business stakeholders.  

In  the  case  of  an  EU  initiative  in  the  field  of  DRRs,  a  majority  of  stakeholders  agreed  on  the 
importance of its possible objectives. Across all groups, almost all respondents viewed it as very 
important or important that possible EU initiatives both foster the adoption of digitally-savvy 
DRRs, and reduce the fragmentation of DRRs.  

Of the suggested possible revisions, a majority of the stakeholders agreed, at least partly, to all of 
them. The revisions with the most support include:  

 

 

introduce  an  EU  DRR  for  intra-EU  transactions  and  harmonise  existing  systems  for 
domestic transactions (Sub-option 4a), and  
introduce an EU DRR for both intra-EU and domestic transactions (Sub-option 4b).  

Agreement  was  less  pronounced  for  recording  data  on  VAT  transactions  in  a  standard  digital 
format,  adopting  non-binding  Commission  recommendations  providing  a  common  design  for 
reporting obligations across the EU, and for no longer requiring Member States to have to ask for 
an  explicit  derogation  for  introducing  mandatory  e-invoicing  for  B2B  transactions.  For  the 
publishing  of  a  non-binding  recommendation,  the  disagreement  among  service  providers  and 
private  individuals  was  higher  than  for  other  groups.  Over  one-third  of  responding  economic 
operators disagreed at least  partly with  removing the need for an explicit derogation  for Member 
States to introduce mandatory B2B e-invoicing.    

100 

 
When  it  comes  to  exchanging  information  on  intra-EU  transactions  between  Member  States, 
stakeholders  were  fairly  split  between  preferring  a  decentralised  or  a  centralised  model161. 
Overall, a  centralised model showed the highest support, but,  if added together, the decentralised 
option  and  the  option  of  a  decentralised  model  with  additional  features  gained  more  consensus. 
Economic operators and service providers indicated a stronger support for a centralised model than 
others, while business federations preferred a decentralised one, ideally with additional features. 

In  assessing  the  risks  in  terms  of  data  protection,  respondents  viewed  the  centralised  model  as 
the  one  with  the  highest  data  confidentiality  risk.  A  decentralised  model,  possibly  with 
additional  features,  gathered  more  confidence  among  stakeholders,  with  around  two-thirds  of 
replies  assessing  the  risk  to  be  average  or  lower.  In  these  cases,  less  than  or  around  one  third  of 
respondents viewed the risk as high or very high. 

Rating  the  models  with  regards  to  their  interoperability  with  national  systems,  stakeholders 
assessed  the  interoperability  of  a  decentralised  system  as  more  difficult.  For  the  centralised 
model, stakeholders were fairly evenly split across their assessments, but more participants thought 
it would be easy or very easy to ensure interoperability. 

Concerning  existing  reporting  and  e-invoicing  requirements,  about  one-third  of  replies  come 
from  countries  with  reporting  or  e-invoicing  requirements  in  place.  Slightly  less  respondents 
live  or  operate  in  countries  that  have  such  requirements  planned.  Among  replies  coming  from 
countries with reporting or e-invoicing requirements in place, the effects for which a majority 
of  respondents  perceive  a  strong  or  moderate  intensity  were  (i)  significant  compliance  costs  for 
companies operating cross-border, (ii) a lack of support from tax authorities, and (iii) limited time 
to  handle  error  and  warning  messages.  In  particular  business  stakeholders  were  concerned  with 
compliance costs for cross-border operators.  

Significant compliance costs for the overall business population were reported by more than two-
thirds  of  respondents,  but  most  answers  assessed  the  intensity  of  this  effect  as  minor.  More  than 
half of the stakeholders considered that national DRR systems  do not allow for sufficient time to 
implement  changes  in  IT  systems,  or  feature  too  frequent  changes  to  requirements,  and  generate 
risks to the confidentiality of transaction and invoice data. Concerning those effects, more than one-
third of stakeholders thought it was too early to experience them, or they did not observe them at 
all.  

The compliance with existing reporting and e-invoicing requirements did not appear to be a 
significant  difficulty  for  a  majority  of  responding  stakeholders.  Around  one-third  of  the 
respondents said that complying with the requirements is either very difficult or difficult. Another 
third  viewed  the  compliance  as  neither  difficult  nor  easy.  Business  stakeholders  assessed 
compliance to be more difficult in comparison to other respondents.   

Confronted  with  outcomes  after  the  introduction  of  reporting  and  e-invoicing  requirements,  a 
majority  of  stakeholders  replied  that  significant  benefits  have  manifested.  A  majority  of 
responding stakeholders saw major or moderate benefits because of the promotion of structured e-

161 In this regard it should however be noted that, based on the evidence from  targeted questionnaires of consultation 
events  listed  under  11.1.3,  there  is  a  broad  preference  amongst  the  Member  States  tax  authorities  for  combining  the 
DRR  with  a  centralised  model  for  the  exchange  of  information  between  them  since  this  will  lower  the  IT  costs  for 
Member States, comes with common implementation of analysis and crosschecks, as well as common interpretation of 
results, all through automation. 

101 

 
                                                 
invoices, quicker invoicing processes, and business automation. Business stakeholders in particular 
viewed a quicker invoicing process as a beneficial outcome. Around one-third also assessed major 
or moderate benefits to come from quicker audits, but most participating stakeholders qualified it as 
being too early to tell. At least minor benefits were mentioned by one-third of respondents to come 
from fewer audits, fewer information requests, the pre-filling of VAT returns, and the removal of 
other VAT obligations, but the single answer provided most often for those four outcomes was that 
these  benefits  have  not  materialised.  Quicker  VAT  reimbursements  were  not  perceived  as  a 
significant benefit.  

For those stakeholders not established or resident in countries with reporting or e-invoicing 
requirements, all seven suggested possible outcomes were deemed likely after the introduction 
of reporting and e-invoicing requirements. Around two-thirds of respondents viewed a major or 
moderate  risk  of  the  following  outcomes  materialising:  significant  compliance  costs;  significant 
compliance  costs  for  companies  operating  cross-border;  insufficient  time  allowed  to  implement 
changes  to  IT  systems;  lack  of  support  from  tax  authority;  frequent  changes  to  requirements; 
limited time to handle error and warning messages; and risks to the confidentiality of data. Business 
stakeholders  were  most  concerned  about  the  risks  of  insufficient  time  to  implement  IT  system 
changes and a lack of support from tax authorities materialising.  

With regards to the expected difficulty of compliance, a majority thought that compliance with 
digital reporting and e-invoicing requirements is going to be very difficult or difficult. None of 
the respondents expected compliance to be very easy and only a marginal number of answers was 
assuming it is going to be easy.  

Concerning  possible  effects  of  the  introduction  of  DRRs,  major  or  moderate  benefits  were 
expected  to  materialise  for  all  nine  suggested  outcomes  by  a  majority  of  participating 
stakeholders.  The  most  positive  expectations  were  expressed  for  the  promotion  of  structured  e-
invoices,  for  quicker  invoicing  processes,  for  quicker  audits,  for  fewer  information  requests, 
removal of other VAT obligations, and for quicker VAT reimbursements, for which more than two-
thirds  of  replies  expected  major  or  moderate  benefits.  Around  two-thirds  of  respondents  also 
expected major or moderate benefits to manifest from business automation gains, fewer audits, and 
pre-filling of VAT returns.  

The additional comments provided to this section can be grouped under the following main themes: 

  There is an urgent need for an EU-level standard, which should be limited – at least at first – 
to  intra-EU  transactions.  At  the  same  time,  domestic  systems  should  share  an  obligatory 
basis to avoid further fragmentation. Existing models at the EU-level should be maintained 
and further developed for this purpose, namely the CEN Norm 16931.  

  The  granted  derogations  have  led  to  a  fragmented  situation  across  the  EU,  which  creates 
barriers for economic operators in entering markets in certain Member States. This creates 
particular  problems  for  SMEs.  Mandatory  e-invoicing  might  be  favourable  for  economic 
operators, as DRRs potentially require further administrative work.  

  SMEs  must  be  supported  when  it  comes  to  DRRs  and  e-invoicing,  for  example  through 

cost-free software or by allowing hybrid file formats.  

  The data to be submitted and stored should be kept to a minimum in order to reduce the risk 

to data confidentiality.  

12.3.4. VAT treatment of the Platform economy 

In the initial questions of this section, stakeholders answered about their usage of platforms in order 
to buy and sell goods. A majority of respondents use platforms to buy goods or services at least 

102 

 
once  or  twice  a  month.  Slightly  less  than  half  of  the  participating  stakeholders  replied  that  they 
buy goods or services via platforms several times per month. Around two-fifths also stated that they 
do not buy via platforms at all. Over two-thirds of participants purchase goods via platforms, 
while around half uses platforms to buy accommodation services and other services, and over 
one-third  to  buy  transport  services.  Moving  from  buying  to  selling  via  platforms,  the  vast 
majority  of  respondents  do  not  offer  goods  or  services  via  platforms.  More  than  a  quarter  of 
respondents offer goods or services via platforms at least once or twice per year. Of those supplying 
goods or services via platforms over half do so several times per week. Around two-thirds of the 
stakeholders state that they are supplying goods via platforms, while the supply of services is 
more fragmented. The most regular answer concerning the supply of services via platforms was 
‘other  services’,  which  are  supplied  by  about  half  of  the  respondents  using  platforms.  One-fifth 
replied that they offer transportation services via platforms. At a lower rate, participants indicated 
that they supply financial services, professional  and household services, accommodation services, 
and advertising / exchange of information services.   

When  supplying  goods  or  services  via  platforms,  a  vast  majority  of  business  stakeholders 
declared to be charging VAT on those supplies made via a platform. Among private individuals 
and other stakeholders selling goods or services via platforms the rate is significantly lower, as less 
than half replied that they charge VAT on such supplies.   

Concerning the absence of specific provisions in the VAT Directive dealing with the treatment of 
services  supplied  via  platforms,  two-thirds  of  responding  stakeholders  thought  that  this  is 
creating major or moderate problems for platforms and their users. Business federations and 
service providers viewed the situation as more problematic.   

More  than  two-thirds  of  respondents  reported  that  they  have  not  experienced  specific 
problems  concerning  the  VAT  treatment  of  services  supplied  via  platforms.  Among  those 
stakeholders that have stated that they offer goods or services via platforms, the share was slightly 
higher.  The  remaining  ones  mentioned  specific  issues  that  can  be  summarised  into  five  general 
problems: 

1)  Stakeholders  reported  difficulties  with  Member  States  applying  different  VAT  treatments, 
ranging  from  different  rates  over  different  treatment  of  electronically  supplied  and 
intermediary services to different thresholds for the application of VAT to SMEs.  

2)  Some  respondents  noted  having  experienced  problems  with  either  double-taxation  or  no-

taxation.  

3)  Problems  were  mentioned  concerning  the  definition  of  supplies,  the  status  of  the  supplier 

and customer, and the place of supply.  

4)  Problems arise due to the platform providers, for example because of a lack of appropriate 

invoicing from their side or because the wrong VAT rate is being applied by them. 

5)  Some  respondents  have  experienced  problems  when  dealing  with  non-EU  counterparts, 
such as uncertainty over whether VAT must be applied and what rate is correct to apply or 
that foreign entities must register in Member States.   

With  regards  to  specific  problems,  the  definition  of  when  providers  and  consumers  would 
qualify as VAT taxable persons is the most difficult issue. This result is particularly driven by 
the accommodation sector, where the issue was mentioned the most often. Across the five sectors, 
the question of determining the status of the service as to whether it is taxable or exempt (and taxed 

103 

 
at what rate) was noted as the least pronounced. This was viewed differently by stakeholders for the 
financial  services  sector,  where  it  was  in  fact  the  most  frequently  mentioned  issue.  For  transport 
services, the assessment of the consumer’s VAT status, which could define the place of supply in 
cross-border transactions, was the most indicated issue. Also often indicated across all sectors was 
the  issue  of  defining  whether  a  platform’s  services  should  be  classified  as  intermediation  or 
electronically supplied services. 

The  majority  of  stakeholders  shared  the  view  that  the  differences  in  VAT  treatment  across 
Member  States  has  led  to  them  experiencing  at  least  moderate  distortions  to  cross-border 
competition  with  other  firms  offering  the  same  services.  Responding  business  federations, 
economic operators, and service providers viewed those distortions as minor at a higher rate than 
private individuals and other stakeholders.    

Asked  about  competition  with  non-platform-supplied  services,  over  two-thirds  of  total 
respondents  said  they  experience  distortions  of  competition  with  other  domestic  firms 
offering  the  same  services  due  to  very  uneven  or  uneven  treatment  of  similar  services  and 
providers  in  their  Member  States.  This  experience  was  reported  most  strongly  by  business 
federations. Almost half of the responding economic operators did not see distortions due to uneven 
treatment at all.   

There does not emerge a clear consensus among the different stakeholders as to whether the current 
VAT  treatment  represents  an  important  driver  of  or  an  obstacle  to  the  digital  platform  business 
model. Economic operators said at a majority that the current VAT treatment is a strong or 
moderate  driver  of  the  digital  platform  business  model,  while  business  federations  were 
pretty  evenly  split.  Across  all  stakeholders,  slightly  more  participants  said  that  the  current  VAT 
treatment is a driver rather than an obstacle to the digital platform business model.   

Concerning  VAT  evasion  in  the  platform  economy,  about  three  quarters  of  respondents 
considered it a specific problem for the platform economy, for trade in either or both goods 
and  services.  Responses  coming  from  business  federations  show  a  different  assessment  of  the 
situation than the other stakeholder groups, as half of this group did not think that VAT evasion and 
avoidance represents a specific problem for the platform economy all together.   

The  need  for  changes  to  the  VAT  Directive  and  its  Implementing  Regulation  in  order  to 
ensure  proper  VAT  treatment  of  the  platform  economy  was  considered  necessary  by  a 
majority of all stakeholders. The different groups of stakeholders largely agreed on this question, 
and only among business federations those believing changes are necessary to a large or very large 
extent were in a slight minority.   

When provided with six different objectives for potential EU initiatives, a majority of respondents 
considered all six objectives as at least important. The objective with the highest importance is 
the simplicity of application, which was considered very important by more than three quarters of 
participants, and in particular by business federations. Around two-thirds of respondents considered 
it  very  important  that  potential  EU  initiatives  aim  at  reducing  costs  for  economic  operators, 
ensuring  a  level-playing  field  between  the  traditional  and  platform  economy,  and  ensuring 
harmonised  treatment  of  the  platform  economy  across  Member  States.  Slightly  less  highly  rated, 
but still significant, was the importance of ensuring a broad tax base and tax compliance.  

Clarifying  the  nature  of  services  provided  by  the  platform  was  the  most  supported 
intervention  across  different  stakeholders.  Over  two-thirds  also  at  least  partly  agreed  with 
initiatives  concerning  the  introduction  of  a  rebuttable  presumption  on  the  status  of  platform 
providers  and  the  streamlining  of  record-keeping  obligations.  The  latter  found  high  agreement 

104 

 
among  business  federations  and  economic  operators.  A  lower  support,  but  still  majoritarian, 
concerned  the  remaining  interventions,  namely  a  deemed  supplier  regime  for  digital  platforms, 
especially among business federations and economic operators.    

Stakeholders were asked about possible practical difficulties (for businesses or the public budget) 
due  to  the  suggested  legislative  interventions  at  the  EU  level.  For  each  of  the  interventions,  the 
responses can be summarised as follows:  

  Clarification of the nature of the services provided by the platform: Stakeholders noted that 
keeping  a  legal  clarification  up  to  date  with  the  business  ideas  and  offered  services  of 
platforms will be difficult or impossible; it was remarked that the nature of the service and 
distinction  between  an  intermediary  and  electronic  supply  of  service  cannot  always  be 
clearly defined 

  Rebuttable presumption on the status of the service provider using a platform: Respondents 
stated that presuming the VAT status of the service provider is difficult as even a taxpayer 
with a VAT ID might not be VAT taxable on certain transactions; other replies warned that 
this adds complexity for platforms and a simple and secure mechanism should be found. 

  Streamlining of record-keeping obligations: Some stakeholders were worried this would in 
fact  increase  costs  and  put  platforms  at  a  disadvantage  compared  to  non-platform 
businesses;  additional  difficulty  could  be  caused  by  difficulties  for  platforms  to  verify 
whether  the  underlying  service  provider  is  resident  or  non-resident;  some  responses  also 
indicated that problems with data protection regulations could occur.  

  Deemed supplier role for digital platforms: Respondents said that this creates difficulties for 
platforms as they become liable to charge and collect VAT in certain cases, a burden which 
might  be  unreasonable  for  purely  domestic  platforms;  there  is  also  a  worry  that  the 
platforms  would  shift  burdens  to  users  of  platforms  by  imposing  strict  conditions  and 
requirements,  a  problem  related  to  the  often  existing  power  imbalance  in  favour  of 
platforms;  some  stakeholders  also  thought  it  could  be  difficult  to  correctly  calculate  the 
VAT rate in some cases 

A majority of respondents said that the deemed supplier model would have at least moderate 
positive impacts on the equal treatment of the traditional and platform economy. Concerning 
the supply of certain accommodation and transport services (i.e. residence renting, ride on demand 
and  home  delivery  services),  around  three-quarters  of  stakeholders  thought  it  would  have  a 
moderate or major positive impact. Still over two-thirds had this view on a deemed supplier model 
for  the  supply  of  all  accommodation  and  transport  services.  Among  business  federations,  the 
responses  were  slightly  less  positive.  The  fear  of  at  least  moderate  negative  impacts  was  even 
higher  among  business  federations  for  a  deemed  supplier  model  for  all  services  for  monetary 
considerations.  

The additional comments provided to the VAT treatment of the Platform economy can be grouped 
into three main themes, which are the following: 

  Any  intervention  should  foster  a  level-playing  field  not  only  between  traditional  and 
platform economies, but also between platforms operating in different sectors and platforms 
of different  sizes. Requirements targeted  at  cross-border supplies could  cause unnecessary 
burdens on platforms with a domestic scope. Certain changes, such as using the ‘group of 4’ 
as a requirement for deemed supplier rules, might be impossible to apply in some sectors.  

105 

 
  The  platform  economy  has  been  addressed  by  other  initiatives  and  any  action  should  be 
aligned  with  those.  Stakeholders  recall  that  the  platform  economy  is  part  of  the  focus  of 
CESOP, DAC7, the eCommerce Directive, and ‘improving working conditions for platform 
workers’.  

  The platform economy is one dimension of an overall economy, and it should not be subject 
to  a  specific  VAT  regime.  Furthermore,  specific  digital  taxes  targeted  at  platforms  might 
undermine the Digital Single Market.  

12.3.5. VAT registration 

At  first,  participants  to  the  public  consultation  were  asked  about  their  view  on  the  importance  of 
some objectives to them or their organisation. Overall, all four suggested objectives were seen as 
very  important  by  a  majority  of  the  responding  stakeholders.  The  objective  with  the  highest 
importance was the simplification and facilitation of VAT compliance, particularly among business 
federations and economic operators. Business federations also rated the importance of minimising 
the need for taxable persons to hold multiple VAT registrations across the EU as more importantly 
than other respondents. Still over two-thirds of replies viewed it as important to reduce fraud and 
maximise  VAT  revenue,  and  to  modernise  VAT  rules  linked  to  VAT  registration  as  important 
objectives. 

When  asked  whether  the  launch  of  the  OSS  brought  progress  towards  those  objectives, 
stakeholders  believed  by  a  majority  that  the  OSS  has  led  to  at  least  moderate  progress 
towards  all  four  objectives.  The  most  significant  progress  due  to  the  OSS  was  towards  the 
minimisation of the need for taxable persons to hold multiple VAT registrations. The progress on 
the other objectives – the simplification and facilitation of VAT compliance, and the reduction of 
fraud and maximisation of VAT revenue – was seen less positively by economic operators than by 
others.  More  than  half  of  the  responding  economic  operators  saw  minor  or  no  progress  towards 
these objectives due to the launch of the OSS. 

The same question posed about the progress towards the objectives caused by the IOSS shows very 
similar results. More than half of the responding stakeholders thought that the launch of the 
IOSS  has  led  to  significant  or  moderate  progress  towards  all  four  objectives.  A  slightly 
different  outcome  was  visible  concerning  the  objective  to  modernise  VAT  rules  linked  to  VAT 
registration obligations for distance sales of goods, for which around one-fifth of answers assessed 
no or minor progress due to the IOSS launch.  

Stakeholders predominantly expressed their view that the OSS is at least mostly, if not very, 
consistent with other EU policies, requirements, and regulations in the four suggested fields 
(the  SME  strategy  for  a  sustainable  Europe,  the  European  digital  single  market,  and  the  EU 
administrative  cooperation  in  the  field  of  indirect  taxation).  In  particular,  replies  from  business 
federations  assessed the  consistency positively. The consistency was viewed slightly less  high by 
respondents when it comes the Union Customs Code.  

The  consistency  of  the  IOSS  with  EU  policies,  requirements,  and  regulations  in  the  listed 
fields was still assessed positively, but at a slightly lower level than for the OSS. The consistency 
with  the  SME  strategy  for  a  sustainable  Europe  and  the  European  digital  single  market  was  still 
appreciated  by  over  two-thirds  of  responses.  For  the  Union  Customs  Code,  around  half  of 
responding stakeholders thought the IOSS is very or mostly consistent with policies, requirements, 
and regulations in this area. The answers coming from economic operators valued the consistency 
less than other participants across all four fields, in particular for the Union Customs Code.  

106 

 
Around half of the participating stakeholders have direct experience with either IOSS, OSS, 
or both. About one-fifth stated that they only have experience with the OSS, about one-fourth with 
both  mechanisms,  and  only  a  very  small  amount  has  experience  only  with  the  IOSS.  The  most 
experience with the IOSS and OSS can be found among service providers.   

Many businesses confirmed that, thanks to OSS, they no longer need to maintain previously 
held VAT registrations in other Member States, and that the OSS is particularly helpful for 
SMEs.  Over  70%  of  stakeholders  held  this  view,  and  more  often  so  among  business  federations. 
The perception is less positive when it comes to whether the OSS has been implemented smoothly, 
a  view  which  was  shared,  at  least  partly,  by  less  than  50%  of  stakeholders.  Among  economic 
operators, more than half of respondents did not consider that OSS is allowing businesses to pursue 
new customers and/or markets, and that it is easy to use the OSS. Private individuals, on the other 
hand, did not agree by a majority that the OSS helps to reduce discrepancies in the application of 
VAT rules in the EU.      

Among  the  factors  determining  whether  businesses  use  the  OSS  or  not,  the  types  of 
transactions the business is engaged in and the Member States in which they would otherwise 
face VAT registrations obligations were noted as the most important. The importance of these 
two  factors  is  especially  underlined  by  the  responding  business  federations.  The  size  of  the 
business,  the  sector/market  where  the  business  operates,  and  whether  the  business  is  a  deemed 
supplier were still seen as a very important or important factor by over 70% of those stakeholders 
providing  a  response.  Slightly  less  importance  was  assigned  to  the  Member  States  in  which  the 
business is established, but a majority of replies still qualifies this at least as important.   

The stakeholders considered that the IOSS is making it easier for businesses to engage in new 
transactions which would require them to register in other Member States. Around one-third 
of  respondents  agreed  with  this  statement  and  another  third  partly  agreed.  Agreement  was 
especially  high  among  replies  from  business  federations,  but  considerably  lower  from  economic 
operators.  Over  two-thirds  of  participating  stakeholders  agreed  or  partly  agreed  that  the  IOSS 
improves VAT compliance. Still a majority  agreed at least partly that the IOSS is simplifying the 
process of importation for low-value consignments, that it is particularly helpful for SMEs, that it 
helps  reducing  discrepancies  in  the  application  of  VAT  rules  in  the  EU,  and  that  it  reduces 
administrative  burdens  for  businesses.  The  latter  was,  however,  not  perceived  by  a  majority  of 
economic operators. Less than half of respondents considered that the IOSS has been implemented 
smoothly,  that  it  is  easy  to  use,  and  that  it  helps  to  reduce  discrepancies  in  the  application  of 
Customs and VAT rules in the EU.  

Out  of  four  possible  impacts  from  the  changes  of  the  VAT  exemption  for  low-value  goods, 
stakeholders mentioned the level playing field between EU and non-EU businesses as the most 
significant  impact.  This  impact  was  agreed  to  by  almost  two-thirds  of  respondents,  with  only 
private individuals and economic operators showing a slightly lower rate of agreement. A majority 
also mentioned the minimisation of the risk of undervaluation and the increase of VAT revenue. A 
stop  to  businesses  relocating  outside  the  EU  to  benefit  from  VAT  savings  was  an  impact  that 
around 50% of responding stakeholders agreed or partly agreed to.  

The  most  important  factor  in  determining  whether  a  business  uses  the  IOSS  or  not  is  the 
types of transactions in which a business is engaged. Around 90% of replies viewed this factor as 
very important or important. Around 80% of respondents thought it is at least important what the 
size  of  the  business  is,  the  sector/market  where  the  business  operates,  whether  the  business  is  a 
deemed supplier, the desire of a business to be compliant, and the customer experience. The latter 
was viewed as less important by private individuals. A lower percentage of stakeholders said that 

107 

 
whether the business has an EU place of establishment is an important factor, but still around two-
thirds noted it as important or very important.  

Other observations in relation to OSS/IOSS experience can be summarised in four categories:  

  There  appear  to  be  certain  dangers  of  fraud  and/or  misuse  of  the  IOSS  number.  One 
stakeholder noted that the IOSS is in practice used for VAT fraud, in particular with relation 
to drop shipping. Other stakeholders described a separate issue with the IOSS number and a 
misuse of the number, for example that there is a conflict with the number being considered 
semi-secret by sellers but the buyer needing it to declare the parcel to customs or the IOSS 
number being used fraudulently. 

  The  lowering  of  the  distance  selling  limit  to  EUR  10.000  is  creating  problems  for  some 
stakeholders. In particular SMEs run into the obligation to register in other EU countries or 
use the OSS due to the change. This requires them to obtain the necessary information about 
the respective national VAT law, which can be time-consuming and costly. 

  Several respondents remarked that the OSS could be improved by including both B2C and 

B2B transactions. 

  A number of problems were being mentioned with the overall functioning of the IOSS and 
OSS, such as: certain  operators being still inexperienced in  managing imports through the 
IOSS; the IOSS/OSS being difficult to apply for deemed suppliers; occurrences of double-
taxation when VAT is collected at customs and through the IOSS; Member States requiring 
businesses to include OSS/IOSS transactions in domestic VAT returns leading to additional 
complexity 

Despite the introduction of the OSS and the IOSS, there are still transactions that require taxpayers 
to obtain and maintain multiple VAT registrations across the EU. Stakeholders were asked to assess 
the importance of these transactions by assessing whether they are widespread among businesses or 
in  specific  segments,  and  the  affected  share  of  turnover.  Among  the  listed  transactions, 
stakeholders  assessed  the  transfer  of  own  goods  cross-border  as  the  most  widespread 
transaction,  representing  a  significant  share  of  their  turnover.  Close  to  60%  of  respondents 
expressed  this  view.  Export  from  a  Member  State  in  which  the  exporter  is  not  established  was 
considered to be either relevant only in specific market segments or affecting a limited proportion 
of  turnover.  The  domestic  supply  of  B2B  services  where  the  reverse  charge  does  not  apply  was 
considered  a  more  marginal  transaction  in  terms  of  both  prevalence  and  turnover  significance. 
Overall, however, none of the proposed transactions was seen as marginal by a majority of replies, 
meaning  a majority  thinks each of them has at  least  sectoral  prevalence, or is  widespread  among 
businesses, albeit with a low turnover significance.  

Despite the introduction of the OSS and the IOSS,  124 responding stakeholders (90% of those 
providing  an  opinion)  thought  that  the  requirement  to  obtain  and  maintain  multiple  VAT 
registrations continues to be a problem, at least to some extent. Over two-thirds thought it is a 
problem to a large or even very large extent.  

With a majority of stakeholders still seeing problems with multiple VAT registrations,  over two-
thirds of respondents believed that it should be a high priority for the European Commission 
to take further action to reduce the need for taxpayers to hold multiple VAT registrations. An 
additional fifth of replying stakeholders said that it should be a medium priority, and less than 10% 
thought it being a low priority is appropriate.  

108 

 
According  to  more  than  90%  of  stakeholders,  VAT  registration  requirements  lead  to  high 
administrative  and  compliance  costs  for  businesses.  Especially  business  federations  supported 
this  view.  Over  80%  of  respondents  considered  that  difficult  compliance  with  VAT  registration 
requirements  contributes  to  high  levels  of  fraud  and  non-compliance,  and  that  taxpayers  do  not 
pursue certain markets or transactions due to them wanting to avoid VAT registration in multiple 
Member States.   

In addition to their opinion on the proposed policy options, stakeholders were asked to put forward 
suggestions  to  make  the  IOSS  more  fraud-proof.  A  suggestion  brought  forward  by  a  range  of 
stakeholders was the introduction of a robust system to avoid the misuse of the IOSS number, for 
example by introducing a two-factor-authentication or by making it easier for intermediaries to spot 
fraudulent  uses  of  IOSS  numbers  by  allowing  them  access  to  EU  databases  logging  all  imports 
using  the  relevant  IOSS  number.  It  was  also  suggested  by  some  respondents  to  improve 
communication  with  Customs  authorities,  such  as  providing  additional  data  to  the  authorities  or 
sharing  information  collected  by  Customs  with  businesses  to  reconcile  their  IOSS  VAT  returns. 
Finally, a stakeholder suggested to introduce a solution for the calculation and collection of VAT 
immediately on all IOSS sales at the time of sales, eliminating the intermediary role 

For VAT  registration,  additional comments  provided by stakeholders can be classified under five 
main topics: 

  Extend the OSS – several respondents called for the OSS to be extended. In particular the 
transfer  of  own  goods  and  the  subsequent  domestic  sale  of  that  inventory  was  mentioned 
repeatedly  as  an  area  that  should  be  included  in  the  OSS.  In  addition,  it  is  suggested  by 
some  to  include  the  remaining  areas  of  B2C  transactions,  in  order  to  fully  develop  the 
already achieved simplification brought by the OSS.  

  Remove  €150  threshold  for  IOSS  –  the  scope  of  the  IOSS  should  also  be  broadened 
according to a number of stakeholders, who argued for a removal of the €150 threshold in 
order to do so. Yet, one respondent warned that this removal would need to be accompanied 
with a review of how customs duty is paid/collected.  

  Making  IOSS  mandatory  and  its  risks  –  while  there  were  replies  wishing  for  the  IOSS  to 
become mandatory, others did not wish to see this change. Certain stakeholders warned that 
this would make small overseas companies much less likely to sell to EU customers, if they 
only occasionally have sales into the EU market.  

  General complexity – it was underlined by a range of answers that, while they do simplify 
things,  the  IOSS  and  OSS  do  not  manage  to  solve  the  general  complexity  of  the  VAT 
system  and  also  bring  their  own  complexities.  One  respondent  believed  that  the 
simplifications should be less targeted on how to declare VAT but rather on how to apply 
VAT, as the main problems of determining the right VAT rate or finding the proper place of 
supply  rule  remain.  Other  stakeholders  outlined  that  certain  complexities  arise  due  to 
administrative  issues  with  the  OSS  and  IOSS,  such  as  determining  residency,  trying  to 
understand how to correct invoices, and the lack of information about transactions within a 
VAT group. Furthermore, the mechanisms are still perceived as complex by smaller entities. 
Finally, it was mentioned that the interaction between the OSS and the margin regimes for 
second-hand goods needs to be examined, as they cannot be used together at the moment.  

109 

 
 

Importance  of  reverse  charge  –  a  couple  of  respondents  underlined  the  importance  of  the 
reverse charge mechanism and that it has proven simpler than the OSS system. Therefore, 
they insisted that the OSS should not override the reverse charge model.   

110 

 
 
 
 
 
13. ANNEX 3: WHO IS AFFECTED AND HOW? 

13.1. 

Practical implications of the initiative 

The  initiative  will  impact  businesses  and  Member  States  directly  and  citizens  indirectly,  trough 
possible price changes.    

13.1.1. Businesses (taxpayers) 

Businesses will be impacted in the way they comply with their VAT obligations. 

13.1.2. Member States 

On one hand, Member States will be impacted by the need to implement the new VAT rules and on 
another hand by how they audit the application by businesses. 

13.1.3. Citizens 

Citizens should not be affected by the changes as they will continue to purchase goods and services 
with  payment  of  VAT.  However,  citizens  only  theoretically  described  as  such,  but  who  in  the 
economic reality act like a business will be impacted by the initiative because they will need to pay 
VAT as businesses do. In this situation, the impact is transferred to the platforms who will bear the 
burden of complying with the VAT obligations. Finally, citizens may be indirectly impacted by a 
price  variation  as  the  playfield  levels  and  the  undetected  businesses  surface,  although  the  price 
change will not  be substantial.  In normal  market conditions,  a better competition,  fraud detection 
and burden reduction as result of simplification are expected to lead to a reduction of the final price 
paid by citizens.  

13.2. 

Summary of costs and benefits 

I.a. Overview of Benefits (total for all provisions) – Enhanced approach, 2023-2032 

Description 

Amount 

Direct benefits 

Comments 

Compliance 
reductions 

cost 

Pre-filling of VAT returns: EUR 4.3 billion savings 

Businesses  will  benefit  from  the 
savings 

The more widespread use of e-invoicing (due to quicker issuance and the 
reduction in postage and printing costs) will save EUR 1.9 billion  

Businesses  will  benefit  from  the 
savings 

EUR 11 billion savings from removal of recapitulative statements 

EUR  0.5  billion  savings 
streamlining and clarifications for the from the platform economy 

in  administrative  costs  resulting  from 

Businesses  will  benefit  from  the 
savings 

Platforms to benefit from the savings 

VAT registration: almost completely eliminating the need to VAT register 
for  distance  sellers  will  save  up  to  EUR  8.7  billion  registration  costs 
(EUR 0.4 billion one-off and EUR 8.3 billion recurrent) 

Businesses  doing  cross-border  trade 
who  otherwise  have  to  register  will 
benefit 

111 

 
 
 
 
 
 
 
 
Reduction 
fragmentation 
(costs 
harmonisation) 

of 

Additional 
revenue  

of 
costs 
non-

VAT 

EUR  24.2  billion  (after  the  5th  year  when  the  full  interoperability  and 
convergence is reached)162. 

Businesses will benefit  

Between EUR 135 billion and EUR 177 billion: EUR 111 billion (digital 
reporting) and EUR 24 billion to EUR 66 billion (platform economy)163  
Being  a  simplification  measure,  the  VAT  registration  will  only  bring 
minor additional VAT revenue. 

Member States will benefit  

Tax control 

The  introduction  of  DRRs  is  expected  to  bring  positive  impacts  on  the 
efficiency and effectiveness of tax control activities 

Levelling 
playfield  

the 

VAT reporting: reduction of MTIC and intra-Community VAT fraud 
Platform economy: competition made fairer between actors performing in 
the same economic reality  
VAT registration: Benefits on levelling the playing field derived from the 
extension of the scope 

This  would  mainly  result  from  the 
improvement of the risk  
analysis  systems,  which  is  the  main 
positive impact acknowledged by tax  
authorities 
benefit 
Taxpayers  will  also  benefit  because 
of  more 
and 
targeted 
sometimes less audits 

that  will 

audits 

VAT  reporting:  In  particular,  it  will 
be  more  difficult  for  fraudsters  to 
operate,  since  the  good  faith  trading 
partner  in  the  chain  will  disclose 
(possibly 
the 
real-time) 
in 
transactions to the authorities. 
the 
Platform  economy:  Part  of 
increase 
in  VAT  collection  will 
come  from  participants  in  economic 
life  that  are  not  VAT  taxable  while 
enjoying  the  network  effects  will 
make the competition fairer 
VAT 
registration  may  not  be 
responsible  for  substantial  amounts 
regulatory  costs  and 
of 
fraud, 
non-
complexity 
increase 
compliance, 
among 
SMEs.  Thus,  reducing  the  scope  of 
situations requiring VAT registration 
for non-established businesses would 
make 
and 
cheaper, and likely to improve it. 

compliance 

especially 

simpler 

can 

Indirect benefits 

Some specific benefits under option 4b (introduction of  domestic digital 
reporting  requirement)  will  also  materialise  because  the  voluntarily 
adoption of domestic DRRs.  

Member States will benefit 

Quicker introduction 
of a DRR for 
domestic transactions 
across Member 
States, due to the 
model-role played by 
the EU DRR 

Interoperability and 
reduction of 
fragmentation 

Under  selected  option,  any  new  introduction  of  domestic  reporting 
obligation must ensure the compatibility and interoperability with existing 
intra-EU solution  

Member  States  and  businesses  will 
benefit 

Indirect 
benefits 

compliance 
very 
are 

First, the reduction of the number of taxpayers in charge of paying VAT 
from  millions  of  providers  to  hundreds  of  (sometimes  very  large) 

Businesses  and  member  States  to 
benefit  

162  Fragmentation  cost  savings  arise  when  a  country  introduce  (or  is  so  required  to  introduce)  a  uniform  EU  DRR. 
Fragmentation costs are eliminated in the medium-term (after fifth year of the 10-year period). 
163  The  initiative  does  not  create  additional  VAT  liabilities  =  does  not  introduce  any  new  tax.  The  additional  VAT 
revenue is due to fraud reduction, increased compliance and broader tax base. 

112 

 
 
                                                 
Larger,  more  structured,  business 
entities  are  likely  to  obtain  more 
savings  due  to  larger  scale  of  their 
invoicing  and  accounting  processes 
and  because  they  have  more  means 
and  know-how  to  invest  in  business 
automation 

likely 
deemed 
regime. 

under 

the 
supplier 

platforms  will  markedly  increase  the  ability  of  tax  administrations  to 
monitor VAT liability in the platform economy.  
Secondly,  the  understatement  of  turnover  to  remain  below  the  VAT 
Scheme threshold, which is one of the main sources of non-compliance in 
the platform economy pointed out by tax authorities, will no longer lead 
to the evasion of the VAT due on their supplies.  

Benefits 
business automation 

from 

An  important  benefit  is  the  automation  of  business  processes  driven  by 
the  introduction  of  digital  reporting  requirements,  due  to  the  electronic 
handling of transactional data 

Between EUR 0.01 billion and EUR 0.5 billion  

Environmental 
benefits, 
the 
i.e. 
monetary value of the 
CO2 saved 

Administrative cost savings related to the ‘one in, one out’ approach* 

Direct cost 

Direct cost 

Direct cost 

Direct cost 

Direct cost 

Direct cost 

Pre-filling of VAT returns 

EUR 4.3 billion  

E-invoicing related savings 

EUR 1.9 billion 

Removal 
statements 

of 

recapitulative 

EUR 11 billion 

Costs  of  compliance  and 
determine the status of providers 

to 

EUR 0.5 billion 

VAT registration costs 

EUR 8.7 billion 

Fragmentation costs for MNCs 

EUR 24.2 billion 

I.b. Overview of Benefits (total for all provisions) – Maximal approach, 2023-2032 

Description 

Amount 

Direct benefits 

Comments 

Compliance 
reductions 

cost 

Pre-filling of VAT returns: EUR 7 billion savings 

Businesses  will  benefit  from  the 
savings 

The more widespread use of e-invoicing (due to quicker issuance and the 
reduction in postage and printing costs) will save EUR 14.5 billion  

Businesses  will  benefit  from  the 
savings 

EUR 11 billion savings from removal of recapitulative statements 

EUR  0.5  billion  savings 
streamlining and clarifications for the from the platform economy 

in  administrative  costs  resulting  from 

VAT registration: almost completely eliminating the need to VAT register 
for distance sellers will save up to EUR 8.7 billion registration costs 

Businesses  will  benefit  from  the 
savings 

Platforms to benefit from the savings 

Businesses  doing  cross-border  trade 
who  otherwise  have  to  register  will 
benefit 

EUR  24.2  billion  (after  the  5th  year  when  the  full  interoperability  and 
convergence is reached)164. 

Businesses will benefit  

Reduction 
fragmentation 
(costs 
harmonisation) 

of 

of 
costs 
non-

164  Fragmentation  cost  savings  arise  when  a  country  introduce  (or  is  so  required  to  introduce)  a  uniform  EU  DRR. 
Fragmentation costs are eliminated in the medium-term (after fifth year of the 10-year period). 

113 

 
 
 
 
 
 
 
 
 
                                                 
Additional 
revenue  

VAT 

Between  EUR  284.4  billion  and  EUR  367.4  billion:  EUR  221.4  billion 
(digital  reporting)  and  EUR  63  billion  to  EUR  146  billion  (platform 
economy)165  
Being  a  simplification  measure,  the  VAT  registration  will  only  bring 
minor additional VAT revenue. 

Tax control 

The  introduction  of  intra  EU  and  domestic  DRRs  is  expected  to  bring 
maximum  positive  impacts  on  the  efficiency  and  effectiveness  of  tax 
control activities 

Member States will benefit  

This  would  mainly  result  from  the 
improvement of the risk  
analysis  systems,  which  is  the  main 
positive impact acknowledged by tax  
authorities that will benefit  
Taxpayers  will  also  benefit  because 
and 
targeted 
of  more 
sometimes less audits 

audits 

Levelling 
playfield  

the 

VAT reporting: reduction of MTIC and intra-Community VAT fraud 
Platform economy: competition made fairer between actors performing in 
the same economic reality  
VAT registration: Benefits on levelling the playing field derived from the 
extension of the scope 

in 

real-time) 

transaction  will 

VAT  reporting:  In  particular,  it  will 
be  more  difficult  for  fraudsters  to 
operate,  since  the  good  faith  trading 
partner  in  the  chain  will  disclose 
(possibly 
the 
transactions  to  the  authorities.  By 
inclusion  of  domestic  DRRs  the 
be 
of 
chain 
complete. 
the 
Platform  economy:  Part  of 
increase 
in  VAT  collection  will 
come  from  participants  in  economic 
life  that  are  not  VAT  taxable  while 
enjoying  the  network  effects  will 
make the competition fairer 
VAT 
registration  may  not  be 
responsible  for  substantial  amounts 
regulatory  costs  and 
fraud, 
of 
non-
complexity 
increase 
compliance, 
among 
SMEs.  Thus,  reducing  the  scope  of 
situations requiring VAT registration 
for non-established businesses would 
make 
and 
cheaper,  and  likely  to  improve  it. 
The  removal  of  EUR  150  threshold 
will  help  the  competition  by  putting 
on  equal  footing 
the  businesses 
inside  and  outside  EU  for  certain 
transactions under the scope 

compliance 

especially 

simpler 

can 

Interoperability and 
reduction of 
fragmentation 

Indirect 
benefits 
likely 
deemed 
regime. 

compliance 
very 
are 
the 
under 
supplier 

Under selected option, the domestic reporting obligation must ensure the 
compatibility and interoperability with existing intra-EU solution  

Member  States  and  businesses  will 
benefit 

Indirect benefits 

First, the reduction of the number of taxpayers in charge of paying VAT 
from  millions  of  providers  to  thousands  of  platforms  will  markedly 
increase the ability of tax administrations to monitor VAT liability in the 
platform economy.  
Secondly,  the  understatement  of  turnover  to  remain  below  the  VAT 
Scheme threshold, which is one of the main sources of non-compliance in 
the platform economy pointed out by tax authorities, will no longer lead 
to the evasion of the VAT due on their supplies.  

Businesses  and  member  States  to 
benefit  

Benefits 

from  An  important  benefit  is  the  automation  of  business  processes  driven  by  Larger,  more  structured,  business 

165  The  initiative  does  not  create  additional  VAT  liabilities  =  does  not  introduce  any  new  tax.  The  additional  VAT 
revenue is due to fraud reduction, increased compliance and broader tax base. 

114 

 
                                                 
business automation 

the  introduction  of  digital  reporting  requirements,  due  to  the  electronic 
handling  of  transactional  data.  This  is  maximised  by  the  inclusion  of 
domestic DRRs 

entities  are  likely  to  obtain  more 
savings  due  to  larger  scale  of  their 
invoicing  and  accounting  processes 
and  because  they  have  more  means 
and  know-how  to  invest  in  business 
automation 

Between EUR 0.01 billion and EUR 0.6 billion  

Environmental 
benefits, 
the 
i.e. 
monetary value of the 
CO2 saved 

Administrative cost savings related to the ‘one in, one out’ approach* 

Direct cost 

Direct cost 

Direct cost 

Direct cost 

Direct cost 

Direct cost 

Pre-filling of VAT returns 

EUR 7 billion  

E-invoicing related savings 

EUR 14.5 billion 

Removal 
statements 

of 

recapitulative 

EUR 11 billion 

Costs  of  compliance  and 
determine the status of providers 

to 

EUR 0.5 billion 

VAT registration costs 

EUR 8.7 billion 

Fragmentation costs for MNCs 

EUR 24.2 billion 

Indirect cost 

Environmental benefits 

EUR 0.02 billion 

(1) Estimates are gross values relative to the baseline for the preferred option as a whole (i.e. the impact of individual 
actions/obligations of the preferred option are aggregated together); (2) Please indicate which stakeholder group is the 
main recipient of the benefit in the comment section;(3) For reductions in regulatory costs, please describe details as to 
how the saving arises (e.g. reductions in adjustment costs, administrative costs, regulatory charges, enforcement costs, 
etc.;);  (4)  Cost  savings  related  to  the  ’one  in,  one  out’  approach  are  detailed  in  Tool  #58  and  #59  of  the  ‘better 
regulation’ toolbox. * if relevant 

II.a. Overview of costs – Enhanced approach (total costs 2023-2032) 

Citizens/Consumers 

Businesses 

Administrations 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Introductio
n of intra-
EU digital 
reporting 
obligation   

Direct costs 

No cost  
impact 

No cost  
impact 

EUR 7.53 billion 
adjustment costs 
for businesses166 

EUR 3.77 billion 
compliance costs 
for businesses 

EUR 0.43 
billion 
implementati
on costs for 
tax 
authorities167 

Indirect costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Data 
confidentiality: 
more data will be 
collected, stored, 
and  
exchanged 

Familiarisati
on and 
training 
costs; 
awareness 
campaigns. 

EUR 1.7 
billion 
implementation 
costs for tax 
authorities 

Data 
confidentiality 

Deemed 
supplier for 

Direct costs 

No cost  
impact 

No cost  
impact 

Initial higher 
costs related to 

New burdens for 
platforms linked 

No cost  
impact 

No cost  
impact 

166See Section 8.1 
167  The  one-off  costs  of  tax  administration  represent  approx.  20%  of  total  costs.  The  value  varies  across  Members 
States,  depending  on  the  IT  development  approach  adopted  (in-house  or  outsourced),  the  range  of  functions  and 
services  included,  and  the  possibility  of  exploiting  platforms  already  set  up  to  support  existing  digital  reporting 
requirements for public procurement. 

115 

 
 
 
 
                                                 
accommod
ation and 
transport 
services 

Extension 
of the OSS, 
reverse 
charge 

Removal of 
the optional 
character of 
the IOSS 

the clarification 
of taxable status 
of the existing 
users 

to the 
administration of  
the deemed 
supplier regime 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Indirect costs 

No cost  
impact 

Price variation 
(VAT/part of 
VAT currently 
not paid may be 
passed on the 
consumer)  

Direct costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Minimal 
costs related 
to updates of 
the existing 
OSS schemes 

No cost  
impact 

Indirect costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Direct costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Marginal 
costs related 
to small 
increase in 
capacity of 
current 
systems in 
place   

No cost  
impact 

Indirect costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Costs related to the ‘one in, one out’ approach 

Direct adjustment 
costs  

No cost  
impact 

No cost  
impact 

Total   

Indirect adjustment 
costs 

No cost  
impact 

No cost  
impact 

Administrative 
costs (for 
offsetting) 

No cost  
impact 

No cost  
impact 

EUR  7.53  billion 
the 
to 
related 
introduction 
of 
DRRs  

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

EUR 3.77 billion 

II.b. Overview of costs – Maximal approach (total costs 2023-2032) 

Citizens/Consumers 

Businesses 

Administrations 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Introductio
n of intra-
EU digital 
reporting 
obligation   

Direct costs 

No cost  
impact 

No cost  
impact 

EUR 29 billion 
adjustment costs 
for businesses 

EUR 14.5 billion 
compliance costs 
for businesses 

EUR 0.7 
billion 
implementati
on costs for 
tax 
authorities 

Indirect costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Data 
confidentiality: 
much more data 
will be collected, 
stored, and  
exchanged 

Familiarisati
on and 
training 
costs; 
awareness 
campaigns. 

EUR 2.7 
billion 
implementation 
costs for tax 
authorities 

Data 
confidentiality 

116 

 
 
 
 
 
 
 
 
 
Direct costs 

No cost  
impact 

No cost  
impact 

Indirect costs 

No cost  
impact 

Price variation 
(VAT/part of 
VAT currently 
not paid may be 
passed on the 
consumer)  

Initial higher 
costs related to 
the clarification 
of taxable status 
of the existing 
users 

New burdens for 
platforms linked 
to the 
administration of  
the deemed 
supplier regime 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Direct costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Minimal 
costs related 
to updates of 
the existing 
OSS schemes 

No cost  
impact 

Indirect costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Direct costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Costs related 
to small 
increase in 
capacity of 
current 
systems in 
place and the 
IT systems 
for  

No cost  
impact 

Deemed 
supplier for 
accommod
ation and 
transport 
services 

Extension 
of the OSS, 
reverse 
charge 

Removal of 
the optional 
character of 
the IOSS 

Indirect costs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

Costs related to the ‘one in, one out’ approach 

Direct adjustment 
costs  

No cost  
impact 

No cost  
impact 

Total   

Indirect adjustment 
costs 

No cost  
impact 

No cost  
impact 

Administrative 
costs (for 
offsetting) 

No cost  
impact 

No cost  
impact 

EUR  29  billion 
the 
related 
to 
introduction 
of 
DRRs 

No cost  
impact 

No cost  
impact 

No cost  
impact 

No cost  
impact 

EUR 14.5 billion  

(1)  Estimates  (gross  values)  to  be provided  with  respect  to  the  baseline;  (2)  costs  are  provided  for  each  identifiable 
action/obligation of the preferred option otherwise for all retained options when no preferred option is specified; (3) If 
relevant  and  available,  please  present  information  on  costs  according  to  the  standard  typology  of  costs  (adjustment 
costs,  administrative  costs,  regulatory  charges,  enforcement  costs,  indirect  costs;).  (4)  Administrative  costs  for 
offsetting as explained in Tool #58 and #59 of the ‘better regulation’ toolbox. The total adjustment costs should equal 
the sum of the adjustment costs presented in the upper part of the table (whenever they are quantifiable and/or can be 
monetised). Measures taken with a view to compensate adjustment costs to the greatest extent possible are presented in 
the section of the impact assessment report presenting the preferred option. 

117 

 
 
 
 
 
 
 
 
13.3. 

Relevant sustainable development goals168 

III. Overview of relevant Sustainable Development Goals – Preferred Option(s) 
Relevant SDG 

Expected progress towards the Goal 

Comments 

A  more  efficient  and  sustainable  VAT  system 
will promote economic growth 

inclusive 

e.g.  SDG  no.  8  –  Promote 
and 
sustained, 
sustainable 
economic 
growth,  full  and  productive 
employment 
decent 
work for all 

and 

The  net  impacts  are  reflecting  an  annual 
average  increase  of  the  EU  GDP  worth 
between EUR 17 billion and EUR 38 billion 
between  2023  and  2032.  While  significant 
as value, these amounts remain very limited 
the  EU  GDP  are 
when  compared 
(between.  0.1%  and  0.2%  of  EU  GDP). 
Therefore, 
the  supporting 
line  with 
study169,  the  effects  on  GDP  are  estimated 
by  applying  the  appropriate  multiplier  to 
changes in VAT revenue and not via a full-
fledged macroeconomic modelling. 

to 

in 

e.g.  SDG  no.  9  -  Build 
resilient 
infrastructure, 
and 
promote 
sustainable  industrialization 
and foster innovation 

inclusive 

Although  not  possible  to  quantify,  automation 
allows the integration of  multiple services, apps, 
in  companies 
and 
providing  an  overarching  and  highly  customised 
service. 

technologies, 

translating 

Technology  and  market  needs  dictate  an 
increased  level  of  security,  data  protection, 
trust.  Digital  reporting 
integration,  and 
contributes 
to  business  automation  and 
foster innovation. 

168 https://sdgs.un.org/goals  
169 Supporting Study, Volume I, Box 18, p. 122 

118 

 
 
 
 
                                                 
14. ANNEX 4: ANALYTICAL METHODS 

14.1. 

Econometric Model (estimate the DRR impact on VAT compliance)  

As different types of DRRs are already in place in some Member States, their effectiveness could 
be verified by looking at actual figures on VAT non-compliance and using appropriate econometric 
methods.  Using  such  methods  means  assessing  how  an  independent  variable,  in  this  case  the 
presence  of  DRRs  and  their  features,  impact  on  VAT  non-compliance170  while  controlling  other 
factors which may also explain changes in non-compliance (i.e. a country’s tax policy or economic 
structure) across analysed time horizon.  

This  note  discusses  initial  choices  that  were  made  with  respect  to  the  data  and  methods  used. 
Section 2.1  presents  a  general  formula  that  formalizes  the  link  between  VAT  efficiency, 
compliance,  and  revenue.  Section 2.2  explains  the  choice  of  the  dependent  variables  –  the  VAT 
Gap  measure.  Section 2.3  presents  two  alternative  econometric  approaches  and  econometric  tests 
that are performed and discusses exogenous variables and methods for their imputation. Section 2.4 
presents the results. 

Section 2.1: General formula for measuring impacts on VAT revenue 

The  value  of  actual  tax  revenue  for  all  ad  valorem  taxes  can  be  decomposed  into  three  basic 
components,  which  are  helpful  to  understand  its  underlying  sources  of  their  evolution.  Since 
revenue  is  a  product  of  the  theoretical  liability  and  the  compliance  ratio,  tax  collection  could  be 
expressed as: 

Actual Revenue = Theoretical Liability × Compliance Ratio , 

where Compliance Ratio is: 1 – Tax Gap (%). 

As for all ad valorem taxes the Theoretical Liability is a product of the base and the average rate 
(WAR, Weighted Average Rate), the actual revenue could be further decomposed and expressed as: 

Actual Revenue = Net Base × WAR × Compliance Ratio , 

where the WAR is the ratio of the Theoretical Liability to the Net Base. 

Expressed as relative changes, the equation could be rewritten as: 

(1 +

∆𝐴𝑐𝑡𝑢𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝐴𝑐𝑡𝑢𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

) =   (1 +

∆𝐶𝑜𝑚𝑝𝑙𝑖𝑎𝑛𝑐𝑒 𝑅𝑎𝑡𝑖𝑜
𝐶𝑜𝑚𝑝𝑙𝑖𝑎𝑛𝑐𝑒 𝑅𝑎𝑡𝑖𝑜

) × (1 +

∆𝑁𝑒𝑡 𝐵𝑎𝑠𝑒
𝑁𝑒𝑡 𝐵𝑎𝑠𝑒

) × (1 +

∆𝑊𝐴𝑅
𝑊𝐴𝑅

) 

As the impacts of additional reporting obligations are expected to come predominantly via change 
in  VAT  compliance  the  overarching  formula  for  measuring  impacts  on  tax  compliance  takes  the 
form:171 

170 VAT non-compliance is a broad term that stands for VAT foregone not only due to fraud and evasion but also due to 
insolvencies, bankruptcies, administrative errors, and legal tax optimisation. 
171 In other words, it is assumed that ∆𝑁𝑒𝑡 𝐵𝑎𝑠𝑒 = 0 and ∆𝑊𝐴𝑅 = 0. 

119 

 
 
                                                 
∆𝐴𝑐𝑡𝑢𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 ≅

∆𝐶𝑜𝑚𝑝𝑙𝑖𝑎𝑛𝑐𝑒 𝑅𝑎𝑡𝑖𝑜
𝐶𝑜𝑚𝑝𝑙𝑖𝑎𝑛𝑐𝑒 𝑅𝑎𝑡𝑖𝑜

× 𝐴𝑐𝑡𝑢𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒  

Section 2.2: Non-compliance measure 

Due to unavailability of figures for certain components of the VAT Gap, the most precise indication 
of  the  evolution  of  non-compliance  across  countries  with  a  sufficiently  long  time  period  is  the 
overall VAT Gap measure172. The VAT Gap accounts for the difference between the expected and 
actual  VAT  revenues;  still,  it  represents  more  than  just  fraud  and  evasion.  The  VAT  Gap  also 
covers  VAT  lost  due  to,  for  example,  insolvencies,  bankruptcies,  administrative  errors,  and  legal 
tax  optimization,  whose  scale  could  only  to  a  limited  extent  be  affected  by  the  reporting 
obligations.  Despite  this  fact,  the  use  of  VAT  Gap  as  the  endogenous  variable  for  assessing  the 
impact of reporting obligations has an advantage as it directly  links with the compliance ratio (as 
presented overleaf). The use of the VAT Gap figures also  has a clear advantage over using VAT 
revenue as an explanatory variable because VAT revenue is also affected by other components, e.g. 
changes  in  policy  structure  and  tax  base.  For  this  reason,  the  use  of  VAT  revenue  as  the 
endogenous variable would not allow to disentangling the direct effect of reporting obligations on 
VAT compliance.  

The  VAT  Gap  measure  which  is  used  in  the  analysis  comes  from  the  most  up-to-date  Study 
published by the European Commission. The Study contains 532 panel observations from all past 
vintages  of  the  Study  transformed  using  so  called  backcasting  method.  The  backcasting  method 
allows the Study Team to minimise the problem of structural breaks between vintages of the Study. 
After  running  the  procedure,  the  figures  rely  on  the  magnitude  of  values  for  a  period  of  5 years 
covered by the most recent estimates (2019 Study). At the same time, the dynamics, i.e. year-over-
year  changes  in  percentage  points,  for  the  years  not  covered  by  the  full  estimates,  are  based  on 
older Studies, as more recent editions did not cover the relevant period of time. Overall, the VAT 
Gap observations (of country i in year t) cover 27 EU Member States and the UK for the 2000-2018 
period initially derived for seven European Commission’s VAT Gap Studies (i.e. the 2013, 2014, 
2015, 2016, 2017, 2018, and 2019 Studies).  

The  VAT  Gap,  which  is  the  most  accurate  measure  that  could  be  used  for  the  modelling  of  the 
impacts  of  reporting  obligations  on  VAT  compliance,  is  available  only  as  yearly  series. 
Unavailability  of  a  more  granular  series  poses  two  important  limitations.  Firstly,  compared  to 
quarterly data, yearly series reduce markedly the degrees of freedom of the model. As a result, the 
model  lacks  data  points  and  their  variability  may  prevent  the  inclusion  of  additional  explanatory 
variables. Secondly, yearly series limit the possibility of observing dynamic effects of introducing 
additional reporting obligations. This is an important drawback as some countries introduced their 
measures in phases and often in the course of the year. Moreover, it may be expected that some of 
the measures may have some pre-emptive and/or delayed impact.  

An alternative measure that could be used as a proxy of VAT-compliance in the situation when tax 
rules remain stable is C-efficiency173 and its changes over time. C-efficiency is expressed as: 

𝐶𝐸 =

𝑉𝑅
𝑡𝐶

172 Proxies of certain components of the VAT Gap, i.e. fraud in intra-Community transactions, are available. However, 
as they likely contain a measurement error they can only serve as right-hand side variables in the model.     
173  Also  known  as  VAT  revenue  ratio,  see:  Ebrill,  L.  Et  al.  (2001),  The  Modern  VAT,  International  Monetary  Fund, 
ISBN:9781589060265.  

120 

 
 
                                                 
where, VR stands for VAT revenue, t for statutory standard rate and C for final consumption. 

C-efficiency  could  be  regarded  as  an  indicator  of  the  departure  of  the  VAT  from  a  perfectly 
enforced  tax  levied  at  a  uniform  rate  on  all  consumption.174  In  other  words,  it  is  an  intensive 
measure, i.e. expressed in relation to the tax base proxy, of both Compliance and Policy Gap.175 C-
efficiency can be computed on a quarterly basis, based on revenue and national accounts data from 
Eurostat. Thus, it allows addressing limitations of VAT Gap indicated above.  

Section 2.3: Econometric methods 

The  approach  to  the  econometric  modelling  implements  two  methods:  (1)  the  base  approach  that 
uses quarterly C-efficiency data, and (2) the alternative approach that uses annual VAT Gap data. 
Two different methods were implemented to ensure the robustness of econometric estimates and to 
verify that the results do not depend on the choice of the dependent variable or data frequency.  

The  base  approach  uses  the  econometric  setup  of  fixed-effects  estimation  for  modelling 
determinants of quarterly C-efficiency. Such an approach could be regarded as a specific form of 
the  difference-in-difference  estimator  in  a  panel  data  setting.  The  main  advantage  of  the  fixed 
effects estimator is that it can isolate the impact of reporting requirements from non-observed time 
and country-specific factors. 

The model of the quarterly C-efficiency includes variables expected to determine the level of non-
compliance but also controlling for factors behind C-efficiency. The base model could be expressed 
as: 

𝐶𝐸𝑖𝑡 = 𝛼1𝑇𝐴𝑉𝑖𝑡+𝛼2𝑀𝑉𝑖𝑡+𝛼3𝐸𝑆𝑉𝑖𝑡 + 𝛼4𝑅𝑂𝑖𝑡 + 𝛼5𝐹𝑅𝑖𝑡 + 𝛼6𝑆𝐸𝐶𝑖𝑡 + 𝑎𝑡 + 𝑎𝑖 + 𝑢𝑖𝑡                          
(1) 

where  the  endogenous  variable  is  C-efficiency  for  country  i  in  year  t,  CEit,  which  might  be 
explained  by  the  variables  related  directly  to  the  actions  taken  by  tax  administrations  (𝑇𝐴𝑉𝑖𝑡), 
control  variables  describing  the  current  macroeconomic  situation  (𝑀𝑉𝑖𝑡),  control  variables 
describing  the  characteristics  of  specific  Member  States  (economic  structure  variables  -  𝐸𝑆𝑉𝑖𝑡). 
Those  control  variables  are:  .  𝑅𝑂𝑖𝑡  stands  for  the  vector  of  variables  describing  reporting 
obligations.  𝐹𝑅𝑖𝑡  stands  for  fraud  proxies  (e.g.  shadow  economy)  and  the  𝑆𝐸𝐶𝑖𝑡  for  the  sectoral 
shares  in  the  economy  (e.g.  share  of  agriculture  in  the  total  value  added).  Apart  from  these 
variables, country fixed effects (𝑎𝑖) and time fixed effects (𝑎𝑡) are included to control for the non-
observed time and country-specific factors. Finally, 𝑢𝑖𝑡 is the error term with the classical statistical 
properties.  

The  dependent  variable  (CEit)  and  some  of  the  explanatory  variables  (e.g.  𝑅𝑂𝑖𝑡,  𝑀𝑉𝑖𝑡, 𝑆𝐸𝐶𝑖𝑡)  are 
available at quarterly frequency whereas the remaining explanatory variables (e.g. 𝑇𝐴𝑉𝑖𝑡, 𝐹𝑅𝑖𝑡) are 
available only at annual frequency. Since all the variables should be aligned in terms of frequency, 
an  interpolation  technique  to  break  the  annual  data  into  quarterly  series  was  necessary.  We 
employed  linear  interpolation  to  construct  new  data  points  within  the  range  of  a  discrete  set  of 
known  data  points.  The  linear  interpolation  is  a  data  imputation  method  that  assumes  a  linear 
relationship between missing and non-missing values176. The gains of such approach are threefold; 

174 See: Keen, M. (2013), The Anatomy of the VAT, IMF Working Paper, WP/13/111.  
175  Policy  Gap  is  an  indicator  of  tax  preferences.  It  grasps  the  additional  VAT  revenue  that  could  theoretically  (i.e. 
under the assumption of perfect tax compliance) be generated if a uniform VAT rate is applied to the final domestic use 
of all goods and services. 
176 The linear interpolation technique is used also to impute the values of the missing variables. 

121 

 
                                                 
(i)  the  number  of  observations  and  degrees  of  freedom  is  substantially  higher;  (ii)  addressing 
possible problem of omitted variable bias; and (iii) more granular series that enable us to estimate 
the dynamic effect of introducing reporting obligations in the base approach.  

The  alternative  approach  uses  the  econometric  setup  of  fixed-effects  estimation  for  modelling 
yearly  VAT  Gap  series.  This  approach  limits  degrees  of  freedom  and  hinders  the  introduction  of 
lead and lags but may prove better if the effective rate, which is one of the revenue components, 
cannot be accurately controlled for.  

The structure of the model takes the form:  

𝑉𝐺𝑖𝑡 = 𝛼1𝑇𝐴𝑉𝑖𝑡+𝛼2𝑀𝑉𝑖𝑡+𝛼3𝐸𝑆𝑉𝑖𝑡 + 𝛼4𝑅𝑂𝑖𝑡 + 𝛼5𝐹𝑅𝑖𝑡 + 𝛼6𝑆𝐸𝐶𝑖𝑡 + 𝑎𝑡 + 𝑎𝑖 + 𝑢𝑖𝑡         (2) 

As mentioned above, the endogenous variable is the VAT Gap for country  i in year t, VGit. Other 
variables are related directly to the actions taken by tax administrations (𝑇𝐴𝑉𝑖𝑡), control variables 
describing 
the 
characteristics of specific Member States (economic structure variables - 𝐸𝑆𝑉𝑖𝑡). 

the  current  macroeconomic  situation  (𝑀𝑉𝑖𝑡),  control  variables  describing 

As  shown  in  Table  26,  the  explanatory  variables  are  often  available  for  only  a  subset  of 
observations even at annual frequency. The nature of the missing data varies across variables. Some 
data  sources  cover  only  specific  Member  States  (e.g.  OECD),  other  are  available  for  most  recent 
years only (Surveillance database) or were discontinued (e.g. Verification actions). However, there 
is one important similarity: data is not missing at random in most of the instances.  

The  problem  of  unavailability  of  observations  decreases  markedly  the  number  of  degrees  of 
freedom  in  the  models  with  numerous  right-hand  side  variables.  This  creates  a  trade-off  between 
two econometric problems – i.e. omitted variables and insufficient degrees of freedom.  

To  reduce  the  scale  of  the  problem  the  values  of  the  missing  variables  were  imputed  for  the 
alternative  approach  as  well.  The  Study  Team  decided  to  use  a  simple  and  intuitive  method  that 
partially  controls  the bias created by the non-random  character of missing data.177 The procedure 
for  missing  predictors  in  regression  analysis  that  has  been  used  is  called  dummy  variable 
adjustment or missing indicator method. In this approach if X is an incompletely observed predictor 
in a regression model, then a binary response indicator for X is created (RX = 1, if the value in X is 
missing; RX = 0, if the corresponding value in X is present) and included in the regression model 
together with Missing values in X are set to the same value, i.e., any constant value c.  

Reporting  obligation  proxies  and  control  variables.  The  treatment  dummies,  i.e.  indicator 
variables that capture the timing and location of the existing reporting requirements, are introduced 
in the model as independent variables. Proxies include dummy variables standing for countries in 
which were introduced (grouped by type, i.e. VAT listing, SAF-T, Real-time, e-invoicing). 

In addition to reporting obligation proxies, the model specification includes variables from multiple 
sources,  i.e.  Eurostat,  World  Bank,  the  VAT  Gap  Study.  The  full  list  of  variables,  their  sources 
along with coverage periods and frequencies, and number of observations are included in Table 26. 

177 See: Allison, P.D. (2001), Missing Data, Sage, Thousand Oaks. 

122 

 
 
 
                                                 
Table 26 – Variables and Descriptive Statistics (econometric model)  

Source 

Coverage 

Frequency 

Number of 
Observations 

C-Efficiency 
VAT Gap 

Real GDP growth 
Deficit to GDP Ratio 
Debt to GDP Ratio 
Unemployment 

Standardized fiscal rules index 

Number of staff 

Verification actions 

VAT electronic filing rate % 

IT expenditure as a share of total 
costs 

Dependent (Endogenous) Variables 

Own elaboration 
VAT Gap reports, EC 

2007-2021 
2007-2019 

Macroeconomic Variables 

EUROSTAT 
EUROSTAT 
EUROSTAT 
EUROSTAT 

2007-2021 
2007-2021 
2007-2021 
2007-2021 
Tax administration variables 
2007-2019 
EC 
2011, 
2013-2017 
2007-2015 
2009, 2011, 2013-
2015 

OECD 

OECD 

OECD 

OECD 

2007-2017 

Shadow Economy 

Size of the shadow economy 

IMF 

2007-2019 

Intra-EU Import at risk 
Trade-at-risk 

Own calculation 
Own calculation 

2007-2019 
2007-2017 

Fraud Proxies 

Population at risk of poverty 
Share of companies with no 
employees 
Share of companies with over 10 
employees 
Gini Index 
Economic Risk Rating 
Political Risk Rating 
The Worldwide Governance 
Indicators: Rule of Law 
The Worldwide Governance 
Indicators: Control of Corruption 

Economic Structure and Institutional Variables 

EUROSTAT 

EUROSTAT 

2007-2019 

2007-2018 

EUROSTAT 

2007-2018 

World Bank 
ICRG 
ICRG 

World Bank 

World Bank 

2007-2018 
2007-2015 
2007-2015 
2007-2014, 2018-
2019 
2007-2014, 2018-
2019 

Quarterly 
Annual 

Quarterly 
Quarterly 
Quarterly 
Quarterly 

Annual 

Annual 

Annual 

Annual 

Annual 

Annual 

Annual 
Annual 

Annual 

Annual 

Annual 

Annual 
Annual 
Annual 

Annual 

Annual 

Sector Shares 

EUROSTAT 
EUROSTAT 

2007-2021 
2007-2021 

Quarterly 
Quarterly 

EUROSTAT 

2007-2021 

Quarterly 

EUROSTAT 
EUROSTAT 
EUROSTAT 

2007-2021 
2007-2021 
2007-2021 

Quarterly 
Quarterly 
Quarterly 

EUROSTAT 

2007-2021 

Quarterly 

Agriculture, forestry and fishing 
Industry 
Wholesale and retail trade, 
transport, accommodation and food 
service activities 
Information and communication 
Financial and insurance activities 
Real estate activities 
Professional, scientific and 
technical activities; administrative 
and support service activities 

Based on ‘VAT Gap Study, 2020’. 

Section 2.4: Results measure 

Baseline model 

1 334 
273 

1 334 
1 334 
1 334 
1 334 

273 

123 

162 

92 

168 

273 

273 
231 

273 

195 

195 

236 
189 
189 

189 

189 

1 334 
1 334 

1 334 

1 334 
1 334 
1 334 

1 334 

Base approach (C-efficiency quarterly data). The baseline econometric estimates using quarterly 
data and C-efficiency, where 𝑅𝑂𝑖𝑡 stand for a dummy variable that takes value 1 for country i if any 
type of DRRs is being implemented in country i at time t and zero otherwise. The simplest model, 

123 

 
 
 
the baseline specification, is described in column (1) and the sample covers periods from 2007q1 to 
2021q2. The econometric estimates include all EU-27 states except Bulgaria, Latvia, Luxembourg, 
and Malta178.  

As can be seen in Table 27, the estimated coefficients of the reporting obligations are statistically 
significant  at  1 percent  level.  The  other  explanatory  variables  are  statistically  significant  as  well 
with GDP growth at 5 percent and general government surplus (deficit), and unemployment rate at 
1 percent  levels.  According  to  the  estimation  results  of  the  baseline  specification,  introducing 
reporting  obligations  lifts  VAT  revenue  by  1.9 percent  of  the  theoretical  liability  (liability  that 
would be obtained if all consumption was taxed at standard rate).  

The alternative specifications (columns (2) to (6)) show that the estimated coefficient of reporting 
obligations  is  statistically  significant  regardless  of  additional  exogenous  variables  introduced179. 
The value of the parameter itself is relatively stable as it varies between 1.5 and 2.6 basis points. In 
summary, the results from the base model show that the countries that introduced DRRs have 
experienced an increase in their VAT revenue and this positive impact is found to be robust 
under different specifications. 

Alternative approach (VAT Gap yearly data). The results of the regressions from the alternative 
set of models using annual data are shown in Table 28. Similar to the base model, 𝑅𝑂𝑖𝑡 in Equation 
2 is a dummy variable that takes value 1 for country i if any type of reporting obligation is being 
implemented in country i at time t and zero otherwise. The dependent variable is 𝑉𝐺𝑖𝑡, VAT Gap 
for country  i in  year  t. The simplest  model, the baseline specification, is  described in  column (1) 
and  contains  the  same  explanatory  variables  of  the  baseline  specification  of  the  base  approach 
except unemployment rate. The estimated coefficients of the reporting obligations and GDP growth 
are  statistically  significant  at  1  and  10  percent  levels,  respectively,  whereas  general  government 
surplus are not statistically significant at the p=0.1 level. According to the estimation results of the 
baseline  specification,  introducing  reporting  obligations  decreases  VAT  Gap  by  2.6  percentage 
point and thus the revenue increase by 2.6 percent of VAT Total Tax Liability (VTTL). 

The  alternative  specifications  (columns  (2)  to  (5))  show  that  the  estimated  coefficient  of  the 
reporting  obligations  is  statistically  significant  in  all  specifications  at  the  1 percent  level  and  the 
estimated values vary between 2.4 to 2.6 basis points.  

The  results  from  the  base  model  estimated  on  annual  data  confirm  that  the  countries  that 
introduced  DRRs  have  experienced  decrease  in  their  VAT  Gap  and  this  positive  impact  of 
reporting obligations on VAT Gap is found to be robust under different specifications.  

Moreover,  and  importantly,  the  magnitude  of  the  reporting  obligation  coefficient  estimated 
through  annual  data  is  similar  to  the  coefficient  estimated  through  quarterly  data  given  in 
column (1) of Table 27, as discussed in the following paragraph. 

178  Bulgaria  and  Latvia  are  excluded  because  VAT  listing  obligation  was  introduced  long  ago  (back  in  2001),  while 
only  digital  compliance  balance  mandatory  in  2011.  Luxembourg  and  Malta  are  excluded  due  to  their  small  size 
compared to the other EU-27 Member States which may pose a risk of heteroscedasticity in the residuals. 
179  The R-sq coefficients for some alternative specifications, notably (3) are biased downwards owing to the need to 
impute interpolated quarterly estimates for annual variables. This issue however does not affect the chosen specification 
(baseline).  The  table  provides  alongside  the  basic  R-sq,  also  within-country  R-sq  which  are  more  informative  for  a 
panel regression with country fixed effects.  

124 

 
                                                 
In order to compare the results from both modelling approaches, the relation between C-efficiency 
and the VAT Gap needs to be established. Using the equation presented in Section 2.2, the result is: 

𝑑𝑉𝐴𝑇𝑟𝑒𝑣𝑒𝑛𝑢𝑒 ≈ −𝑑𝑉𝐺 ×

𝑉𝑇𝑇𝐿
𝑉𝑅

≈ 𝑑𝐶𝐸 ×

𝑡𝐶
𝑉𝑅

As 𝑉𝑇𝑇𝐿 ≈ (1 − 𝑃𝑜𝑙𝑖𝑐𝑦 𝐺𝑎𝑝) × 𝑡𝐶: 

𝑑𝐶𝐸
𝑑𝑉𝐺

=  𝑃𝑜𝑙𝑖𝑐𝑦 𝐺𝑎𝑝 − 1 

The average Policy Gap in the EU was estimated at 44 percent in 2018180. Hence, one can expect 
that when the coefficient of reporting obligation is  equal  to  -2.6 basis points  when the dependent 
variable is VAT GAP, the same coefficient should be equal to 1.5 basis points when the dependent 
variable  is  C-efficiency  based  on  the  above  formula.  However,  even  though  close,  this  does  not 
hold perfectly in our regressions and the coefficient is equal to 1.9 basis points in the model with C-
efficiency.  The  difference  could  be  explained  by  considering  that  the  quarterly  data  may  better 
capture  the  timing  of  the  impact  since  data  are  more  granular,  thus  leading  to  a  larger  estimated 
impact  of  reporting  obligations  on  VAT  revenue  and  by  different  periods  between  quarterly  and 
yearly data.   

Econometric  tests.  All  model  specifications  were  thoroughly  tested.  Among  others,  the  Study 
Team  conducted  a  collinearity  test  for  the  exogenous  variables  to  minimize  the  risk  of 
multicollinearity.  As  this  test  proved,  there  was  no  case  of  Variance  Inflation  Factor  with  value 
above 10 in the specifications presented.181 Since the model contains time series, the Study Team 
verified that the model does not suffer from the issue of spurious regression. For this purpose, unit 
root  tests  were  performed  –  Levin-Lin-Chu  (2002),  Harris-Tzavalis  (1999),  and  Im-Pesaran-Shin 
(2003).  All  tests  indicated  that  the  C-efficiency  and  explanatory  variables  included  in  the 
specifications  are  stationary.  The  tests  showed  that  debt-to-GDP  is  non-stationary  and  cannot  be 
included in levels in the base model equation. 

Table 27 – Baseline approach model estimates: C-efficiency quarterly data (econometric model)  

Reporting Obligations 

GDP growth 

Government 
surplus(deficit) 

Unemployment rate 

Intra-EU import at risk 

Trade at risk 

Shadow economy size 

(1) 
Baseline 

0.019*** 
(5.47) 
0.122** 
(2.15) 
0.136*** 

(6.26) 
-0.465*** 
(-9.22) 

(2) 
Fraud 

0.015*** 
(4.36) 
0.129** 
(2.33) 
0.119*** 

(5.63) 
-0.493*** 
(-9.93) 
-0.190 
(-0.87) 
-0.287*** 
(-8.57) 

(3) 
Shadow 
Economy 
0.017*** 
(5.07) 
0.095* 
(1.70) 
0.107*** 

(4.90) 
-0.533*** 
(-10.45) 

-0.011*** 
(-6.06) 

(4) 
Economic 
Structure 
0.016*** 
(4.30) 
0.121** 
(2.11) 
0.138*** 

(6.30) 
-0.537*** 
(-10.35) 

(5) 
Tax 
Administration 
0.026*** 
(7.25) 
0.120** 
(2.17) 
0.150*** 

(6) 
Sectors 

0.020*** 
(5.71) 
0.145*** 
(2.63) 
0.131*** 

(7.07) 
-0.427*** 
(-8.42) 

(6.21) 
-0.248*** 
(-3.80) 

180 European Commission (2020), Study and Reports on the VAT Gap in the EU-28 Member States: 2019 Final Report, 
TAXUD/2015/CC/131. 
181 Variance Inflation Factor measure the correlation among independent variables. In general, factor above 10 indicates 
high correlation and is cause for concern (Dodge, Y., 2008). 

125 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Poverty Index 

Small size companies 

Large size companies 

Standardised fiscal rules 

Number of staff  

Number of verifications  

Electronic filling 

IT expenditure  

Agriculture share 

Industry share 

Retailers share 

Communication share 

Finance share 

Real estate share 

Scientific share 

Constant 

Observations 
R-sq overall 
R-sq – within 
R-sq – between  
Number of countries 

0.505*** 
(5.44) 
0.006 
(0.35) 
0.225** 
(2.23) 

-0.013*** 
(-7.37) 
-0.738** 
(-2.42) 
-0.006*** 
(-3.90) 
22.208 
(0.62) 
0.003 
(0.30) 

-0.207 
(-0.85) 
-0.102 
(-1.07) 
-0.137 
(-1.09) 
-0.568*** 
(-3.83) 
-0.756*** 
(-4.14) 
0.125 
(0.78) 
-0.572*** 
(-2.80) 
0.647*** 
(7.99) 
1334 
0.0307 
0.4631 
0.0033 
23 

0.558*** 
(81.60) 
1334 
0.1850 
0.3892 
0.1569 
23 

0.574*** 
(78.89) 
1334 
0.0477 
0.4235 
0.0010 
23 

0.823*** 
(18.64) 
1334 
0.0000 
0.4067 
0.0072 
23 

0.499*** 
(26.23) 
1276 
0.1236 
0.3968 
0.0495 
22 

0.573*** 
(59.87) 
1334 
0.3132 
0.4240 
0.2938 
23 

Table 28 – Alternative approach model estimates: VAT Gap annual data (econometric model)  

Reporting Obligations 

GDP growth 

Government surplus(deficit) 

Trade at risk 

Intra-EU import at risk  

Shadow Economy 

Gini (Unequality) Index 

Poverty Index 

Small size companies 

Large size companies 

Standardised fiscal rules 

Verification Actions 

(1) 
Baseline 

-0.026*** 
(-3.66) 
-0.138* 
(-1.84) 
0.019 
(0.25) 

(2) 
Fraud 

-0.025*** 
(-3.38) 
-0.156** 
(-2.08) 
0.050 
(0.65) 
0.261** 
(2.00) 
-0.315 
(-0.74) 

(3) 
Shadow 
Economy 
-0.026*** 
(-3.61) 
-0.137* 
(-1.82) 
0.022 
(0.28) 

0.001 
(0.12) 

126 

(4) 
Economic 
structure 
-0.024*** 
(-3.17) 
-0.146* 
(-1.94) 
0.003 
(0.04) 

(5) 
Tax 
Administration 
-0.026*** 
(-3.66) 
-0.142* 
(-1.91) 
0.004 
(0.05) 

-0.000 
(-0.18) 
-0.253 
(-1.11) 
-0.039 
(-1.02) 
-0.295 
(-1.49) 

0.000 
(0.02) 
0.000** 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Constant 

Observations 
R-sq within 
Number of countries 

0.142*** 
(19.72) 
273 
0.4439 
21 

0.136*** 
(13.95) 
273 
0.4543 
21 

0.131 
(1.36) 
273 
0.4440 
21 

0.215*** 
(3.63) 
273 
0.4559 
21 

(2.21) 
0.136*** 
(18.24) 
273 
0.4600 
21 

Lagged and forward-looking effects 

In the baseline estimations, the reporting obligations were allowed to have only contemporaneous 
impact on the VAT revenue (through C-efficiency). However, the impact of reporting obligations 
on VAT revenue may be ‘dynamic’. It could be expected that it may take some time to reach full 
impact, and some of the impact might also be seen already before the introduction (e.g. if taxpayers 
adjust  their  behaviours  by  anticipating  the  forthcoming  obligations).  For  this  purpose,  the  Study 
Team rerun the baseline estimation six different times and at each time 𝑅𝑂𝑖𝑡 was replaced with one 
or four quarter of the lagged or lead values of 𝑅𝑂𝑖𝑡.  

Base approach (C-efficiency quarterly data). The results of the base estimations are shown in the 
columns  (2)-(5)  of  Table  29.  In  the  very  last  two  columns,  the  Study  Team  rerun  the  baseline 
estimation with ROit and it’s one quarter lagged and lead value, separately.182 

As can be seen in column (2) of Table 29, the estimated coefficient of one quarter lagged reporting 
obligations  (L.RO)  is  statistically  significant  at  1  significance  percent  level  and  its  magnitude  is 
similar to the coefficient of current reporting obligations (RO) given in column (1). The same holds 
for one and four quarter lagged  reported  as (L.RO) in  column (2) and as (L4.RO) in  column (4), 
respectively,  and  one  lead  reporting  obligations  reported  as  (F.RO)  in  column  (3).  When  current 
and  one  quarter  lagged  values  of  reporting  obligations  are  included  in  the  explanatory  variable 
vector,  only  current  value  coefficient  becomes  significant  in  column  (6).  Even  though  the 
coefficient of current is larger relative to the baseline estimation, its sum with the coefficient of the 
lagged  reporting  obligations  gives  the  same  magnitude  as  given  in  column  (1).  Finally,  the 
coefficients of the current and lead values become insignificant in column (7) when both of them 
are used as  explanatory  variable. Even though both coefficients are statistically not different than 
zero, the magnitudes of reporting obligations given in column (1) and the sum of lead and current 
ROs are equal.  

All in all, the regressions with lead and lag values for introducing reporting obligations show that 
the impacts of introducing reporting obligations do not vary significantly over time. The forward-
looking impact, if any, appeared to be not larger relative to the lagged or contemporaneous impact.  
This proves that there is no reversed causality in the model.183 

Table 29 – Baseline approach model estimates with lags and leads: C-efficiency quarterly data  

(1) 
Current 

0.019*** 
(5.47) 

Reporting Obligations 

(2) 
One 
Quarter 
Lag 

(3) 
One 
Quarter 
Lead 

(4) 
Four 
Quarter 
Lag 

(5) 
Four 
Quarter 
Lead 

L.Reporting Obligations 

0.018*** 

(6) 
One 
Quarter 
Lag and 
Current 
0.022** 
(2.25) 
-0.003 

(7) 
One 
Quarter 
Lead and 
Current 
0.006 
(0.60) 

182  The  analysis  could  not  be  replicated  with  the  alternative  approach  due  to  the  different  time  granularity  of  the 
dependent variable. 
183  Reversed  causality  would  mean  that  the  change  in  the  VAT  Gap  is  a  major  reason  for  implementing  reporting 
obligations rather than on the contrary.  

127 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
(5.22) 

(-0.30) 

L4.Reporting Obligations 

F.Reporting Obligations 

F4.Reporting Obligations 

GDP growth 

Government 
surplus(deficit) 

Unemployment rate 

Constant 

Observations 
R-sq overall 
Number of countries 

0.018*** 
(5.18) 

0.019*** 
(5.52) 

0.122** 
(2.15) 
0.136*** 

0.112** 
(1.98) 
0.132*** 

0.125** 
(2.19) 
0.134*** 

0.118** 
(2.11) 
0.135*** 

(6.26) 
-0.465*** 
(-9.22) 
0.558*** 
(81.60) 
1334 
0.1850 
23 

(6.08) 
-0.442*** 
(-8.60) 
0.533*** 
(72.37) 
1311 
0.1792 
23 

(6.13) 
-0.469*** 
(-9.24) 
0.558*** 
(81.36) 
1311 
0.1838 
23 

(6.27) 
-0.380*** 
(-7.18) 
0.530*** 
(73.45) 
1242 
0.1689 
23 

0.013 
(1.34) 

0.113** 
(1.98) 
0.133*** 

0.125** 
(2.19) 
0.134*** 

(6.11) 
-0.436*** 
(-8.48) 
0.532*** 
(72.28) 
1311 
0.1787 
23 

(6.13) 
-0.468*** 
(-9.21) 
0.558*** 
(81.31) 
1311 
0.1837 
23 

0.015*** 
(4.32) 
0.189*** 
(2.94) 
0.123*** 

(5.60) 
-0.503*** 
(-10.02) 
0.559*** 
(82.95) 
1242 
0.1847 
23 

The analysis with lagged and lead values is also carried out for the distinguished types of reporting 
obligations;  periodic  and  CTCs.  Results  are  not  different  from  the  general  analysis:  for  PTCs, 
coefficients of lagged and led variables are of the same order of magnitude and their significance 
disappears  when  controlling  for  current  variables.  For  CTCs,  results  are  more  spurious,  likely 
because  of  the  data  limitations  discussed  above.  When  controlling  for  both  lagged  and  current 
variables, both coefficients are statistically significant (at least at 5 percent level), and the analysis 
would  point  out  that  only  the  lagged  variable  has  a  positive  effect  on  VAT  revenue.  However, 
caution  is  needed  in  that  respect,  since,  in  the  EU,  the  implementation  of  CTCs  took  place  in 
countries  where  already  obligations  were  already  in  place.  Therefore,  it  is  not  possible  to  argue 
whether the lagged effect is due to the introduction of CTCs or to the pre-existing PTC system. 

Table  30  –  Baseline  approach  model  estimates  with  lags  and  leads  of  distinguished  types  of 
reporting obligations: C-efficiency quarterly data  

(1) 

(2) 
Current  One Quarter 
Lag 

(3) 
One Quarter 
Lead 

(4) 
Four Quarter 
Lag 

(5) 
Four Quarter 
Lead 

Periodic 

L.Periodic 

L4.Periodic 

F.Periodic 

F4.Periodic 

CTCs 

L.CTCs 

L4.CTCs 

F.CTCs 

F4.CTCs 

GDP growth 

Government 
surplus(deficit) 

Unemployment 

0.019*** 
(5.04) 

0.019*** 
(5.06) 

0.018*** 
(2.93) 

0.014** 
(2.28) 

(7) 
One Quarter 
Lead and 
Current 
0.010 
(0.84) 

(6) 
One Quarter 
Lag and 
Current 
0.012 
(0.97) 
0.009 
(0.74) 

0.018*** 
(4.78) 

0.019*** 
(4.99) 

0.019*** 
(2.73) 

0.019*** 
(3.14) 

0.015*** 
(3.90) 

0.048*** 
(2.68) 
-0.032* 
(-1.74) 

0.010 
(0.80) 

-0.004 
(-0.19) 

0.023 
(1.25) 

0.122** 
(2.15) 
0.136*** 

0.112** 
(1.98) 
0.132*** 

0.125** 
(2.18) 
0.134*** 

0.118** 
(2.11) 
0.135*** 

0.015** 
(2.43) 
0.189*** 
(2.93) 
0.123*** 

0.113** 
(1.99) 
0.133*** 

0.125** 
(2.18) 
0.134*** 

(6.25) 
-0.465*** 

(6.06) 
-0.439*** 

(6.13) 
-0.469*** 

(6.26) 
-0.380*** 

(5.60) 
-0.503*** 

(6.12) 
-0.435*** 

(6.12) 
-0.468*** 

128 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
rate 

Constant 

Observations 
R-sq overall 
Number 
countries 

of 

(-9.17) 
0.558*** 
(81.52) 
1334 
0.1857 
23 

(-8.53) 
0.533*** 
(72.36) 
1311 
0.1818 
23 

(-9.21) 
0.558*** 
(81.28) 
1311 
0.1837 
23 

(-7.17) 
0.530*** 
(73.37) 
1242 
0.1688 
23 

(-9.95) 
0.559*** 
(82.86) 
1242 
0.1849 
23 

(-8.46) 
0.533*** 
(72.34) 
1311 
0.1796 
23 

(-9.17) 
0.558*** 
(81.22) 
1311 
0.1834 
23 

Conclusions for the econometric analysis (VAT liability simulation model): 

 

the impact of introducing reporting obligations on VAT compliance and overall efficiency, 
and thus on VAT revenue, is positive with a central estimate of +1.9 basis points for C-
efficiency (range: 1.5-2.6 basis points) and -2.6 basis points for VAT Gap (range: 2.4-2.6 
basis points), meaning a reduction of the VAT Gap  

  Such results are highly significant and robust across two approaches and various model 

specifications. The magnitude of the impact is similar, albeit slightly larger for VAT Gap. 

  The results on any differential impact of PTCs and CTCs are conflicting and non-

conclusive, and this likely depends on the very short period and limited number of Member 
States which implemented the latter. In a nutshell, as far as the impact of CTCs in the EU 
Member States, it is yet too early to tell. 

  When considering lagged or forward-looking effects, the impacts of DRRs do not vary 

significantly across times and, consequently, the non-dynamic variables well capture the 
impacts on VAT revenue. 

Although  both  methods  used  in  this  analysis  have  pros  and  cons,  the  analysis  looking  at  C-
efficiency and using quarterly data appears to be better-suited for the purpose. The quarterly data 
provide larger number of observations and degrees of freedom that increase the statistical power of 
the  estimations.  Moreover,  quarterly  data  allows  to  inspect  the  dynamic  effects  of  the  reporting 
requirements. 

14.2. 

Net impacts on businesses’ administrative burdens by category and type of firm 

(Table 12) 

On company size, data are taken from a recent Commission study on the VAT schemes (Deloitte 
(2017), Special scheme for small enterprises under the VAT Directive 2006/112/EC  - Options for 
review, Final Report, Annex D). Based on data from national tax authorities, the number of VAT 
taxable  persons  in  the  EU  is  estimated  at  about  37.5  million,  36.5  million  of  which  are  micro 
entities with a turnover lower than EUR 2 million. Of the about 900,000 companies with a turnover 
higher than EUR 2 million, the distribution in small, medium and large companies is extrapolated 
based on Eurostat’s data. Data on VAT taxable persons are not directly compatible with Eurostat’s 
data on enterprises for at least two reasons. First, not all taxable persons are enterprises (they could 
include,  for  instance,  self-employed  individuals  or  VAT  registrations  of  non-established 
companies).  Secondly,  data  on  taxable  persons  are  segmented  on  a  turnover  basis,  while  data  on 
companies  are  segmented  based  on  the  number  of  employees.  For  instance,  it  is  possible  that  an 
entity  with  a  turnover  of  less  than  2  million  is  not  a  micro  company  if  it  has  more  than  10 
employees; or that an entity with 9 employees is not a micro company if it has a turnover higher 
than  EUR  2  million.  Therefore,  the  following  procedure  is  applied:  first,  the  relative  weight  of 
small, medium and large enterprises are calculated based on Eurostat’s data; then, these weights are 
applied to the number of VAT taxable persons with a turnover higher than EUR 2 million. 

129 

 
 
 
14.3. 

VAT liability simulation model 

A VAT liability simulation model for each Member State was used to estimate VAT revenue from 
the platform economy for the sectoral analysis. The model was calibrated to reflect changes in tax 
rules under projected policy scenarios and adapted to forecasted increase in the tax base. 

The model consists of equations parametrised for each Member State and each sector, calibrating 
the shares of transactions provided by exempt and non-taxable providers separately for providers’ 
and platforms’ services. 

The VAT liability simulation model used for in the sectoral analysis and for the impact assessment 
composes  of  two  blocks:  (1)  the  set  of  equations  modelling  effective  liability  on  platforms’ 
facilitation  services,  and  (2)  the  set  of  equations  calculating  liability  for  the  underlying  services. 
The equations in each of the block were calibrated and adapted to tax base in every Member State 
and sector.  

The model for facilitation services (for country i and sector s) is a sum of products of net tax bases 
subject to different rules and applicable rates. The factors of this equation are.  

1)  VAT collected in country i as a permanent location of the provider (on respective tax base - 

𝑇𝐵1,𝑖.𝑠) with the effective rate applicable as on the underlying service (𝑡𝑠); 

2)  VAT  collected  in  country  i  as  the  place  of  establishment  or  permanent  location  of  the 
provider  (on  respective  tax  base  -  𝑇𝐵2,𝑖.𝑠)  with  the  effective  rate  applicable  as  on  average 
rate for final goods in the transaction chain (𝑡𝑓𝑖) 

3)  VAT  collected  in  country  i  as  the  place  of  establishment  or  permanent  location  of  the 
provider (on respective tax base - 𝑇𝐵3,𝑖.𝑠) with the effective rate applicable as on facilitation 
services (𝑡𝑓𝑎) 

4)  VAT collected in country i as the place where the underlying transaction was supplied (on 
respective tax base - 𝑇𝐵4,𝑖.𝑠) with the effective rate applicable as on facilitation services (𝑡𝑓𝑎) 
5)  VAT paid in country i as the place of establishment or permanent location of the user (on 
respective tax base - 𝑇𝐵5,𝑖.𝑠) with the effective VAT rate as on facilitation services (𝑡𝑓𝑎) 
For every sector s and country i, we have: 𝑉𝐿𝑖,𝑠 = 𝑇𝐵1,𝑖.𝑠 × 𝑡𝑠 + 𝑇𝐵2,𝑖.𝑠 × 𝑡𝑓𝑖 + 𝑇𝐵3,𝑖.𝑠 × 𝑡𝑓𝑎 + 𝑇𝐵4,𝑖.𝑠 ×
𝑡𝑓𝑎 + 𝑇𝐵5,𝑖.𝑠 × 𝑡𝑓𝑎 

The estimates of respective tax bases for each of the country was based on estimated revenue and 
cross border flows of services. The parameters necessary to decompose the overall value of revenue 
to components of tax base were based primarily on statistics of transaction characteristics provide 
by  platform  operators.  The  list  of  estimated  coefficients  that  allowed  to  decompose  tax  base 
includes:  (1)  percent  of  services  classified  and  ESS  and  intermediary  services,  (2)  percent  of 
providers who are taxable person, non-taxable persons and belonging to group of four, (3) percent 
of consumers who are taxable person, non-taxable persons and belonging to group of four, and (4) 
percent of transactions in which provider and/or consumers pay the facilitation fee. 

The  equation  describing  the  VAT  liability  on  underlying  services  excluding  liability  attributed  to 
the  facilitation  fee  takes  simpler  form  as  it  is  assumed  that  the  place  of  supply  is  always  the 
physical location of consumption. On the contrary to the liability on the facilitation services, non-
deductible input VAT of exempt and non-taxable providers had to be modelled. For this purpose, 
the  parameter  of  average  value  of  input  tax  to  output  in  sectors  covered  by  this  analysis  was 

130 

 
calculated  using  fiscal  figures  provided  by  Member  States  Authorities.  Three  situations  were 
possible: 

1)  VAT collected in the place of consumption with the rate applicable as on the service (𝑡𝑠); 
2)  VAT collected in the place of consumption with the rate applicable as on final goods in the 

transaction chain (𝑡𝑓𝑖); 

3)  There  is  no  output  VAT  but  there  is  non-deductible  intermediate  VAT  on  inputs  (of  non-

taxable or exempt providers).  

The sum of liabilities could be expressed as: 

𝑉𝐿𝑖,𝑠 = 𝑇𝐵𝑖.𝑠𝜑(𝛾𝑡𝑠 + (1 −𝛾)𝑡𝑓𝑖) + 𝑇𝐵𝑖.𝑠(1 −𝜑)𝛼𝑠𝑡𝑓𝑎 

where: 
𝑇𝐵𝑖.𝑠 – value of service s consumed in MS i; 
𝜑 – share of transactions provided by taxable non-exempt persons; 
𝛾 – share of transactions with good provided to taxable persons (C2B and B2B in all transactions);  
𝛼 – proportion of intermediate input in output.  

14.4. 

Standard Cost Model (SCM)  

The Model estimates administrative burdens of regulatory interventions based on personnel’s time 
(in FTE) and IT investment associated with the provision of information, as reported by businesses.  

14.5. 

Comparative analysis  

A comparative analysis is used to assess the VAT burden on the platform economy and competing 
businesses in the traditional economy 

14.6. 

Qualitative assessment of legal certainty and other regulatory costs  

Qualitative  assessment  of  legal  certainty  and  other  regulatory  costs  (that  could  not  be  quantified 
using  the  SCM)  based  on  the  legal  analysis,  sectoral  analysis  and  legal  analysis,  as  well  as  the 
results of the targeted consultation. 

14.7. 

Methodology to assess the revenue shift in platform economy 

The type of service that would be most impacted by the revenue shift are is intra-Community cross-
border  trade  in  accommodation  services  in  situations  when  the  consumer  is  a  non-taxable  person 
and is responsible for the payment of the facilitation fee. The second type of services with a sizable 
impact on revenue shifts between Member States is cross-border trade in accommodation services 
when the property owner is a non-taxable person and resides in a Member State other than that of 
the location of real estate he/she rents. If the facilitation service is recognised as an  electronically 
supplied service (ESS), VAT on the facilitation services shall be collected in the place of residence 
of the consumer. If the facilitation service is recognised as an intermediary service (IS), VAT shall 
be collected in the Member State where the property is located.  

131 

 
 
Three  parameters  are  crucial  for  the  assessment  of  VAT  revenue  shifts  for  the  above-mentioned 
services  in  the  scenarios  of  alternative  rules  on  the  place  of  supply  applicable.  These  are:  (i) 
percentage of transactions in the accommodation sector in which consumers pay the fee (estimated 
at  18.8 percent),  (ii)  share  of  facilitation  services  that  are  classified  as  ESS  and  intermediary 
services  (estimated  at  80.7  and  19.3 percent  respectively),  and  (iii)  cross-border  ownership  of 
rented  apartments  and  vacation  houses.  Out  of  the  three  parameters,  (i)  and  (ii)  were  estimated 
using detailed statistics provided by platform operators.  

Unfortunately, the evidence on cross border ownership and of rented real estate is rather scarce and 
outdated, and required extrapolating the information from various unconnected sources. Available 
information on the cross-border ownership of rented apartments and vacation houses According to 
the  information  from  real  estate  registers,  between  2010  and  2012,  the  fraction  of  the  stock  of 
homes purchased by foreigners in Spain was about 6 percent. In 2003, the share of foreign owners 
of real estate in Mediterranean region in France was estimated at ca. 12.8 percent. Despite growing 
popularity  of  apartments  and  vacation  homes  rented  via  platforms,  they  account  for  a  moderate 
share of short-term rentals even in most popular tourist destinations. Overall, the count of person-
nights  spent  in  other  locations  than  hotels,  campsites,  caravan  or  trailer  parks  (considered  to  be 
taxable persons at  all times) in  all rented locations was ca. 34.1 percent in  2019. Apartments  and 
vacation homes rented by individuals contributed to  a fraction of these stays and  their value, and 
even  more  so  if  only  non-resident  owners  were  to  be  singled  out.  Therefore,  in  monetary  terms, 
transactions  in  accommodations  services  in  which  the  provider  is  non-taxable  person  and  the 
location for the real estate in different than the residence of the owner are estimated at a very small 
share of the accommodation service market, tentatively set at one percent of transactions184. 

When matching the available data on foreign ownership of real estate in  touristic regions and the 
number  of  nights  spent  by  tourists  in  non-traditional  accommodation  service  providers,  the 
available  information  points  out  that  this  represents  a  small  share  of  transactions,  Based  on  the 
available  information,  it  is  estimated  that,  in  monetary  terms,  transactions  in  accommodations 
services in which the provider is a non-taxable person and the location for the real estate is different 
than the residence of the owner account for ca. 1 percent of transactions (across all accommodation 
services). 

14.8. 

Parameters, assumptions and calculations 

To ease the readability of the Section on Impact Assessment, a number of parameters and methods 
for calculation are described in this Annex, and referred to, when necessary, in the main text. 

Currency Conversion 

All  monetary  values  in  this  Report  are  expressed  in  EUR.  Values  in  other  currencies  were 
converted 
retrievable  at: 
https://sdw.ecb.europa.eu/browse.do?node=9691296. 

into  EUR  based  on  ECB  annual  average  exchange 

rate, 

184 The estimate of one percent of transactions results from multiplying the expected ownership of rented real estate by 
foreigners in the EU (ca. 5 percent) and the share of apartments and vacation houses rental in the accommodation sector 
(ca. 20-25 percent). 

132 

 
                                                 
Type of Digital Reporting Requirements 

The quantitative analysis does not provide solid findings on the impact of the choice of the type of 
DRR.  This  result  is  also  due  to  the  fact  that  the  econometric  analysis  provides  no  conclusive 
evidence  on  a  differential  impact  on  VAT  revenue  between  PTCs  and  CTCs.185  Therefore,  the 
analysis of the choice among different DRRs has been performed by means of a qualitative analysis 
(multi-criteria analysis).  

Table 31 – Type of DRRs: multi-criteria analysis 

VAT Listing 

SAF-T 

Real-time 

e-Invoicing 

Compliance Costs 
Fragmentation costs 
VAT revenue 
Tax control 
Additional services 
Administrative burden 
savings  
Environmental benefits 
Business automation 
Data confidentiality 
Fit-for-the-future 

- 
++ 
++ 
++ 
+ 

0 

0 
0 
- 
0 

- 
++ 
++ 
++ 
+ 

0 

0 
0 
- 
0 

-- 
++ 
++ 
++ 
++ 

0 

0 
+ 
- 
0 

--- 
++ 
++ 
++ 
++ 

++ 

+ 
+++ 
-- 
+++ 

The  multi-criteria  analysis  identified  e-invoicing  as  the  preferred  type  of  DRR  and  more 
importantly, the only  one that is  fit  for the future.  The main  two disadvantages are  related to  the 
higher  compliance  costs  (specific  to  all  real-time  solutions)  and  data  confidentiality  (manageable 
with appropriate measures).   

Annual administrative burdens per company 

The monetary equivalent of personnel time was calculated based on Eurostat statistics on earning 
by occupation: Mean annual earnings by sex, age, and occupation  - NACE Rev. 2, B-S excluding 
O. 

In line with the SCM standard, 25% overheads were added to the annual earning. For IT personnel, 
the  earning  of  ‘technicians  and  associate  professionals’  was  used;  for  familiarization  costs, 
‘professionals’; and for training and ongoing costs, ‘clerical support workers’. 

Annual administrative burdens per company 

The  annual  administrative  burdens  per  company  are  estimated  based  on  the  assessment  of  the 
current  situation  and  result  from  the  average  of  the  values  estimated  for  the  Member  States  with 
existing DRRs. They are estimated per company size and type of DRR. 

185 See Supporting Study, Vol. I, p. 128, p. 141 

133 

 
 
 
 
                                                 
Table  32  –  VAT  digital  reporting  obligations:  annual  administrative  burdens  per  company 
(EUR/year)  

Micro 

Small 

Medium 

Large 

VAT listing 
SAF-T 
Real-time 

E-invoicing 

150 
230 
170 

500 

450 
870 
760 

600 

760 
1 350 
1 350 (HU) / 4 710 
(ES) 
3 400 

1 950 
2 470 
4 870 (HU) / 20 980 
(ES) 
16 300 

Implementation costs for tax authorities 

The annual implementation costs for tax authorities result from the annualised investment costs and 
the annual operating costs. They are estimated based on the assessment of the current situation and 
result  from  the  average  of  the  values  estimated  for  the  Member  States  with  existing  DRRs.  The 
estimation is provided per type of DRR. 

For  most  types  of  DRRs,  the  existing  costs  are  predominantly  one-off  (investment).  They  are 
therefore  not  expected  to  vary  whether  the  investment  is  done  for  both  EU  and  domestic 
transactions  or  only  for  the  former  (i.e.  under  Option  4a).  Only  for  e-invoicing,  the  operational 
costs  are  significant.  In  that  case,  the  operational  implementation  costs  for  the  tax  authority  are 
assumed to be 60% lower (in line with the estimate of VAT revenues from intra-EU transactions). 

Table 33 – VAT digital reporting obligations: implementation costs for tax authorities 

VAT listing 
SAF-T 
Real-time 
E-invoicing 
E-invoicing  
(intra-EU transactions only) 
Source. Assessment of the current situation. 

EUR million / year 
0.85 
0.85 
10.5 
25 
10.60 

Share of intra-EU VAT 

Due  to  unavailability  of  detailed  revenue  figures,  the  share  of  VAT  revenue  from  intra-EU 
transactions  on  the  overall  net  VAT  revenue  was  estimated  on  the  basis  of  estimated  VAT 
liabilities.  The  VAT  liability  on  the  intra-Community  acquisition  of  goods  and  services  was 
estimated  by  multiplying  intra-EU  importation  figures  (in  basic  prices,  broken  by  two-digit 
Classification  of  Products  by  Activity  codes)  multiplied  by  their  respective  weighted  average 
rates.186  As  the  Supply  and  Use  Tables  were  unavailable  for  most  of  Member  States  for  2018 
onwards,  the  calculations  are  based  on  a  sample  of  23  EU  Member  States  in  2017.187  Then,  the 
import VAT liability in intra-Community acquisition for all countries in the sample was divided by 
their overall VTTL for 2017 reported in the 2020 VAT Gap Study.   

The  calculation  does  not  account  for  ‘re-export’.  As  a  result,  the  figures  could  be  slightly 
overestimated to the fact that import figures partially involve the importation in transit procedures, 

186 Source: intra-EU Acquisition - Eurostat SUT, weighted average rates - VAT Gap Study 2020.  
187 The 2017 SUT was not available for BG, CY, LU, and MT. The UK was excluded from the calculation.  

134 

 
 
 
                                                 
in  which  the  VAT  payments  are  suspended.  To  account  for  the  risk  of  over  estimation,  the  EU 
estimate  is  set  at  40%,  slightly  lower  than  the  results  of  the  calculation.  Smaller  Member  States 
(more exposed to intra-EU trade) tend to have a higher share, while larger Member States a lower 
one. 

Companies active in intra-EU trade, administrative burdens from recapitulative statements 

The administrative costs and burdens due to the submission of recapitulative statements are not due 
to DRR; accordingly, they do not enter the CBA carried out in  sections 6 and 7 of the supporting 
study.188 Nevertheless, they are assessed to provide a reference point that can be used to measure 
the impact of possible changes to these rules in the IA. Because of such different analytical need, 
the underlying data were not retrieved directly from companies during the targeted consultation, but 
are  based  on  two  representative  secondary  sources,  and  namely  two  studies  carried  out  for  the 
European Commission:189 

1)  Capgemini’s measurement of administrative burdens in the area of Tax Law;190 

2)  PWC’s study on recapitulative statements.191 

The  findings  from  these  studies  are  helpful  in  defining  a  cost  per  occurrence.  Capgemini’s  study 
estimates that the costs per occurrence are as follows 

  For companies complying with this IO in-house, annual administrative costs are estimated 
at EUR 240 for companies submitting the statements every three months, and EUR 960 for 
those submitting them every month; 

  For  companies  outsourcing  compliance,  annual  administrative  costs  are  estimated  at  EUR 
400 for companies submitting the statements every three months, and EUR 1 200 for those 
submitting them every month. 

This  assessment  does  not  include  any  familiarisation  and  software  cost  associated  with 
recapitulative statements;192 no segmentation based on company size is provided. 

PWC’s  study  provide  a  separate  estimate  of  setup  and  recurring  costs  for  different  company 
segments: 

  For  SMEs,  median  setup  costs  are  estimated  at  around  EUR  180  and  recurring  costs  at 

around EUR 1 200;193 

188 Supporting Study, Annex B, p. 163. 
189 As a consequence, the supporting study cannot account for local differences in the implementation of recapitulative 
statements, such as different frequencies and scope of transactions. However, the data for the two studies originate from 
companies located in 14 different Member States, thus ensuring that the costs reported are representative of the various 
local conditions. 
190  Capgemini  (2009),”EU  Project  on  Baseline  Measurement  and  Reduction  of  Administrative  Costs,  Final  Report, 
Measurement  data  and  analysis  as  specified  in  the  specific  contract  5&6  on  Modules  3&4”,  Report  on  the  Tax  Law 
(VAT) Priority Area. 
191 PwC (2011), ”Expert study on the issues arising from a reduced time frame and the options allowed for submitting 
recapitulative  statements  -  Application  of  Article  263(1)  of  Directive  2006/112/EC  (amended  by  Directive 
2008/117/EC)”, Final Report. 
192 Which are separately recorded under the generic IOs “VAT training” and “Software cost”. 

135 

 
                                                 
  For large companies, median setup costs amount to about EUR 180 and recurring costs at 

about EUR 8 000. 

No information is available on difference between insourcing and outsourcing population segments. 

Based on the above, the following costs per occurrence are estimated: 

  Setup  costs  are  very  low  or  negligible:  once  properly  annualised  over  three  or  five  years, 
depending on whether they relate to physical or intangible investments, they would result in 
few tens of euros per year. This was confirmed by the discussions with VAT practitioners, 
suggesting that in most cases no additional investment compared to the ‘normal’ VAT setup 
are  required  for  the  provision  of  the  recapitulative  statements.  Therefore,  setup  costs  are 
assumed to be nil. 

 

In terms  of annual  recurring costs, the studies provide rather consistent data for SMEs.  In 
particular,  Capgemini  estimates  for  the  insourcing  companies194  with  monthly  submission 
almost  coincide  with  PWC  data  for  SMEs.  Therefore,  in  this  case,  the  annual  costs  are 
assumed  to  be  EUR  400  or  1 200,  depending  on  whether  they  are  required  to  submit  the 
statements quarterly or monthly.  

  For large companies, PWC estimates can be used, with annual costs of EUR 8 000. 

In  terms  of  business  population,  two  dimensions  are  to  be  considered:  company  size,  and  the 
likelihood  that  companies  engage  in  cross-border  trade  (since  this  IO  only  applies  to  companies 
engaged  in  certain  intra-EU  transactions).  The  size  of  the  company  also  impacts  on  the  likely 
amount of cross-border trade, which in turn affects the frequency of submission: 

  On company size, data are taken from a recent Commission study on the VAT schemes195. 
Based on data from national tax authorities, the number of VAT taxable persons in the EU is 
estimated  at  about  37.5  million,  36.5  million  of  which  are  micro  entities  with  a  turnover 
lower  than  EUR  2  million.  Of  the  about  900 000  companies  with  a  turnover  higher  than 
EUR 2 million, the distribution in small, medium and large companies is extrapolated based 
on Eurostat’s data.196 

193  Results  presented  in  the  Study  are  significantly  higher,  due  to  the  presence  of  an  outlier  which  has  a  significant 
impact on the sample, consisting of 5 SMEs. In this study, it has been preferred to remove the outlier, since data were 
not compatible with the information retrieved during the targeted consultation. 
194 A majority of SMEs, and a large majority of small and micro in particular, is likely to delegate this IO to an external 
provider. 
195 Deloitte (2017), Special scheme for small enterprises under the VAT Directive 2006/112/EC  - Options for review, 
Final Report, Annex D. 
196 Eurostat Structural Business Statistics. Data on VAT taxable persons are not directly compatible with Eurostat’s data 
on enterprises  for at least two reasons. First, not all taxable persons are enterprises (they could include, for instance, 
self-employed individuals or VAT registrations of non-established companies). Secondly, data on taxable persons are 
segmented  on  a  turnover  basis,  while  data  on  companies  are  segmented  based  on  the  number  of  employees.  For 
instance, it is possible that an entity with a turnover of less than 2 million is not a micro company if it has more than 10 
employees; or that an entity with 9 employees is not a micro company if it has a turnover higher than EUR 2 million. 
Therefore,  the  following  procedure  is  applied:  first,  the  relative  weight  of  small,  medium  and  large  enterprises  are 
calculated  based  on  Eurostat’s  data;  then,  these  weights  are  applied  to  the  number  of  VAT  taxable  persons  with  a 
turnover higher than EUR 2 million. 

136 

 
                                                                                                                                                                  
  As for the likelihood of engaging in cross-border trade, the same study estimates that 15% 
of SMEs  trade cross-border. While this estimate  seems  appropriate for small  and medium 
companies, the Study also suggested that micro-entities may have a lower propensity, in the 
area of 5%197. For large companies, no estimate could be retrieved it is therefore assumed 
that the share of large companies in transactions that need to be reported the recapitulative 
statements is treble than the SME segment, in line with the ratio between SMEs and micro 
companies.  

  Based on the different turnover, medium and large companies are associated with monthly 

frequency, while small and micro companies with quarterly submission. 

Finally,  costs  per  occurrence  reported  in  the  previous  studies  need  to  be  updated  to  account  for 
changes  in  the  average  earnings.198  The  BAU  factor  is  assumed  to  be  0%  (i.e.  all  administrative 
costs are burdens) in line with the previous analyses. 

Table 34 summarises the main assumptions about the business population, the frequency, and the 
annual  costs  per  company,  and  provides  the  estimates  for  total  burdens  across  the  EU.  In  total, 
administrative burdens from recapitulative statements amount to about EUR 1,100 million. About 
80%  of  the  burdens  are  borne  by  microenterprise,  given  that  they  represent  98%  of  the  overall 
business population on the EU and 93% of the companies subject to this IO.199 

Table 34 – Administrative burdens from recapitulative statements  

Share of taxable 
person active in cross-
border trade 

Business 
population 
subject to IO 

Micro 
Small 
Medium 
Large 
Total 

5% 
15% 
15% 
45% 
9% 

1,827,800 
106,882 
21,228 
16,754 
1,972,664 

Frequency 

Quarterly 
Quarterly 
Monthly 
Monthly 
- 

Annual 
burden per 
company 

Total 
burdens 
 (EUR mn) 

470 
470 
1,410 
9,400 
- 

859 
50 
30 
157 
1,096 

Table  35  –  Share  of  companies  active  in  intra-EU  trade  and  annual  burden  from  recapitulative 
statements  

Companies active in cross-
border trade 

Annual burden per company  
(EUR/year) 

Micro 
Small 
Medium 
Large 

5% 
15% 
15% 
45% 

470 
470 
1,410 
9,400 

197 Deloitte (2017), Special scheme for small enterprises under the  VAT Directive 2006/112/EC - Options for review, 
Final Report, Annex I. 
198 Eurostat, Mean annual earnings by sex, age and occupation - NACE Rev. 2, B-S excluding O. 
199 The results are higher than those provided by the previous Capgemini study (2009) for three reasons: (i) the Study 
included  no  specific  segmentation  for  large  companies,  that  have  higher  costs;  (ii)  the  Study  assumed,  for  VAT 
obligations in general, that 50% of micro, small and medium companies would insource compliance; this is however 
not realistic for this specific IO, which most companies would need to outsource; and (iii) the mean earning of clerical 
workers increased by 17%. 

137 

 
 
 
                                                 
Burden savings from pre-filled VAT return 

The administrative burdens saved per company due to the availability of pre-filled VAT return are 
estimated based on the number of person/days saved on this obligation, per company size. This  is 
retrieved  from  the  assessment  of  the  current  situations  in  countries  where  this  simplification  is 
already operational (Spain, Portugal). 

Table 36 – Burden savings from pre-filled VAT return  

Micro 
Small 
Medium 
Large 

Person/days per year 
1.5 
1.5 
6 
12 

Number of invoices issued in the EU 

The number of invoices – in total, paper, and electronic – issued in the EU is estimated based on 
‘EA  2019’,  per  company  size.  Electronic  invoices  include  both  structured  and  unstructured  (e.g. 
PDF) format. It is then apportioned across Member States proportionally to the number of taxable 
persons. 

Table 37 – Number of invoices issued in the EU (million per year) 

Total 
Million per year 
1,953 
1,451 
1,310 
4,553 
9,266 

Electronic 
% 
50% 
50% 
50% 
58% 
54% 

Paper 
% 
50% 
50% 
50% 
42% 
46% 

Micro 
Small 
Medium 
Large 
Total 
Source: EA 2019. 

Burden savings from e-invoicing 

The  calculation  of  burden  savings  from  switching  to  paper  to  e-invoicing  are  based  on  the 
parameters estimated for ‘EA 2019’. 

Table 38 – Parameters to estimate the benefits from e-invoicing (per e-invoice issued) 

Share of paper 
invoices sent via 
post 

Number of 
invoices sent per 
postage 

Postage 
costs 

Printing costs (EUR per 
invoice) 

E-invoice issuance 
saving (minute per 
invoice) 

Micro 
Small 
Medium  
Large 

15% 
50% 
80% 
80% 

1 
1 
3 
5 

1.1 
0.28 
0.28 
0.28 

0.02 
0.02 
0.02 
0.02 

0 
0 
0.22 
0.22 

Sources.  EA  2019;  Deutsche  Post  2021  for  postage  costs;  Assessment  of  current  situation  for 
invoice issuance savings.  

138 

 
 
 
 
Environmental benefits 

When an invoice is issued electronically rather than on paper, it is estimated that 27 grams of CO2 
are saved.200 To monetise the amount of CO2 saved, a price of 30 EUR/tonne of CO2 is used, based 
on 2020 market trends for EU Emission Allowances. 

Exchange rates 

Yearly  average  2020  exchange  rates  for  non-Euro  countries  are  retrieved  from  the  European 
Central Banks. 

VAT revenue and compliance  

VAT receipts (in national currency and EUR), VTTL, the VAT Gap are taken from the latest EU 
VAT  Gap  Study  (2021).  C-efficiency  and  total  liability  are  authors’  own  calculation,  based  on 
Eurostat’s national account data. Latest available data are used. 

Number of taxable persons 

The number of taxable persons per country is retrieved from Deloitte (2017), which provide data on 
VAT taxable persons below EUR 2 million revenue (micro-enterprises) and above. The latter are 
then  segment  into  small,  medium,  and  large  enterprises  based  on  Eurostat  Structural  Business 
Statistics.  

Share of taxable persons covered by DRRs 

In  EU  Member  States  with  a  domestic  DRR,  the  number  of  taxable  persons  within  its  scope  is 
invariably lower than the number of taxable persons. This is due for various reasons, including (i) 
the existence of a threshold within the DRR; (ii) the application of the VAT SME scheme which 
may  foresee  such  a  simplification  for  micro  taxable  persons;  (iii)  inactive  VAT  persons;  or  (iv) 
persons carrying out only VAT exempt transactions. Currently, in all Member States with a DRR, 
excluding  Spain  with  a very  high  threshold  in  place,  the  share  of  taxable  persons  covered  by  the 
DRR is 67%.  

Administrative burdens are calculated on the number of taxable persons covered by the DRR. It 
is assumed that 100% of small, medium and large companies are covered by the DRR, while the 
non-covered taxable persons are assumed to be micro entities. 

The estimated  amount of taxable persons potentially covered by the EU  DRR  at  EU level, in  the 
case of its application to intra-EU transactions and domestic transactions is about 12 times higher 
than for the application to intra-EU transactions only.    

Table 39 – Estimated amount of taxable persons potentially covered by the EU DRR (domestic and 
intra-EU transactions) 

Domestic + intra-EU 
transactions 

Intra-EU transactions 
only 

Micro 

24,230,297 

1,829,787 

200  Endresen,  L.  –  Pagero,  “Sustainable  business:  E-invoicing,  your  company  and  the  environment”,  January  2021, 
available at: https://www.pagero.de/blog/sustainable-business/ (last accessed in September 2021); 
Moberg,  A.,  Borggren,  C.,  Finnveden,  G.,  Tyskeng,  S.  (2021),  Effects  of  a  total  change  from  paper  invoicing  to 
electronic  invoicing  in  Sweden,  Report  from  the  KTH  Centre  for  Sustainable  Communications  (Royal  Institute  of 
Technology, Stockholm). 

139 

 
 
                                                 
Small 

Medium 

Large 

Total 

Deflator 

639,713 

319,149 

27,051 

95,957 

47,872 

12,173 

25,216,210 

1,985,789 

A cost deflator per each Member States is calculated based on Eurostat national accounts data. 

Number of subsidiaries of multinational companies 

The number of subsidiaries of MNCs established in another Member State or in a third country is 
estimated based on Eurostat, Structure of multinational enterprise groups in the EU. Missing data 
are extrapolated proportionally to nominal GDP (from Eurostat national accounts).  

Annual administrative burdens for multinational companies 

The annual administrative burdens per each subsidiary of a MNC company are estimated based on 
the assessment of the current situation and result from the average of the values estimated for the 
Member States with existing DRRs. They are estimated per small- and large-scale MNC, and per 
type of DRR. 

Table 40 – Annual administrative burdens per multinational subsidiary (EUR/year) 

Small-scale 

Large-scale 

13,000 
17,000 
28,000 
32,000 

17,000  
25,000 
97,000 
133,000 

VAT listing 
SAF-T 
Real-time 
E-invoicing 

Salaries 

Salaries  for  the  various  typologies  of  workers  across  the  EU  Member  States  are  taken  from 
Eurostat’s national mean annual earning by occupation (2018). In line with the SCM standard, 25% 
overheads were added to the earning. 

Mapping of digital reporting requirements (Box 1) 

Since reporting requirements can be introduced and defined at national level, DRRs existing in the 
EU  are  heterogeneous  and  differ  over  several  dimensions,  such  as  the  frequency  (time)  and 
modality of reporting. 

Two  types  of  systems  can  be  distinguished  based  on  the  time  at  which  information  is  to  be 
submitted: 

  Periodic  Transaction  Controls  (PTCs),  in  which  transactional  data  are  reported  to  tax 

authorities at regular intervals. 

  Continuous  Transaction  Controls  (CTCs),  in  which  transactional  data  are  submitted 
electronically  to  tax  authorities  just  before,  during  or  shortly  after  the  actual  exchange  of 
such data between the parties, also including e-invoicing requirements. 

140 

 
 
 
Regarding  the  modality  of  compliance  with  the  reporting  obligations,  such  distinction  captures 
better the various types of requirements that exist across the EU Member States:  

  within  PTCs,  one  could  distinguish  between  VAT  listing  and  SAF-T  requirements.  The 
former  requires  the  periodic  transmission  of  transactional  data  according  to  a  nationally-
defined format, while the latter relies on the national specification of an OECD standard, i.e. 
the Standard Audit File for Tax; 

  within  CTCs,  the  main difference  is  between  real-time  and  e-invoicing  systems.  Under  a 
real-time  system,  the  taxpayer  should  submit  certain  data  shortly  after  carrying  out  a 
transaction  but  does  not  need  to  mandatorily  use  and  share  e-invoices  with  the  tax 
administration.  Under  an  e-invoicing  system,  the  taxable  person  is  mandated  to  use  a 
structured e-invoice according to a pre-determined format, which is then shared with the tax 
administration. 

Scope  of  data.  Considering  the  systems  currently  in  place  in  the  EU,  relevant  differences  also 
appear as regards the scope of the data required. Member States may require businesses to provide:  

  only certain or all VAT data among those which can be retrieved from an invoice, such as 
the VAT taxable amount, the VAT payable and the applicable rate, including the e-invoice 
(or a subset of data from it); or  

  both  VAT  and other data on other taxes or accounting information, such as stock data on 

inventories or depreciation, or payments. 

Groups of requirements.  Based on the reporting frequency, the modality  of  compliance  and the 
data required, the DRRs existing in the EU can be classified into one of the following four groups 

Frequency of the 
obligation 

Periodic Transaction Controls (PTCs) 

Continuous Transaction Controls (CTCs) 

Group 

VAT listing 

SAF-T 

Real-time 

E-invoicing 

Their distinctive features can be summarised as follows:   

  VAT  listing  is  the  obligation  imposed  on  taxpayers  to  submit  VAT  transactional  data 
according  to  a  national  format.  Transactional  data  usually  consist  of  a  list  of  transactions 
(hence the term ‘listing’) with information on their values and counterparts, as well as other 
VAT  relevant  data  among  those  which  are  to  be  included  in  the  invoice.  The  data  are 
submitted on a periodic basis (typically monthly  or quarterly), often jointly  with  the VAT 
return. 

  SAF-T reporting is a specific form of DRRs based on the OECD’s standard. The standard 
was developed for tax audit purposes and can encompass information on direct and indirect 
taxes  as  well  as  accounting  data;  it  can  be  tailored  to  single  countries  via  national 
specifications. Several Member States adapted and then mandated a SAF-T standard as the 
format  through  which  tax  and  audit  information,  including  on  VAT  transactions,  is  to  be 
submitted to tax authorities on a periodic basis. 

  Real-time  reporting  is  the  obligation  on  taxpayers  to  transmit  transactional  data  shortly 
after issuance of the invoice. The data required  can be extracted from  the invoice, but  the 

141 

 
invoice itself does not need be transmitted to the tax authority. The taxpayers must comply 
with the requirement within a short time-limit (the same day, or within a few days). 

e-Invoicing  is  a  compliance  system  requiring  taxpayers  to  issue  a  structured  e-invoice  for  VAT 
purposes.  ‘Structured’ means that the e-invoice  must conform  to  a machine-readable standard, so 
that it can be automatically processed. The e-invoice as a whole, or a set of data therefrom, must 
then be transmitted to the tax authority, prior to its issuance, as it takes place, or shortly thereafter. 
The taxpayer may be able to send the e-invoice directly to its customers while sharing it with the 
tax authority (no-clearance e-invoicing). Alternatively, the taxpayer may be required to go through 
the tax authority first, either to obtain a preliminary authorisation, or by using a central IT platform, 
which, in turn, delivers the e-invoice to the customer (clearance e-invoicing) 

Figure 12 – Digital Reporting Requirements in the EU  

Legend: 

Clearance e-invoicing 
 (IT) 
Real-time reporting 
(ES, HU) 
SAF-T reporting 
(LT, PL, PT) 
VAT listing 
(BG, CZ, EE, HR, LV, SK) 
Forthcoming reporting requirement 
(EL, FR, RO) 
No digital reporting requirement 

Supporting Study, vol. I, p. 18 

15. ANNEX 5: OTHER INITIATIVES  

Directive  2014/55/EU  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on 
electronic invoicing in public procurement. 

The Directive 2014/55/EU on electronic invoicing in public procurement has the goal of facilitating 
the  use  of  a  European  Standard  on  electronic  invoicing  across  Member  States  and  to  reduce  the 
obstacles  in  cross-border  trade  that  arise  from  the  coexistence  of  different  national  legal 
requirements and technical standards in e-invoicing. A common European Standard on e-invoicing 
(EN 16931)201 is  used to  achieve interoperability, ensuring that  public  entities  are able to  receive 
and  process  electronic  invoices.  A  previous  assessment  of  the  EU  invoicing  legal  framework202 
proved that this requirement was instrumental in fostering the use of structured e-invoices among 
economic operators in several Member States.  

201 C/2017/6835 (OJ L 266, 17.10.2017, p. 19–21) 
202 SWD(2020) 29 final 

142 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
VAT in the Digital Age and the definitive regime203  

VAT  in  the  digital  age  is  about  adapting  the  VAT  system  to  new  technologies  from  different 
angles:  real-time  reporting  to  the  tax  administrations  to  fight  fraud  more  efficiently,  an  increased 
use of the One Stop Shop to enable businesses to enjoy a single place of registration in the EU and 
increased responsibilities for platforms to collect VAT. The definitive regime of VAT is a proposal 
whose  aim  is  to  replace  an  exemption  on  intra-EU  trade  (with  taxation  at  destination  by  the 
customer) by a collection of the VAT by the supplier at the rate of destination. Together with a One 
Stop Shop to facilitate compliance, the aim of definitive regime, like the digital reporting, is to fight 
VAT fraud.  

Therefore, the two proposals have a common goal (fighting fraud), through different means which 
can  be  seen  as  complementary.  The  definitive  regime  of  VAT  is  still  needed  to  address  intrinsic 
weaknesses of the EU VAT system and remains a medium to long term  goal. VAT in the digital 
age  can  work  with  both  VAT  systems  (the  current  one  and  a  definitive  regime).  Moreover,  the 
DRRs  (real  time  reporting)  can  help  increasing  the  level  of  trust  between  Member  States,  which 
constitutes one of the main obstacles in agreeing on a VAT definitive regime that requires Member 
States to collect VAT on behalf of each other. 

Regulation  (EU)  2019/1150  on  promoting  fairness  and  transparency  for  business  users  of  online 
intermediation services (the ‘P2B Regulation’)  

The  P2B  Regulation  contains  a  set  of  rules  to  ensure  a  fair,  predictable,  sustainable  and  trusted 
online business environment, granting business users of online intermediation services appropriate 
transparency, as  well as  effective redress  possibilities. These rules  create  an obligation for online 
platforms, inter alia, to update their terms and conditions to provide information to business users 
about whether they are granted access to the data generated through their use of the online platform 
and  whether  data  is  shared  with  third  parties.  Depending  on  the  outcome  of  this  STR  initiative, 
online platforms shall need to update their terms and conditions to refer to the data that could be 
shared with public authorities and give business users prior notice of this change, before it becomes 
effective. 

In  addition,  the  Regulation  imposes  a  reporting  obligation  on  larger  online  platforms,  which 
requires them to make easily available public information on the functioning and effectiveness of 
their  internal  complaint-handling  system  on  an  annual  basis,  which  could  be  more  frequent  if 
significant changes are needed. Therefore, any reporting obligations imposed by the STR initiative 
would  be  in  addition  to  those  already  required  by  the  P2B  Regulation.  Article 4  of  the  P2B 
Regulation  requires  notice  to  be  provided  prior  to  the  restriction,  suspension  or  termination  of  a 
business  users’  account.  Any  notice  and  takedown  obligation  would  need  to  respect  the  time 
periods, notice periods and requirements to provide a reason and be listed as a possible grounds for 
removal of an offer in  the terms  and  conditions  in  respect  of providers of STR  who are business 
users  (Article 3(1)(c)).  Such  business  users  would  have  the  possibility  to  lodge  a  complaint  in 
accordance with the procedures for complaint handling set out in Article 11 and also, potentially the 
subject of mediation under Article 12. Member States have taken steps to implement Article 15 that 
requires them to ensure adequate and effective enforcement of the Regulation and have appointed 
authorities to be responsible for the enforcement in the following Member States. It is possible that 
such  authorities  could  take  on  the  limited  additional  responsibility  for  the  enforcement  of  the 
obligations on online platforms to share data. 

203 COM/2017/0569 final - 2017/0251 (CNS) 

143 

 
                                                 
Council  Directive  (EU)  2021/514  of  22  March  2021  amending  Directive  2011/16/EU  on 
administrative cooperation in the field of taxation (‘DAC7’)  

Council  Directive  (EU)  2021/514  has  amended  Directive  2011/16/EU  on  administrative 
cooperation  in  the  field  of  taxation  extending  the  EU  framework  on  the  automatic  exchange  of 
information in the field of taxation. Member States have to transpose this Directive by 31 January 
2022 and apply the new provisions from 1 January 2023.  

The  purpose  of  this  amendment  was  to  (i)  address  the  potential  loss  of  tax  revenue  caused  by 
unreported  income  earned  through  the  sale  of  goods  and  services  via  online  intermediating 
platforms and (ii) ensure a level playing field between operators active on platforms and traditional 
businesses.  

To this end, the new rules create an obligation for platforms to report the income earned by sellers 
and for the Member State where reporting takes place, to exchange this information automatically. 
They  introduce due diligence procedures  and an  annual  reporting obligation on platforms located 
both  inside  and  outside  the  EU  concerning  information  on  sellers  that  use  the  platforms  to  earn 
income.  This  includes,  among  other  activities,  the  rental  of  immovable  property,  including  on  a 
short-term basis. Platforms must collect the following information and assess its reliability using all 
information  and  documents  available  in  their  records,  including  their  electronically  searchable 
records: 

 

 
 

 
 
 
 

the first and last name of the host who is an individual, or its legal  name if the host is  an 
entity;  
the primary address; 
the tax identification number (TIN) of the host, including each Member State of issuance, 
or, in the absence of a TIN, the place of birth of the host who is an individual; 
the business registration number of the host that is an entity;  
the VAT identification number of the host, where available; 
the date of birth of the host who is an individual;  
the address of each property listing and, where issued, respective land registration number 
or  its  equivalent  under  the  national  law  of  the  Member  State  where  it  is  located,  where 
available. 

Platforms must report the following information to the relevant Member State:  

  details of the platform (name, registered office address, TIN, as well as the business name(s) 

 
 

of the platform(s) in respect of which the Reporting Platform Operator is reporting);  
the information collected and listed above;  
the Financial Account Identifier (where the financial account to which the consideration is 
paid  is  different  from  the  name  of  the  seller,  the  name  of  the  account  holder  is  required 
along  with  any  other  financial  information  available  to  the  Reporting  Platform  Operator 
with regard to this account holder); 

  Member State(s) of residence of the host;  
 

the revenue received during each quarter and the number of relevant activities provided with 
respect to each property listing; 

  any fees, commissions or taxes withheld or charged by the platform during each quarter; 
  where available, the number of days each property listing was rented and the type of each 

property listing. 

144 

 
The  Member  State  where  reporting  takes  place  will  then  share  the  relevant  information  with  the 
competent tax authorities of the other relevant Member State(s). DAC7 requires Platform Operators 
to  report  certain  information  with  the  competent  authorities  of  Member  States.  DAC7  includes  a 
legal base to share such information for VAT purposes. 

The Digital Services Act (DSA)204 

The DSA establishes EU-wide due diligence obligations that will apply to all digital services that 
connect consumers to goods, services, or content, including new procedures for faster removal of 
illegal content as well as comprehensive protection for users' fundamental rights online. The DSA 
includes enhanced due diligence rules for very large online platforms (i.e. online platforms with 
more than 45 million users in the EU), that will be supervised by the Commission. The Regulation 
maintains the key principles of the e-Commerce Directive, in particular the provisions concerning 
the liability of intermediaries and the prohibition of general monitoring obligation. It has impact on 
the VAT in the Digital Age initiative. 

The Digital Markets Act (DMA)205 

The  DMA  proposal,  adopted  in  2022  together  with  the  DSA,  aims  to  ensure  contestable  and  fair 
markets  in  the  digital  sectors  across  the  Union  by  addressing  the  unfair  practices  of  certain 
undertakings  (designated  as  “gatekeepers”).  Gatekeepers  are  companies  that  play  a  particularly 
important  role  in  the  internal  market  because  of  their  size  and  their  importance  as  gateways  for 
business users to reach their customers. Providers of core platform services should be designated as 
gatekeepers either based on the quantitative criteria or following a case-by-case assessment during 
a market investigation.  

The  DMA  will  apply  to  ‘core  platform  services’,  a  concept  which  includes  online  intermediation 
services provided or offered by gatekeepers companies to business users established in the EU or 
end users established or located in the Union, irrespective of the place of establishment or residence 
of  the  gatekeepers  and  irrespective  of  the  law  otherwise  applicable  to  the  provision  of  service. 
These core platform services include, among others, online intermediation  services, online search 
engines, social networking, video sharing platform services, operating systems and cloud services. 
It has minimal impact on the VAT in the Digital Age initiative. 

Upcoming proposal for a Regulation concerning short-term accommodation rentals (STRs)206 

The main objective of the initiative is to improve and harmonise the framework for data generation 
and  data  sharing  on  short-term  rentals  across  the  Union.  The  initiative  seeks  to  tackle  two  main 
problems: first, the market fragmentation and burdens for online platforms caused by numerous and 
divergent  transparency  and  data  sharing  requirements  across  the  EU  and,  second,  the  insufficient 
access to data on STRS by public authorities in the EU. However, when let on a temporary short-
term  basis  the  accommodations  are  subject  to  VAT,  unlike  the  leasing  of  residential  property, 
which is usually exempt, thus the STR initiative has minimal impact on the VAT in the Digital Age 
initiative. 

204 https://eur-lex.europa.eu/legal-content/en/TXT/?qid=1608117147218&uri=COM%3A2020%3A825%3AFIN) 
205 https://eur-lex.europa.eu/legal-content/en/TXT/?qid=1608116887159&uri=COM%3A2020%3A842%3AFIN 
206https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13108-Tourist-services-short-term-rental-
initiative_en 

145 

 
 
                                                 
Proposal for a Directive on improving the working conditions in platform work - COM(2021) 762 
final 

The proposed  Directive seeks  to  ensure  that  people  working  through  digital  labour  platforms  are 
granted the legal employment status that corresponds to their actual work arrangements. It provides 
a  list  of  five  control  criteria  to  determine  whether  the  platform  is  an  “employer”.  If  the  platform 
meets at least two of those criteria, it is legally presumed to be an employer. This means the digital 
labour platforms in question will be considered as employers by relevant national authorities, and 
will  have  to  fulfil  their  obligations  as  employers,  for  instance  with  regard  to  working  time  and 
annual  and  family-related  leaves.  Platforms  will  have  the  right  to  contest  or  “rebut”  this 
classification, with the burden of proving that there is no employment relationship resting on them. 
The  clear  criteria  the  Commission  proposes  will  bring  the  platforms  increased  legal  certainty, 
reduced litigation costs and it will facilitate business planning. 

The Directive increases transparency in the use of algorithms by digital labour platforms, ensures 
human monitoring on their respect of working conditions and gives the right to contest automated 
decisions. These new rights will be granted to both workers and genuine self-employed.  

In addition, national authorities often struggle to access data on platforms and the people working 
through them. This is even more difficult when platforms operate in several Member States, making 
it unclear where platform work is performed and by whom. 

The  Commission's  proposal  will  bring  more  transparency  around  platforms  by  clarifying  existing 
obligations  to  declare  work  to  national  authorities  and  asking  platforms  to  make  key  information 
about their activities and the people who work through them available to national authorities.  

146 

 
 
 
16. ANNEX 6: E-COMMERCE EVALUATION 

16.1. 

Introduction 

Value added tax (VAT) has become an increasingly important source of revenue for Member States 
and is also an important EU own resource. However, recent developments, such as the increase of 
online sales via internet, created new challenges for the smooth functioning of the EU VAT system. 

On 1 July 2021 the VAT e-commerce package207 introduced a number of simplifications in order 
to reduce the administrative burdens for businesses in complying with their VAT obligations. With 
the  introduction  of  two  new  mechanisms,  namely  the  One-Stop  Shop (OSS)  and  the  Import 
One-Stop  Shop  (IOSS),  businesses  can  now  declare  and  pay  VAT  incurred  on  certain  types  of 
B2C  transactions  taking  place  in  Member  States  where  they  are  not  established  in  their  own 
Member State and, consequently, the scope of situations requiring VAT registration was reduced. A 
new rule, known as the ‘deemed supplier rule’, has also been introduced to reduce VAT avoidance 
among businesses whose supplies are facilitated by electronic platforms208. In addition, the new e-
commerce  rules  reduced  the  intra-EU  distance  selling  thresholds  for  the  application  of  the 
destination  principle  to  an  EU  wide  EUR  10,000  threshold,  minimising  the  VAT  compliance 
burden for micro-businesses. This new annual threshold applies to intra-Community distance sales 
of goods and supplies of telecommunications, broadcasting and electronic (TBE) services. Since 1 
July 2021, as part of the e-commerce package, the import VAT exemption for goods valued at up to 
EUR 22 was also abolished.  

Nonetheless,  there  remain  numerous  circumstances  –  adding  up  to  a  significant  volume  of 
transactions and affecting many stakeholders – that oblige businesses to obtain and hold more than 
one VAT registration. Further reducing the range of situations that require non-established persons 
to  obtain  multiple  VAT  registrations  is  one  of  the  objectives  of  the  VAT  in  the  Digital  Age 
initiative209. This particular objective can be achieved by further extending the scope of the above 
mentioned  two  mechanisms  (OSS  and  IOSS),  the  feasibility  of  which  is  examined  in  the  VAT 
registration pillar of the VAT in the Digital Age initiative. In this context, it is necessary to reflect 
on  the  effectiveness  of  the  current  rules,  hence  the  need  to  evaluate  the  functioning  of  the  e-
commerce  package,  its  robustness  and  the  potential  need  for  improvements.  This  evaluation  is 
based on the replies (i) to a public consultation and (ii) to a specific questionnaire addressed to the 
27  Member  States  (tax  and  customs  authorities).  The  evaluation  covers  the  first  6  months  of 
implementation of the e-commerce package, from 1 July 2021 until 31 December 2021.  

207 
 Council Directive (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112/EC and Directive 2009/132/EC 
as  regards  certain  value  added  tax  obligations  for  supplies  of  services  and  distance  sales  of  goods  and  Council 
Regulation  (EU)  2017/2454  of  5  December  2017  amending  Regulation  (EU)  No  904/2010  on  administrative 
cooperation and combating fraud in the field of value added tax.  
208 
 When  an  electronic  interface  facilitates  (i)  the  distance  sales  of  goods  B2C  imported  from  a  third  country  (not 
exceeding a value of EUR 150) to a customer in the EU or (ii) the B2C supply of goods within the EU if the underlying 
supplier is not established in  the EU, the electronic interface is  ‘deemed’ to purchase the goods from the  underlying 
supplier and to sell them to the final customer, thus being liable to report on and pay the VAT. 
209  Communication  from 
https://ec.europa.eu/taxation_customs/system/files/2020-07/2020_tax_package_tax_action_plan_en.pdf 

the  European  Parliament  and 

the  Council  COM(2020)312 

the  Commission 

to 

147 

 
 
                                                 
In  the  first  instance,  the  effectiveness  criterion  of  the  evaluation  report  is  assessed  by  measuring 
how the objectives of these new rules are met:  fairer taxation, facilitation of VAT compliance, 
reduction of the administrative burden and protection of Member States’ VAT revenue. The 
evaluation  of  the  implementation  of  the  VAT  e-commerce  package  from  each  Member  State’s 
perspective, including relevant figures in relation to the functioning of the OSS/IOSS schemes (the 
number  of  registered  traders  and  the  total  VAT  revenue  declared  and  paid),  along  with  an 
assessment  of  business  satisfaction,    enables  to  gauge  the  efficiency  of  these  new  rules. 
Furthermore, the relevance criterion of this VAT e-commerce reform is assessed against the need to 
reform the VAT system to address the exponential increase in e-commerce activity in recent years, 
together with the associated need to level the playing field between EU and non-EU traders and to 
simplify the collection of VAT. Finally, the coherence of the reform is assessed by the consistency 
of these new rules with other EU policies, requirements and regulations such as the SME strategy 
for  a  sustainable  Europe210,  the  European  digital  market211,  the  EU  VAT  administrative 
cooperation212 and the Union Custom Code213. Ultimately, the EU added value criterion is covered 
by further strengthening the internal market and simplifying the VAT obligations.  

16.2. 

What was the expected outcome of the intervention? 

16.2.1. Description of the intervention and its objectives 

The  VAT  e-commerce  package  was  one  of  the  priorities  under  the  Digital  Single  Market 
Strategy214. This strategy was adopted on 6 May 2015 in response to the problem of barriers to the 
use of online tools faced by the EU citizens and businesses and was intended to adapt the European 
market to the digital age. In recent years, advancements in technology have had a profound, lasting 
effect on commercial activity. Affordable access to technology has been one of the key drivers in 
initiating a  global  e-revolution,  affecting how  consumers transact,  breaking down market  barriers 
and creating new opportunities for traders to gain access to a globalised market.  

To  help  overcome  the  challenges  presented  by  the  globalised  economy  and  to  modernise  and 
simplify  the  collection  of  tax  on  e-commerce  transactions,  the  European  Commission  proposed  a 
package of VAT reforms215. These proposals were designed to  reshape, update and modernise the 
VAT system to ensure its relevance and effective application to the new realities of the e-commerce 
market. The main aim was to create a fairer, simpler and more harmonised system of taxation by 

210 Communication from the Commission to the European Parliament, the Council, the European Economic and Social 
committee and the Committee of the Regions “An SME strategy for a sustainable and digital Europe”, COM(2020) 103 
final, 
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020DC0103 
211 Communication from the Commission to the European Parliament, the Council, the European Economic and Social 
Committee and the Committee of the Regions “A Digital Single Market Strategy for Europe”  COM(2015) 192 final, 
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52015DC0192 
212 
 Council  Regulation  (EU)  No 904/2010  of  7 October  2010 on  administrative  cooperation  and  combating  fraud  in  the 
field of value added tax. 
213 
 Regulation  (EU)  No 952/2013  of  the  European  Parliament  and  of  the  Council  of  9 October  2013  laying  down  the 
Union Customs Code.  
214 Communication from the Commission to the European Parliament, the Council, the European Economic and Social 
Committee and the Committee of the Regions “A Digital Single Market Strategy for Europe”  COM(2015) 192 final, 
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52015DC0192  
215 Communication from the Commission to the European Parliament, the Council, the European Economic and Social 
final,  https://eur-lex.europa.eu/legal-
Committee  on 
content/EN/TXT/HTML/?uri=CELEX:52016DC0148&from=EN   

“Action  plan  on  VAT”,  COM(2016)  148 

an 

148 

 
                                                 
removing legislation that created distortions of competition and achieving better administrative co-
operation.  At  the  same  time,  the  reforms  sought  to  make  VAT  compliance  easier  for  legitimate 
businesses who carry out cross-border online commercial activity by taking a new approach to tax 
collection.  

Figure 13 – Problem tree (VAT registration) 

Figure 14 – Linking the objectives to the problem 

149 

 
 
 
As  part  of  the  2016  VAT  Action  Plan216,  the  Council  adopted  the  VAT  e-commerce  package  on 
5 December  2017,  which  focussed  on  reforming  the  taxation  of  e-commerce  activity.  On  21 
November 2019, the Council also adopted the implementing measures for this package. The reform 
entered into force on 1 July 2021 (with the exception of some new simplification measures related 
to the Mini One-Stop Shop217 (MOSS) that took effect on 1 January 2019). 

The new rules included:  

1)  improvements  to  the  MOSS  special  scheme  and  introduction  of  a  new  harmonised  EU-wide 
annual threshold for intra-Community distance sales of goods and cross-border supplies of TBE 
services,  

2)  extension  of  the  scope  of  the  MOSS,  turning  it  into  a  One-Stop  Shop  (OSS)  for  all  B2C 

supplies of services, 

3)  provisions relating to the supply of goods (e-commerce), such as: 

  special  schemes  for  intra-Community  distance  sales  of  goods  (OSS)  and  distance  sales  of 
goods  imported  from  third  countries  and  third  territories  in  consignments  of  an  intrinsic 
value of not exceeding EUR 150 (IOSS); 

  special  rules  applicable  to  supplies  of  goods  facilitated  by  electronic  interfaces  (deemed 

supplier regime218); 
removing  the  VAT  exemption  for  imports  of  goods  in  small  consignments  not  exceeding 
EUR 22; 
introducing the special arrangements for declaration and payment of import VAT. 

 

 

These  measures  were  designed  to  strike  a  balance  between  the  need  to  take  action  against  e-
commerce related VAT  fraud  and the ultimate objective of facilitating e-commerce trade. On the 
one  hand,  the  purpose  of  introducing  the  changes  was  to  ensure  effective  collection  of  VAT  and 
avoid  distortion  of  competition  between  suppliers  inside  and  outside  the  EU.  On  the  other  hand, 
equally important, was to simplify VAT obligations for taxable persons and reduce administrative 
burdens on e-commerce businesses, tax administrations and consumers.  

16.2.2. Point(s) of comparison  

Improvements to the MOSS and introduction of new harmonised EU-wide threshold  

In  January  2015,  the  Commission  introduced  a  simplified  system  (MOSS  special  scheme)  to 
declare and pay VAT on B2C supplies of telecommunications, broadcasting and electronic (TBE) 

216 https://ec.europa.eu/taxation_customs/action-plan-vat_en. 
217  The  Mini  One-Stop  Shop  came  into  force  on  1  January  2015  and  allows  taxable  persons  supplying 
telecommunication  services,  television  and  radio  broadcasting  services  and  electronically  supplied  services  to  non-
taxable persons in Member States in which they are not established to account for the VAT due on those supplies via a 
web-portal in the Member State in which they are identified. This scheme was optional, and constituted a simplification 
measure following the change to the place of supply VAT rules, in that the supply takes place in the Member State of 
the customer, and not the Member State of the supplier. This scheme allows these taxable persons to avoid registering 
in each Member State of consumption (Member State where the customer is located). 
218 
 When  an  electronic  interface  facilitates  (i)  the  distance  sales  of  goods  B2C  imported  from  a  third  country  (not 
exceeding a value of EUR 150) to a customer in the EU or (ii) the B2C supply of goods within the EU if the underlying 
supplier is not established in  the EU, the electronic interface is  ‘deemed’ to purchase the goods from the  underlying 
supplier and to sell them to the final customer, thus being liable to declare and pay the VAT due on those supplies. 

150 

 
                                                 
services in the EU. The MOSS allowed suppliers of TBE services to declare and pay VAT due in 
all Member States where they have customers via a MOSS registration in one single Member State. 
As  assessed  in  the  Impact  Assessment  of  the  VAT  e-commerce  package219,  this  special  scheme 
offered an attractive solution to many traders who wished to simplify their VAT obligations arising 
from their supplies of TBE services to customers in the EU. The experience of the MOSS system 
clearly  demonstrated  the  EU  added-value  for  Member  States  in  terms  of  securing  VAT  revenues 
and in terms of reducing the costs for businesses trading cross-border. However, the assessment of 
MOSS has also identified a number of areas for improvement. For this reason, new simplification 
measures, which took effect on 1 January 2019, were introduced.  
In  order  to  reduce  the  burdens  and  complexity  associated  with  VAT  compliance  for  micro 
businesses,  a  new  harmonised  EU-wide  annual  threshold  of  EUR  10  000  for  intra-Community 
distance  sales  of  goods  and  cross-border  supplies  of  TBE  services  was  introduced.  As  a  result, 
supplies of TBE services below this threshold remained subject to VAT in the Member State where 
the  taxable  person  supplying  those  TBE  services  was  established,  thus  preventing  the  micro 
businesses from having to register in the Member State of consumption or to register for the MOSS 
to declare their TBE supplies of services. Moreover, non-EU suppliers were permitted to access the 
non-Union scheme as improvements were introduced to allow foreign suppliers to register for the 
MOSS  even  if  they  were  already  VAT  registered  in  some  Member  States  without  a  fixed 
establishment.  Finally,  the  proofs  required  to  determine  the  place  of  supply  were  simplified.  In 
addition the invoicing rules were amended to ensure the application of the rules in accordance with 
the Member State of identification.   As a result of these measures, the administrative burden for 
taxable  persons  using  the  special  scheme  was  reduced  and  the  efficiency  for  Member  State  tax 
administrations increased. 

Extension of the scope of MOSS special scheme to all B2C supplies of services 

Prior to the implementation of the VAT e-commerce package, taxable persons supplying services 
other than TBE services to non-taxable persons had to register for VAT purposes in each and every 
Member  State  where  those  services  were  subject  to  VAT.  These  rules  were  burdensome  and 
expensive for business to monitor and comply with. In 2015220, ongoing cost of maintaining a VAT 
registration in a Member State was  estimated, on average, to EUR 8 000 per annum. Taking into 
account the success of the MOSS simplification, the 1 July 2021 amendments extended the scope of 
the  MOSS  to  become  a  broader  OSS,  which  now  covers  all  services221  supplied  to  non-taxable 
persons established in the EU. These rules were introduced to further simplify VAT obligations and 
reduce the administrative burden for taxable persons supplying cross-border services. 

New rules relating to the supply of goods (e-commerce) 

On 1 July 2021 the VAT e-commerce package entered into application and introduced a number of 
amendments to the VAT rules governing the taxation of B2C cross-border e-commerce activity in 
Europe aiming to protect Member States' tax revenue and to create a level playing field for the e-

219 
 Impact assessment accompanying the document Proposals for a Council Directive, a Council Implementing Regulation 
and a Council regulation on modernising VAT for cross-border B2C e-commerce, COM(2016) 757 final. 
220 
 Deloitte Study for the Commission on ‘Modernising VAT for cross-border e-commerce’ – Lot 1, Pg. 44 
221 
 This concerns all B2C supplies of services  that do  not follow the general rules of place of supply of  services in the 
Member State of establishment of the supplier as stated in Article 45 of Council Directive 2006/112/EC.    

151 

 
 
                                                 
commerce businesses while, at the same time, minimizing the burden for complying with the VAT 
obligations.  

Removal of the VAT exemption for imports of goods in small consignments 

The  VAT  provisions  previously  applicable  to  the  taxation  of  low  value  imports  of  goods      were 
prone to fraud and created favourable conditions for businesses selling low value imported goods to 
consumers  in  the  EU.  Those  complex  and  non-harmonised  rules  granted  a  VAT  exemption  to 
supplies of low value goods imported into the EU with a value not exceeding EUR10 to EUR 22, 
varying from one Member State to another. The application of this exemption was detrimental to 
EU  established  businesses  that  were  selling  the  same  goods  within  the  EU  as  their  low  value 
supplies did not enjoy such a relief and, therefore, led to a distortion of competition within the e-
commerce market. This situation was further compounded by the misuse of this EUR 22 threshold. 
A  study  carried  out  by  Copenhagen  Economics,  which  was  based  on  a  sample  of  400  real 
purchases, has  found that  65% of  consignments from non-EU suppliers through the public postal 
channels  were  non-compliant  resulting  in  a  lack  of  payment  of  VAT  and  import  duties  to  the 
national authorities222. The VAT e-commerce package levelled the playing field for EU established 
suppliers making sales of goods within the EU, as the VAT exemption for the importation of small 
consignments  not  exceeding  EUR  22  was  abolished.  As  a  result,  VAT  is  now  due  on  all 
commercial goods imported into Europe from a third country or third territory, irrespective of their 
value. 

Special schemes OSS and IOSS  

In  recognition  of  the  success  of  earlier  initiatives,  many  of  the  measures  included  in  the  VAT  e-
commerce  package  leveraged  and  built  on  the  success  of  the  MOSS  simplifications.  In  fact,  the 
MOSS  infrastructure  has  been  used  as  the  blueprint  for  the  design  of  a  number  of  new 
simplifications  such  as:  (i)  the  One-Stop    Shop  (OSS),  which  has  extended  the  range  of  supplies 
within the scope of the Union scheme of the MOSS to include intra-Community distance sales of 
goods  and  certain  domestic  supplies  of  goods  facilitated  by  electronic  interfaces,  (ii)  for  non-EU 
established  traders  the  non-Union  scheme  of  the  MOSS is  extended  to  cover  all  B2C  supplies  of 
services within the EU, and also (iii) the introduction of the Import One-Stop Shop (IOSS) scheme, 
which  is  a  special  scheme  for  declaring  and  remitting  VAT  on  distance  sales  of  goods  imported 
from  third  territories  or  third  countries  in  consignments  of  an  intrinsic  value  not  exceeding  EUR 
150. Traders who opt to register in these schemes can deal with their VAT compliance obligations 
in one language via the tax administration of the Member State in which they are registered, even 
though their sales are EU-wide. 

Moreover,  the  IOSS  supports  the  import  side  of  e-commerce  activity  and  reduces  the  VAT 
compliance burden associated with  the importation of low value  goods.  Customers who purchase 
from  IOSS  registered  suppliers  pay  the  VAT  inclusive  price  at  the  time  of  their  online  purchase. 
The customer, therefore, has certainty and transparency about the total price of the transaction and 

222  E-COMMERCE  IMPORTS  INTO  EUROPE:  VAT  AND  CUSTOMS  TREATMENT  (2016)  Authors:  Dr  Bruno 
Basalisco, Julia Wahl, Dr Henrik Okholm E-commerce imports into Europe: VAT and customs treatment - Copenhagen 
Economics carried out this study on behalf of UPS by making approximately 400 real purchase brought to delivery via 
e-commerce  platforms  located  in  US,  Canada,  Japan,  India  and  China.  Delivery  was  made  to  7  destination  Member 
States.  50%  of  purchases  were  via  express  operators  with  50%  via  public  postal  operators.  VAT  was  due  on  all  the 
consignments,  customs  duties  were  due  on  45%  of  the  consignments.  This  experimental  study  found  that  shipments 
sent via national postal operators , resulted in a lack of payment of VAT and import duties to the national authorities for 
more than 60% of items purchased online. 

152 

 
 
                                                 
is not confronted with unexpected VAT costs when goods are imported into the EU and delivered 
to their home address. IOSS goods are, therefore, exempt from VAT upon importation into the EU 
as  the  VAT  has  already  been  paid  at  the  time  of  the  purchase.  The  use  of  the  IOSS  further 
simplifies logistics and introduces more flexibility as the goods can enter the EU and be released 
for  free  circulation  in  any  Member  State,  regardless  of  where  the  transport  of  those  goods  to  the 
customer ends. 

Deemed supplier regime  

Prior to the implementation of the VAT e-commerce package, the rule according to which Member 
States may provide that a person other than the person liable for the payment of VAT is to be held 
jointly  and severally liable for payment of  VAT  was insufficient  to  ensure effective and  efficient 
collection  of  VAT  in  cases  when  distance  sales  of  goods  were  facilitated  through  the  use  of  an 
electronic interface, such as platforms. Therefore, it was decided to involve electronic interfaces in 
the  collection  of  VAT  on  those  sales.  This  new  ‘deeming’  provision  for  VAT  purposes  is 
significant as it mitigates the risk of non-payment of VAT. Where the deeming provision applies, 
individual sellers on electronic interfaces do not have to register for VAT as the platforms will be 
responsible  for  paying  the  VAT  due  on  sales  from  its  platform.  This  particular  reform  bolsters 
compliance as it streamlines the VAT obligations of thousands of underlying sellers by deeming the 
platform  as  the  person  liable  to  declare  and  pay  the  VAT  due  on  those  supplies.  This  is 
accompanied by new record keeping obligations for these deemed suppliers and also for platforms 
who merely facilitate the supply without being a deemed supplier. 

Special Arrangements for declaration and payment of import VAT 

The VAT e-commerce package also introduced a new simplification measure known as the special 
arrangement. This provides an alternative solution for the collection of import VAT in cases where 
neither the IOSS nor the standard VAT collection mechanism on importation are used. The special 
arrangement measure applies to distances sales of good imported into the EU with an intrinsic value 
not  exceeding  EUR  150,  excluding  excisable  goods.  It  allows  postal  operators,  express  carriers, 
customs  agents  and  other  operators  who  fulfill  the  customs  import  declarations  on  behalf  of  the 
customer  to  declare  and  remit  the  collected  VAT  on  these  imports  on  a  monthly  basis.  It  only 
applies where the goods are released for free circulation in the Member State where the dispatch or 
transport ends. 

16.3. 

How has the situation evolved over the evaluation period? 

16.3.1. Implementation  

Originally, the VAT e-commerce package was supposed to enter into force on 1 January 2021 (with 
the  exception  of  some  new  simplification  measures  related  to  the  MOSS  that  took  effect  on  1 
January  2019).  However,  taking  into  consideration  the  challenges  that  Member  States  faced  in 
tackling the COVID-19 crisis and the fact that the new provisions were based on the principle that 
all Member States had to update their IT systems, which also impacted e-commerce stakeholders, it 
was necessary to postpone the date of transposition and  entry into application of the package. To 
minimize the additional budgetary losses for Member States, the delay was as short as possible and 
limited  to  only  6  months.  Thus,  the  e-commerce  rules  are  applied  as  of  1  July  2021  instead  of  1 
January 2021, which gave Member States and businesses some additional time to prepare. 

Overall,  the  entry  into  application  of  the  package  went  smoothly,  without  major  operational 
problems.  The  Commission  services  ensured  a  close  follow-up  of  the  implementation  in  the 

153 

 
 
Member States prior to 1 July 2021 and provided support during the deployment phase as well as 
during  the  first  months  of  operation.    The  OSS  and  IOSS  are  based  on  interoperability  between 
different Member States’ tax authorities as well as between the tax and customs authorities within 
each Member State. To ensure the correct functioning of the systems, it was essential that  all the 
Member States met the critical deployment deadlines, therefore regular deployment and operational 
calls were organised with the Member States  throughout  2021.  In the spirit of providing support, 
these calls continue to take place on a regular basis, even after the new rules entered into force on 1 
July  2021.    A  risk  dashboard  and  a  deployment  map  providing  an  overall  state  of  play  of  the 
deployments were regularly updated and shared with Member States. All national webportals (OSS 
and IOSS) were accessible before 1 July 2021, allowing traders to register for these new schemes. 
However, a couple of Member States needed to  set up workaround solutions with the help of the 
Commission services in order to assure interoperability between tax and customs authorities. Only 
the UK, in relation to Northern Ireland, was not able to implement all the mandatory requirements 
on  time.  This  affected  the  Northern  Irish  businesses  willing  to  register  for  the  IOSS  in  Northern 
Ireland,  forcing  them  to  register  for  this  special  scheme  via  an  intermediary  in  another  Member 
State 

154 

 
 
 
Figure 15 – E-commerce deployment map of 23 March 2022 

16.3.2. Growth and evolution of e-commerce  

Although the evaluation  period only covers the first six months of application of  the e-commerce 
package,  it  is,  nevertheless,  important  to  understand  the  recent  and  profound  changes  in  the 
economic landscape that drove this reform.  

To help set the scene, in 2017, at the time when the need for reform of VAT e-commerce rules was 
ratified,  worldwide  revenues  from  e-commerce sales were in  the  region  of EUR 2,1 trillion223. At 
that time, projections indicated that this figure would more than double over the next 4 years. The 
predictions suggested that global e-commerce retail sales would reach EUR 4,3 trillion by 2021224.  

From  a  European  perspective,  at  that  time,  the  total  value  of  the  e-commerce  economy  was 
estimated to be in the region of EUR 530 billion225. By 2019, studies showed that the e-commerce 
sector in Europe had grown to EUR 636 billion, up 14,2% on the previous year226. The value of the 
e-commerce economy in Europe was expected to be in the region of EUR 717 billion by 2020. 

At the same time, the VAT compliance losses (which include compliances losses from non-EU and 
intra-EU  transactions)  for  Member  States  were  estimated  to  EUR  5  billion227.  This  estimate 
included the VAT foregone (EUR 1 billion) from the VAT exemption for the importation of small 
consignments.  

223 The 2017 average US dollar to Euro exchange rate of 0.8865 was used for 2017 figures and for projections. 
224 Worldwide retail e-commerce sales 2014 -2024 – statista.com. 
225 Ecommercenews.eu – The total value of e-commerce in Europe was EUR 530 billion in 2016. 
226 Euroecommerce.eu – e-commerce activity in Europe was estimated was up 14.2% in 2019 from 2018’s figures. 
227 SWD(2016) 379 final p20. 

155 

 
  
 
                                                 
The pre-1 July VAT rules governing the taxation of low value imports of goods were prone to fraud 
and  created  favourable  conditions  for  non-EU  businesses  selling  low  value  imported  goods  to 
consumers  in  the  EU.  Those  rules  granted  a  VAT  exemption  to  supplies  of  low  value  goods 
imported into the EU with a value not exceeding EUR 22. In fact, of the EUR 5 billion VAT that 
was  estimated  to  be  lost  across  Member  States  on  cross-border  supplies  of  goods  each  year,  it  is 
estimated that EUR 1 billion of it was a direct result of the application of the VAT exemption itself, 
whereas the remaining EUR 4 billion related to compliance losses (non-compliance) from non-EU 
and  intra-EU  transactions.  The  significance  of  the  EUR  5  billion  loss  that  the  EU  suffered  each 
year  (estimated  to  have  reached  EUR  7  billion  by  2020)  could  not  be  ignored  and,  therefore,  it 
focussed the Commission’s priorities on the need to take action to combat e-commerce rated VAT 
fraud. 

Analysis  from  PricewaterhouseCoopers  (PwC)228  suggests  that  in  2020,  over  two  billion  people 
purchased goods or services online worldwide229. In Europe, e-commerce is expected to grow by 42 
percent in five years from 2021230.. The recent pandemic, as well as the UK’s withdrawal from the 
EU, seem to have contributed to this growing trend. Within the EU, e-commerce accounts for 10-
15% of total retail sales231. In terms of turnover, e-commerce in Europe grew 14% in 2019, while in 
2020 the growth rate was at 10%232. Despite the slight dip, the forecast suggests an upward trend for 
the coming years.233. 

The  number  of  e-commerce  consumers  in  the  EU  almost  doubles  between  from  2014-2029.  The 
number of consumers participating in e-commerce increased in 2020, at the height of the COVID-
19  pandemic.  Across  the  period,  there  is  an  upward  trend  in  consumers  making  cross-border 
purchases,  increasing  from  30  million  in  2014  to  a  projected  160  million  in  2029.  This  is  driven 
partially by the growth in the total number of e-commerce shoppers over the period.  

228  On-going study carried out by PwC on ‘an integrated and innovative overhaul of the collection of import duties and 
taxes (VAT and excise duties) on B2C e-commerce transactions from third countries’. 
229  Statista, 2021a. 
230 Statista, 2021a, projection to 2025. 
231  E-commerce Europe, 2021 
232  E-commerce Europe, 2021 
233  E-commerce Europe, 2021 

156 

 
 
 
                                                 
Figure 16 – Estimated number of (cross-border) e-commerce consumers in the EU, 2014-2029 

Source:  PwC  analysis;  (Eurostat,  2021a)  (Eurostat,  2021b)  (Eurostat,  2021c)  (Statista,  2021a)  (Eurostat,  2021d); 
(Forrester Research, 2021). See text for the key assumptions underlying these estimates. 

In terms of import, the total volume of e-commerce consignments from third countries is estimated 
to increase significantly by 2029. This is driven by a combination of growth in the number of EU 
consumers  purchasing  goods  online  and  growth  in  the  average  annual  volume  of  consignments 
purchased per consumer. The largest growth in the number of cross-border e-commerce imports is 
for  consignments  worth  less  than  EUR  22,  which  is  estimated  to  increase  from  40  million 
consignments in 2014 to around 460 million consignments by 2029. 

157 

 
 
 
 
Figure 17 – Estimated volume of cross-border e-commerce in the EU, 2014-2029 

Volume of cross-border e-commerce in the EU by consignment price in EUR.  
Source: PwC Analysis; (European Commission, 2015a) (International Postal Corporation, 2021) (International Postal 
Corporation,  2022)  (Juniper  Research,  2021)  (Fusacchia  et  al.,  2020)  (Ghodsi  et  al.,  2016)  (Eurostat,  2022a) 
(Eurostat, 2022b).  
Note: The graph above includes the impact of COVID-19, the UK’s departure from the EU, business model change and 
the e-commerce VAT package. 

The  total  value  of  cross-border  e-commerce  consignments  from  third  countries  is  projected  to 
increase from EUR 14 billion in 2014 to EUR 37 billion in 2029. The largest growth in the value of 
cross-border e-commerce imports is in consignments valued between EUR 22 and EUR 150. These 
imports are expected to grow by EUR 18 billion over the period. 

16.3.3. Actions taken 

Although  the  period  of  the  evaluation  only  covers  the  first  six  months  of  application  of  the  e-
commerce package, it is, nevertheless, important to consider the development of European policies 
that were introduced to reshape the VAT system to these new e-commerce realities. 

Taxation of TBE supplies and MOSS 

Generally, the pre-MOSS VAT rules were burdensome and expensive for business to monitor and 
comply with. At that time, the Commission estimated that the costs associated with registration in 
other Member States is somewhere in the region of EUR 8,000 per Member State per annum. The 
implementation  of  the  2015  new  place  of  supply  rules  was  the  first  step  towards  increasing  the 
fairness and efficiency of the VAT collection system. The MOSS offered an attractive solution to 
many  traders  who  wished  to  simplify  their  VAT  obligations  arising  from  their  supplies  of  TBE 
services to customers in the EU. Prior to the introduction of the VAT e-commerce package, there 
were over 11.500 traders registered to use the MOSS. 

158 

 
 
In  2020,  EUR  6.56  billon  in  VAT  revenue  was  collected  via  the  MOSS,  which  was  more  than 
double  2015’s  figure  of  EUR  3  billion.  These  figures  highlight  the  success  of  this  initial  action 
which formed the foundations for the development of the VAT e-commerce package. 

Figure 18 – MOSS Total Revenues 2015-2020234  

VAT e-commerce package 

Building on the success of the MOSS, the e-commerce package introduces a number of reforms to 
help modernise the VAT system in response to the increase in e-commerce activity. 

Since  the  new  rules  came  into  application,  preliminary  analysis  of  import  data  from  the  EU 
Customs Surveillance system suggests that approximately EUR 1,9 billion VAT  was  collected in 
respect  of  imports  of  low  value  consignments  not  exceeding  EUR  150  in  the  first  6  months  of 
implementation  of  the  new  rules,  which  equates  to  approximately  EUR  3,8  billion  on  an  annual 
basis.  

In terms of registration numbers, the data provided by Member States show that there were   8654 
traders registered to use the Import One-Stop Shop at the end of the first 6 months of application of 
the  scheme.  Early  analysis  also  shows  that  the  top  8  IOSS  registered  traders  accounted  for 
approximately 91% of all transactions declared for import into the EU via the IOSS. This is a very 
encouraging statistic as it highlights the impact that the new ‘deeming’ provision for marketplaces 
has had on compliance. As a result of the deeming provision, the critical compliance effort is now 
focused on a much smaller number of large players in the market, who account for the majority of 
low value goods imported into the EU.  

234 The blue chart bars represent the total MOSS revenue each year whereas the green bars represent the year on year 
percentage increase in revenue. 

159 

 
 
                                                 
16.3.4. Identified issues 

Although  the  implementation  went  smoothly,  some  teething  problems  emerged  which  required 
further  intervention  in  order  to  ensure  a  proper  functioning  of  the  VAT  e-commerce  rules. 
Therefore, the Commission services and Member States have been looking into possible solutions 
to tackle the following issues: 

  Cases of double taxation when the IOSS VAT identification number could not be validated due 

to technical issues  

  Further  limiting  the  possibilities  to  misuse  Import  One-Stop  Shop  (IOSS)  VAT  identification 

numbers 

  High postal fees 

Double taxation 

Cases  of  double  taxation,  which  may  arise  in  certain  circumstances,  were  identified  as  a  major 
issue235  that  requires  the  urgent  application  of  a  pragmatic  and  workable  solution  to  address  the 
problem in the short-term. Such circumstances are considered temporary, because postal operators 
are gradually adapting their IT systems that enables the electronic transmission of the VAT IOSS 
identification  number  across  the  postal  network  and  Member  States  are  gradually  updating  their 
national  import  customs  systems  by  end  2022  so  that  these  can  process  declarations  relating  to 
IOSS goods.  

In  order  to  mitigate  the  financial  effect  on  the  customers  facing  double  taxation,  common 
guidelines236 to handle these cases of double taxation have recently been agreed by Member States. 

Misuse of the IOSS VAT identification numbers  

Upon  importation,  IOSS  consignments  are  exempt  from  import  VAT  when  the  valid  IOSS  VAT 
identification number of the (deemed) supplier is provided to the competent customs office in the 
Member State of importation at the latest upon lodging of the import declaration. 

235  There  are  two  main  root  causes  for  such  systematic  double  taxation  cases:  (i)  the  non-communication  of  the 
supplier’s IOSS number due to the fact that the postal operator of the country of dispatch is unable to transmit the IOSS 
number  and  (ii)  some  Member  States’  national  import  customs  system  currently  cannot  validate  the  IOSS  number 
correctly  communicated  in  a  full  customs  declaration,  because  they  have  not  been  updated  in  accordance  with  the 
Union Customs Code. Such update has to take place until 31 December 2022. 
236  VAT  Committee  Guidelines  on  the  proposed  solution  to  regularise  double  taxation  in  the  IOSS  VAT  return. 
Working paper No 1036, Document A, taxud.c.1(2022)1657365. 

160 

 
 
                                                 
The Commission is conscious that there may be a risk that IOSS VAT identification numbers could 
potentially  be  misused  and,  therefore,  understands  the  associated  need  to  secure  IOSS  import 
transactions.  The  risk  of  IOSS  abuse  manifests  itself  in  cases  where  the  trader  is  not  IOSS 
registered, yet fraudulently uses the IOSS number of a legitimate IOSS registered trader in order to 
falsely  benefit  from  the  VAT  exemption  upon  importation.  Currently,  IOSS  monthly  reports  can 
help somewhat in the detection of this abuse as they provide the total value of the imported goods 
VAT  exempted  under  the  IOSS,  during  each  month,  per  IOSS  VAT  identification  number,  per 
Member State of identification and can be compared with the amount of VAT declared in the IOSS 
VAT return. 

To date, the Commission has facilitated a number of discussions with different stakeholders across 
various  fora  with  the  view  to  establishing  the  magnitude  of  the  issue  and  identifying  potential 
solutions. Although the magnitude of the problem could not be established in these discussions, the 
participants,  nevertheless,  recognised  the  potential  risk  of  abuse  and  the  importance  of  further 
securing  the  IOSS  VAT  identification  number  against  possible  fraud.  Despite  the  difficulties  in 
assessing the scale of the fraud, the Commission is aware that Member States have already taken 
steps to examine the extent of potential IOSS VAT identification number abuse. The Commission 
will  support  common  and  innovative  solutions  to  better  secure  the  IOSS  process  which  will  be 
addressed in the VAT in the Digital Age initiative. 

High postal fees 

When postal operators act as representatives of consignees receiving parcels in the EU, they need to 
follow the required formalities necessary to release goods for free circulation. Postal operators may 
require  a  fee  for  this  service.  The  Commission  and  Member  States  received  several  complaints 
regarding  high  postal  fees.  Consequently,  the  Commission  and  the  national  consumer  protection 
authorities in some Member States, are interested in verifying that the fees charged are proportional 
to  the  services  rendered  to  the  consignee  of  the  goods.  Following  this  action,  the  relevant 
information on the level of service fees applicable by national postal operators will be published on 
the website of the Commission.  

List of improvements 

In  addition  to  the  three  above  mentioned  operational  issues,  the  Member  States  and  the 
Commission have identified a certain number of technical improvements that should be addressed 
in  relation  to  the  current  schemes  in  order  to  further  improve  their  functioning.  These  are 
implementing/technical  improvements  of  the  current  policy  that  may  require  a  legislative  update 
and will be included in the VAT in the Digital Age initiative.  

EUR 10 000 threshold - Article 59c of the VAT Directive  Exclude  from  the  calculation  of  this  threshold  the 
distance  sales  from  other  Member  States  than  the 
Member State of establishment  

Services provided to non-established customers  

Allow the declaration of zero rated supplies and exempt 
distance  sales 
the 
introduction of the new SME rules 

the  Union  OSS 

following 

in 

Include in the scope of Article 359 of the VAT Directive 
services  provided  to  non-established  customers  (non-
Union scheme)  

(i)  Allow 

the  declaration  of  zero  rates  supplies 

(exempted supplies with right for deduction)  
(ii)  Cohabitation of new SME and OSS schemes: 
Amend the OSS VAT return to allow taxable 
persons to declare exempted distance sales (in the 
Member States where the business benefit from the 
SME scheme) 

161 

 
 
Disparate  rules  on  tax  representation  for  access  to  the 
OSS/IOSS schemes  

TEDB database with CN and CPA codes 

(i)  Harmonise the rules for the appointment of a tax 
representative/intermediary for the registration of 
non-EU traders in the different OSS/IOSS schemes 

(ii)  Align the joint and several liability rules of 

intermediaries 

Make  the  use  of  CN  and  CPA  codes  mandatory  in  the 
TEDB database  

Use  of  the  Standard  Audit  File  (SAF)  OSS  for  records 
related to Article 242a of the VAT Directive 

Enable  the  use  of  the  standard  audit  file  to  the  records 
requested  to  platforms  when  they  are  facilitating  a 
supply (although not deemed supplier) 

Include the timing of the chargeable event for intra-EU 
distance sales under the Union scheme  

Modify  Article 369g  of  VAT  Directive  to  include  the 
timing  of  the  chargeable  event  for  intra-EU  distance 
sales under the Union scheme  

Treatment of the registration of a VAT group 

Upgrade the IOSS monthly reports 

Miscellaneous IT suggestions for improvements 

Amend  the  registration  form  of  the  IOSS  in  order  to 
specify  that  the  taxable  person  is  a  VAT  group  and 
clarify the scope of the transactions that can be declared 
by  a  VAT  group  having  stock  of  goods  in  another 
Member States 

Include  the  Member  State  of  final  destination  in  the 
IOSS monthly reports  

Update  of 
registration,  declaration  and  payment 
processes and interoperability between Member States in 
order to further improve the functioning of the schemes 

16.4. 

Evaluation findings (analytical part) 

16.4.1. To what extent was the intervention successful and why?  

Effectiveness 

Effectiveness is measured in terms of the  extent to which the objectives of the VAT e-commerce 
package were achieved:  

Fairer taxation 

The implementation of the e-commerce package has resulted in a system of fairer taxation, which 
has been achieved by the removal of the EUR 22 VAT exemption on imported goods. The abolition 
of this exemption was one of the key amendments introduced by the e-commerce package, the aim 
of which was to level the playing field between EU and non-EU established traders. More than 80% 
of  the  respondents  to  the  public  consultation  who  had  an  opinion  agreed  that  the  e-commerce 
packaged  achieved  a  system  of  fairer  taxation  as  a  result  of  the  removal  of  the  VAT  exemption 
threshold.  

Moreover, in addition to the removal of the EUR 22 threshold, the taxation of cross-border supplies 
and distance sales of  goods in  the Member State of  consumption has  also led to  fair competition 
among  EU  businesses.  On  the  basis  of  the  figures  provided  by  the  tax  authorities  more  than 

162 

 
 
 
 
EUR 6 billion  VAT  revenue  was  collected  in  the  (extended)  Union  scheme,  distributed  among 
Member States in accordance with the principle of taxation in the Member State of consumption. 

Figure 19 – VAT revenue collected in the OSS between 1 July 2021 and 31 December 2021 

VAT revenue during the first 6 months in the OSS

s
n
o

i
l
l
i

M
R
U
E

7.000

6.000

5.000

4.000

3.000

2.000

1.000

0

2.014

3.993

Union scheme

non-Union scheme

752

goods

services

Facilitate VAT compliance 

Without the simplification mechanisms brought by the OSS and IOSS schemes, businesses would 
have to register in all Member States in which they are supplying goods and services to consumers. 
These  schemes  have  therefore  minimised  the  need  for  taxable  persons  to  hold  multiple  VAT 
registrations.  Moreover,  they  simplified  and  facilitated  the  VAT  compliance  by  allowing 
businesses to declare and pay the VAT due on all of their distance sales of goods and cross-border 
supplies of services in a single VAT return, from their Member State of establishment. 

As shown in the pie charts below, the e-commerce package’s goal to facilitate VAT compliance is 
recognised  by  the  respondents  to  the  public  consultation  as  an  important  achievement  of  this 
intervention.  

163 

 
 
 
When replying to the specific questions on VAT compliance, 75% (OSS) and  75% (IOSS) of the 
respondents  confirmed  the  improvements.  In  terms  of  registration  numbers,  the  figures  as  at  31 
December  2021  also  demonstrate  how  the  e-commerce  package  reforms  have  been  widely 
welcomed  by  traders.  These  figures  are  a  further  indication  of  the  success  of  the  e-commerce 
package  as  many  traders  have  opted  to  reduce  the  administrative  burdens  associated  with  VAT 
compliance  by  streamlining  their  VAT  compliance  obligations  via  the  e-commerce  simplification 
schemes. 

The  e-commerce  package  also  introduced  new  rules  governing  the  taxation  of  supplies  of  goods 
that are facilitated by electronic interfaces/platforms and, under certain conditions, those platforms 
become  the  ‘deemed  supplier’  in  respect  of  certain  supplies  they  facilitate.  Where  the  electronic 
interfaces are the deemed supplier, they are liable to report on and pay the VAT on those supplies. 
Therefore, the introduction of the deemed supplier provision has further contributed to the goal of 
improving  VAT  compliance.  IOSS  registration  data  shows  that  all  of  the  major  platforms  have 
registered  to  use  the  import  scheme.  Early  analysis  of  import  data  indicates  that  the  top  8  IOSS 

164 

 
 
 
 
 
 
 
 
registered traders accounted for approximately 90% of all transactions declared for import into the 
EU via the IOSS. In terms of volume, an analysis of the import data from Q3 of 2021 suggests that 
this  equates  to  approximately  200  million  transactions  in  the  import  scheme  during  the  initial 
quarter.237.  The  results  of  this  analysis  clearly  evidence  the  fundamental  impact  that  the  new 
‘deeming’  provision  for  marketplaces  has  had  on  compliance  by  shifting  the  compliance  burden 
from underling suppliers to platforms. As a result of the deeming provision, the compliance effort is 
now directed at a much smaller number of large players in the market, who account for the majority 
of low value goods imported into the EU.  

Protection of Member State VAT revenue 

In  these  times  of  recovery  following  the  pandemic,  the  fight  against  loss  of  VAT  revenue  has 
become  a  high  priority.  The  e-commerce  package  helps  to  generate  additional  VAT  revenue  for 
Member States as a result of the removal the EUR 22 VAT exemption on goods imported into the 
EU. In the first 6 months (July to December 2021), the total amount of VAT collected on low value 
consignments  is  estimated  at  around  EUR  1,9  billion.  As  an  estimate, the  VAT  collected  to-date 
equates to at least EUR 3,8 billion on a yearly basis. Almost one third of the EUR 1.9 billion (EUR 
692  million  during  the  first  six  months  of  application)  is  generated  from  imported  goods  with  a 
value  not  exceeding  EUR  22,  which  can  be  considered  as  additional  VAT  revenue  due  to  the 
abolition of the VAT exemption. The other portion is generated from imported goods with a value 
between EUR 22 and EUR 150, on which studies showed the level of fraud was very high (65%) 
before the reform. 

VAT due to the import of low value 
goods ≤ 150€

€ 692.404.694

€ 1.214.595.375

Total VAT value ≤ EUR 22

Total VAT value > EUR 22 and ≤ EUR 150

By  simplifying  the  declaration  and  the  collection  of  VAT,  the  OSS  and  IOSS  have  clearly 
contributed to the protection of VAT revenue. The statistics provided by the Member States for the 
first  6  months  of  entry  into  application  indicate  that  a  VAT  revenue  of  almost  8  billion  was 
collected in these schemes: 

237  Statistics of Q3/2021 provided by the Surveillance system gathering data from the import declarations 

165 

 
 
                                                 
Figure 20 – Total of VAT amounts declared via OSS/IOSS (1/07/2021 to 31/12/2021) 

VAT revenue during the first 6 months

6.006

752

1.084

Union scheme

non-Union scheme

import scheme

7.000

6.000

5.000

4.000

3.000

2.000

1.000

0

s
n
o

i
l
l
i

M
R
U
E

Cost-benefits analysis 

To  measure  the  real  added  value  and  the  extra  revenue  generated  for  Member  States  as  a  direct 
result of the implementation of the e-commerce package reforms, it is necessary to undertake a cost 
benefits analysis.  

In their replies to the questionnaire, the Member States provided details in relation to the costs of 
implementing these new rules and schemes. These costs encompass the IT implementation of the 
OSS  and  IOSS  schemes,  together  with  the  costs  associated  with  the  development  of  the  IOSS 
distributive registry which enables customs to validate the IOSS VAT identification number. It also 
includes  the  costs  of  updating  the  Surveillance  system  with  additional  data  from  the  import 
declaration that are used to set up the IOSS monthly reports and the costs of the implementation of 
the new import declaration with super reduced data set, as well as any other costs Member States 
may have faced (e.g. communication, human resources…).  The amounts provided by the majority 
of tax and customs administrations indicate that the total implementation costs are estimated to be 
in  the  region  of  EUR  72  million  across  all  the  Member  States.  These  costs  therefore  represent 
approximately only 10% of the new VAT collected on goods imported with a value not exceeding 
EUR 22 for the first 6 months of application of these new rules and 0.01% of the total amount of 
VAT collected via the OSS and IOSS schemes.  

166 

 
 
 
 
Facilitate  the  monitoring  of  compliance  and  the  fight  against  fraud  for  Member  States’ 
authorities 

From  1  July  2021,  the  country-based  thresholds  on  distance  sales  disappeared238,  and  VAT 
became  due  in  the  country  of  the  consumer,  subject  to  an  EU-wide  turnover  threshold  of  just 
EUR  10 000.  This  EU-wide  threshold  applies  to  intra-Community  distance  sales  of  goods  and 
cross-border supplies of TBE services. The threshold only applies to EU established businesses that 
are established in one Member State only. If distance sales of goods and supplies of TBE services 
are  under  the  threshold,  sellers  who  are  only  established  in  one  Member  State  can  continue  to 
charge and pay the VAT in the Member State where the goods are located at the time of dispatch. 
Once the threshold is exceeded, for intra-Community distance sales of goods, VAT has to be paid 
in the Member State of destination of the goods, and for supplies of TBE services VAT has to be 
paid in the Member State of establishment of the consumer, possibly by means of the OSS.  

The replacement of the different Member State’s distance sales thresholds by a uniform and lower 
EU-wide threshold has significantly reduced the risk of non-compliance with disparate VAT rules 
and has helped to improve overall compliance levels. Moreover, the record keeping obligations for 
businesses and marketplaces registered for these special schemes facilitate the audit and control of 
the VAT declared via the OSS and IOSS.  

As regard imports, the compliance is reinforced by the IOSS monthly reports, which is drawn up by 
the Commission’s Surveillance system and is based on the data collected from the import customs 
declarations. They provide the total value of the imported goods VAT exempted under the IOSS, 
during each month, per IOSS VAT identification number, per Member State of identification and is 
shared  with  the  tax  authority  of  the  Member  State  where  the  given  IOSS  VAT  identification 
number was registered.   

The replies to the EU survey as regards the audit process show the limit of such reports which do 
not  correspond  entirely  with  the  taxable  amounts  declared  in  the  IOSS  VAT  returns239.  The 
respondents also expressed the need to upgrade these reports to include the Member State of final 
destination. The access to additional data, in conjunction with the records that are already held by 
traders, should provide improvements to the audit and control processes.  

Efficiency 

The  efficiency  of  the  VAT  e-commerce  package  is  measured  by  how  well  Member  States 
implemented the special schemes, by the evaluation of the functioning of the OSS and IOSS and by 
the level of business satisfaction. 

238 Until 1 July 2021, according to Article 34 of  the  VAT Directive,  a supplier selling goods to consumers (B2C) in 
other  EU  Member  States  charged  VAT  in  his  own  country  if  the  total  value  of  his  sales  to  the  consumer’s  country 
within the respective calendar year fell below the threshold set by that country and had not exceeded that threshold in 
the previous calendar year. Each Member State was able to define the threshold for supplies made to customers in their 
country  (destination  country)  by  choosing  between  the  maximum  EUR  100  000  threshold  set  by  the  Directive  and  a 
lower threshold of EUR 35 000. If the sales of the supplier  were above the national threshold, the supplier  needed to 
register and pay VAT in the Member State of destination. 
239 The time of the import differs from the time of declaring the transactions in the IOSS VAT return. 

167 

 
                                                 
Implementation of the OSS and IOSS  

Built  on  the  experience  and  functioning  of  the  MOSS,  the  implementation  of  the  OSS  and  IOSS 
went smoothly, without major operational issues. The vast majority of Member States were able to 
meet  the  deadlines  while  the  Commission  services  helped  a  few  Member  States  to  put  in  place 
some workarounds.  

In  their  evaluation,  Member  States  are  however  insisting  on  the  need  to  stabilise  the  current 
functionality of the systems. In this regard, as a first step, Member States have indicated the need to 
solve issues  relating to  the exchange of information  between Member States so that all messages 
(registration,  VAT  return  and  payment  messages)  can  be  treated  in  a  fully  automated  way.  The 
issues  of  interoperability  between  Member  States  must  be  seen  as  mere  teething  problems, 
especially given the fact that the new rules only entered into force 6 months ago. Furthermore, this 
particular issue rarely impacts businesses.  

Moreover, Member States have also listed a number of improvements/simplifications to the current 
functioning of these schemes. These improvements/simplifications will be taken in account in the 
framework of the VAT registration part of the VAT in the Digital Age initiative, which examines 
options to further extend the schemes.  

As showed above, the schemes are regarded as real simplification mechanisms avoiding the VAT 
registration  in  multiple  Member  States.  A  majority  of  OSS  registered  traders  provided  a  positive 
reaction to the statement that it is easy to use the OSS. The equivalent replies in terms of the IOSS 
are more evenly spread. 

Functioning of the OSS and IOSS  

The  evaluation  of  the  functioning  of  the  OSS  and  IOSS  is  based  on  the  figures  provided  by  the 
Member States’ administrations in relation to the number of registrations in the different schemes 
and the amount of VAT declared/collected via those schemes. 

It must be underlined that although the use of the schemes is voluntary, the number of registrations 
in  the  schemes  is  increasing  on  a  daily  basis  and,  thus,  the  appetite  for  registration  further 
demonstrates the attractiveness of the schemes. 

Table 41 – Number of registrations in OSS/IOSS on 1 February 2022  

OSS-Union 
scheme 

OSS- Non-
Union scheme 

IOSS –Import 
scheme 

Number of 
intermediaries 

Total number 

90250 

4638 

8654 

876 

168 

 
 
 
 
of registrations 

These figures can be compared with the number of registrations in the MOSS Union and non-Union 
schemes  in  2020.  The  extension  of  the  scope  of  the  Union  scheme  to  cover  intra-Community 
distances  sales  of  goods  has  had  a  major  impact  on  the  number  of  registrations.  Although  the 
extension  of  the  scope  of  the  non-Union  scheme  was  limited,  the  number  of  registrations  in  the 
non-Union scheme almost tripled. This high number of registrations confirms the attractiveness of 
the schemes and helps to verify the success of the accompanying communication campaign. 

Table 42 – OSS/MOSS – Comparison of the number of registrations  

Number of registrations in: 

OSS (01/02/2022) 

MOSS (2020) 

Union scheme 

90250 

9892 

4638 

1696 

Non-Union scheme 
 Moreover,  the  amount  of  VAT  declared  through  the  schemes  confirms  the  good  functioning  of 
these schemes. As the scope of the MOSS was extended to become the broader OSS, which now 
includes Intra-EU distance sales of goods, it is therefore not possible to compare the VAT amounts 
collected  under  the  MOSS  with  the  VAT  amount  collected  under  the  OSS.  Nevertheless,  these 
figures  proof  the  proper  functioning  of  the  OSS  as  a  VAT  collection  mechanism.  Although  the 
increase in the amount of VAT collected in the OSS is not proportionally as high as the increase in 
OSS VAT registrations, this may be due to the fact that the amount of VAT collected in respect of 
new  registrations  in  the  first  quarter  of  2022  will  only  be  reflected  in  April  2022  (outside  of  the 
scope of this evaluation).  

Table 43 – OSS/MOSS – Comparison of the VAT declared on an annual basis  

VAT declared on an annual 
basis 

OSS (2021240) 

MOSS (2020) 

Union scheme 

EUR 12 billion 

EUR 5,92 billion 

Non-Union scheme 

EUR 1,5 billion 

EUR 0,64 billion 

Coherence 

The  evaluation  of  the  coherence  criterion  is  possible  by  assessing  the  consistency  of  the  VAT  e-
commerce package with EU policies, requirements and regulations. A focus has been placed on the 
coherence of these new schemes with the SME strategy for a sustainable Europe241, the European 

240 The amount of VAT declared in OSS in Q3 and Q4 in 2021 is multiplied by 2 in order to have an estimate for the 
annual amount. 
241 Communication from the Commission to the European Parliament, the Council, the European Economic and Social 
Committee  and  the  Committee  of  the  Regions  “An  SME  strategy  for  a  sustainable  and  digital  Europe”,  COM(2020) 
103 final, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020DC0103 

169 

 
 
 
                                                 
digital  single  market242,  the  EU  administrative  cooperation  in  the  field  of  indirect  taxation243 and 
the Union Customs Code244. 

The  respondents  to  the  public  consultation  underlined  the  coherence  of  this  intervention  with  the 
SME strategy for a sustainable Europe. As the VAT e-commerce package simplifies the process of 
distance  sales  of  goods  and  services  into  the  EU  by  decreasing  the  need  to  register  in  different 
Member States, it clearly helps SMEs to cope more easily with their VAT obligations and to extend 
and grow their business throughout the EU. 

Public consultation – Assessment of the consistency of the OSS/IOSS with the SME strategy for a sustainable 
Europe 

The coherence with the European digital single market policy is fully recognised by the respondents 
to the public consultation. Indeed, the OSS and IOSS schemes are completely digitalised solutions 
allowing the businesses to declare and remit the VAT on all cross-border B2C supplies of services 
and distance sales of goods through the national webportal of their Member State of establishment.  

Public consultation – Assessment of the consistency of the OSS/IOSS with the European Digital single market policy 

The functioning of the  VAT e-commerce package is  based on  exchanges  of information  between 
Member States. After the MOSS, the cases whereby Member States are collecting VAT on behalf 
of each other are further increased. These processes are supported by some control tools245 such as 
the  IOSS  monthly  reports,  the  requests  for  the  records  of  a  business  and  the  coordination  of 
administrative enquiries. These control tools are also based on administrative cooperation. The e-

242 Communication from the Commission to the European parliament, the Council, the European Economic and Social 
Committee  and  the  Committee  of  the  Regions  a  Digital  Single  Market  strategy  for  Europe,  COM/2015/0192  final, 
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A52015DC0192 
243 Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the 
field of value added tax. 
244 Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the 
Union Customs Code. 
245 Council Regulation (EU) 2017/2454 of 5 December 2017 amending Regulation (EU) n°904/2010 on administrative 
cooperation and combating fraud in the field of value added tax.  

170 

 
 
 
                                                 
commerce  package  introduces  a  consistent  approach  with  the  existing  administrative  cooperation 
practices. This consistency has been confirmed by the respondents to the public consultation as well 
as  by  the  Member  States  in  their  replies  to  the  evaluation.  As  listed  in  section 3,  Member  States 
have suggested further improvements concerning exchange of information, for both the OSS/IOSS 
processes and for the control tools (e.g. upgrade of the IOSS monthly reports).  

Public  consultation  –  Assessment  of  the  consistency  of  the  OSS/IOSS  with  the  EU  administrative  cooperation  in  the 
field of indirect taxation 

Finally, the consistency of these new rules with the Union Customs Code (UCC) must be assessed. 
The removal of the EUR 22 VAT exemption on importation of goods accompanied by simplified 
procedures  to  collect  the VAT on distance sales of imported goods, such as the  Import One-Stop 
Shop (IOSS), has undoubtedly impacted the customs processes (e.g. mandatory check of the IOSS 
VAT identification number validity by customs offices upon importation to grant VAT exemption, 
collection of VAT on all goods imported when the IOSS is not used). An import declaration with 
super reduced dataset was introduced for the release for free circulation of low value goods below 
the  dutiable  threshold  to  facilitate  their  customs  clearance  and  to  collect  the  import  VAT  (when 
IOSS is not used).    

The changes introduced by the VAT e-commerce package amplified the need to adapt the customs 
processes as well to the digital age. At the end of 2021, the Commission launched a comprehensive 
study246 to explore new approaches in relation to e-commerce goods imported into the EU with a 
view  of  increasing  the  synergy  between  customs  and  taxation  rules.  In  parallel,  the  Commission 
evaluated  the  implementation  of  the  Union  Customs  Code  and  confirmed  the  need  to  adjust  the 
customs  legislation  for  e-commerce  transactions.  Moreover,  the  recommendations  of  the  Wise 
Persons  Group247  point  to  radical  changes  in  relation  to  the  customs  treatment  of  e-commerce 
imports. The outcome of these processes could impact the rules as defined in the VAT e-commerce 
package.  

246 On-going Study carried out by PwC on an integrated and innovative overhaul of EU rules governing e-commerce 
transactions from third countries from a customs and taxation perspective. 
247 Wise Persons Group on Challenges Facing the Customs Union (WPG) (europa.eu) 

171 

 
 
 
                                                 
Public consultation- Assessment of the consistency of the OSS/IOSS with the Union Customs Code 

16.4.2. How did the EU intervention make a difference? 

The assessment of the EU added value criterion in relation to the VAT e-commerce package will 
focus on the strengthening of the internal market, on ensuring fairer taxation and on simplifying the 
VAT obligations.  

Further strengthening the internal market and ensuring fairer taxation  

By replacing the Member State thresholds on intra-EU distance sales of goods by a uniform, lower, 
EU-wide threshold of EUR 10.000, the e-commerce package has further enforced the principle of 
taxation at the place of consumption. Subject to this threshold, all EU businesses must apply VAT, 
at  the  relevant  rate,  to  their  supplies  of  services  in  the  Member  State  where  the  customer  is 
established  or  to  their  intra-Community  distance  sales  of  goods  in  the  Member  State  where  the 
goods are dispatched to. This reform prevents any distortion of competition and also contributes to 
a  fairer  system  of  taxation.  Consequently,  the  principle  of  taxation  in  the  Member  State  of 
consumption  strengthens  the  functioning  of  the  internal  market  and  creates  a  fairer  system  of 
taxation, which is a necessary and fundamental reform to ensure that the VAT system is adapted to 
new realities of the e-commerce market.  

The EUR 6 billion of VAT collected over the first 6 months in the OSS confirms its success.    

The  removal  of  the  EUR  22  VAT  exemption  on  imported  goods  has  also  contributed  to  a  fairer 
taxation by  levelling the playing field  between EU and non-EU traders.  Now, all goods imported 
into the EU are taxed regardless of their value. The supplies of goods from outside or inside the EU 
are therefore equally taxed thereby further strengthening the internal market.  

Simplified VAT obligations  

To  complement  and  support  taxation  at  the  place  of  consumption,  the  e-commerce  package   
introduced a number of simplifications to help avoid the need for businesses to register in multiple 
Member States in which they are supplying services and/or goods. The OSS and IOSS allow traders 
to report and pay the VAT due on these supplies to the relevant Member States of consumption via 
a  single  OSS/IOSS  registration  in  their  Member  State  of  establishment.  As  shown  above,  the 
number of registrations in the special schemes is testament to their overall attractiveness.  

To  help  businesses  fulfil  their  VAT  obligations,  these  simplification  measures  are  supported  by 
different EU tools: 

-  The Taxes  in  Europe  Data Base248  (TEDB) is  a webportal, which  provides  the VAT rates 

applicable in all Member States by CN code for goods and CPA codes for services.  

-  The  OSS  portal249  provides  information  on  the  functioning  of  the  schemes,  including 
guidelines, explanatory notes and relevant legislation.  The specific national VAT rules, as 
well as contact points in the Member States’ administration are available in this portal. 

The Commission has also designed a Standard Audit File (SAF-OSS) allowing businesses to fulfil 
more easily their record keeping obligations by providing them with a standard format for reporting 
that is acceptable in all Member States.  

248 Taxes in Europe Database v3: https://ec.europa.eu/taxation_customs/tedb/taxSearch.html 
249 One-Stop Shop: https://vat-one-stop-shop.ec.europa.eu/index_en 

172 

 
                                                 
16.4.3. Is the intervention still relevant? 

The  exponential  increase  of  e-commerce  was  one  of  the  major  drivers  for  the  need  for  better 
regulation in this market segment. The estimated growth of the e-commerce market by 42% in the 
next five years250 reinforces the relevance and importance of this intervention. This trend has been 
further exacerbated by the recent pandemic, as well as the UK’s withdrawal from the EU.  

As outlined in the replies of the respondents to the public consultation, the main objectives of the 
VAT e-commerce package remain very relevant for businesses.  

The  objectives  of  modernisation/digitalisation  and  of  simplification  of  the  VAT  collection  on  the 
cross-border  supplies  of  goods  and  services,  as  achieved  by  the  implementation  of  the  OSS  and 
IOSS, are  still of high importance. The aim to  minimise the need for businesses to  hold  multiple 
VAT registrations is a fundamental part of this simplification and it is clearly recognised as a very 
important feature by the respondents to the public consultation.  

Following  the  implementation  of  the  e-commerce  package,  there  are  still  some  transactions  that 
continue to trigger VAT registration in a Member State in which a taxable person is not established. 
Taking  in  account  the  importance  of  the  above-mentioned  objectives  of  modernisation  and 
simplification,  business  stakeholders  expressed  a  keen  interest  in  extending  the  OSS  to  cover  all 
remaining  B2C  transactions  within the  scope  of the  schemes.  The  VAT  Registration  pillar  of  the 
VAT in the Digital Age initiative will propose measures in this direction.  

250 

 Statista, 2021a, projection to 2025. 

173 

 
 
 
                                                 
In  terms  of  distance  sales  of  imported  goods,  the  IOSS  simplification  could  also  be  extended  by 
removing the EUR 150 threshold, as currently the IOSS scheme is restricted and cannot be used for 
imported goods above this value. It could also be made mandatory in order to further prevent the 
under-evaluation  and  secure  the  VAT  revenue.  These  improvements  are  also  supported  by 
businesses and will be addressed in conjunction with the comprehensive revision of the respective 
customs rules as mentioned above.  

As depicted above, the objectives to accrue the VAT revenue in the Member State of consumption 
as well as to  set  up a fairer taxation by levelling  the playing field  for EU businesses are covered 
with  the  application  of  the  destination  principle  and  the  removal  of  EUR  22  VAT  exemption  on 
importation  of  goods.  These  objectives  remain  however  relevant  in  times  of  post-pandemic 
recovery.  

174 

 
 
 
 
 
 
 
16.5. 

What are the conclusions? 

The  exponential  growth  of  e-commerce  impacted  EU  VAT  policies,  which  were  upgraded 
subsequently  to  take  into  account  the  specificities  of  this  new  market  segment.  In  2015,  the 
Commission implemented its initial response to help adapt and modernise the VAT rules to the new 
realities  of  the  e-commerce  market  by  introducing  new  rules  to  ensure  the  application  of  the 
destination  principle  to  the  taxation  of  the  cross-border  supplies  of  telecommunication, 
broadcasting  and  electronic  (TBE)  services.  A  fairer  system  of  taxation  was  achieved  under  the 
destination principle, which was complemented and supported by the introduction of simplification 
mechanism for reporting and collecting VAT: the Mini One Stop Shop (MOSS). The MOSS was a 
ground breaking  concept  as it allowed businesses to  report and  remit  the  VAT on all their  cross-
border  supplies  of  TBE  services  in  a  single  VAT  return  of  their  Member  State  of  establishment, 
avoiding the costly and burdensome registration and reporting obligations in the different Member 
States.  The  application  of  the  MOSS  proved  to  be  an  innovative  approach  to  the  declaration  and 
collection of VAT as it pioneered the collection of VAT by Member States on each other’s behalf, 
which is a fundamental feature of the broader simplifications that followed in 2021. 

With the focus on the objective of a fair taxation, it was decided to extend the destination principle 
to  all  B2C  cross-border  supplies  of  services  and  intra-Community  distance  sales  of  goods.  In 
parallel the MOSS was extended to simplify the compliance burden associated with these supplies. 
The VAT e-commerce package entered into application on 1 July 2021 and provided for a number 
of amendments to the VAT legislation, which were introduced to address and overcome the barriers 
to cross-border online sales, including the challenges arising from the unharmonised VAT regimes 
for distance sales of goods. The amendments further modernised the VAT legislation governing the 
taxation  of  business-to-consumer  supplies  of  services  and  the  importation  of  low  value 
consignments and created a fairer, more harmonised and simpler system of taxation. 

All the different distance sales thresholds were replaced by one unique EU-wide threshold of EUR 
10.000 above which intra-Community distance sales and supplies of TBE services are taxed in the 
Member State of consumption. To minimise the VAT compliance burden for businesses, the MOSS 
was  extended  to  become  a  bigger  One-Stop  Shop  (OSS).  The  broader  OSS  was  designed  and 
introduced to allow taxable persons to declare and pay VAT due on all their cross-border supplies 
of  services  and  intra-Community  distance  sales  of  goods.  At  the  same  time,  the  EUR  22  VAT 
exemption, which applied to imported goods, was removed. A new Import One-Stop Shop (IOSS) 
was  created  to  ease  the  collection  of  VAT  and  improve  the  import  process  of  these  low  value 
consignments not exceeding EUR 150.  

Due to the Covid-19 pandemic, the entry into application of the e-commerce package was delayed 
by 6 months, but nevertheless, the final implementation of the new rules went smoothly with only 
few workarounds required for certain Member States, which did, however, not impact the business 
side of the system. The necessary IT systems at both EU and national level for the implementation 
of  these  EU  VAT  rules  are  now  broadly  up-and-running,  with  Member  States  finalising  their 
implementation and solving the few remaining issues.  

However, some teething problems emerged which require further intervention in order to ensure a 
proper functioning of these new rules and schemes. A practical solution has been agreed between 
the  Commission  and  the  Member  States  to  solve  the  temporary  technical  problem  triggering 
possible double taxation which may arise in certain circumstances in the framework of the IOSS. 
The  potential  risk  of  abuse  of  the  IOSS  number  has  also  been  recognised.  In  this  regard,  the 
Commission  is  cognisant  of  the  importance  of  further  securing  the  IOSS  VAT  identification 

175 

 
number  and  is  currently  taking  a  proactive  approach  to  further  secure  the  IOSS  process  against 
possible fraud. This issue will be addressed as part of the VAT in the Digital Age initiative.    

Teething issues aside, the VAT e-commerce package has  proved to  be a success  by achieving its 
main goals: fairer taxation, VAT compliance simplification and increase of the VAT revenue. The 
package  clearly  contributes  to  the  digital  transition,  the  economic  recovery  and  also  helps  to 
generate sustainable public finances across the EU.  

The removal of the EUR 22 of VAT exemption on imported goods, as well as the application of the 
principle  of  taxation  at  destination  on  all  distance  sales  of  goods  and  cross-border  supplies  of 
services  have  contributed  to  a  fairer  system  of  taxation.  The  removal  of  the  exemption  threshold 
generated additional EUR 692 million of new VAT revenue during the first six months.  

By simplifying the declaration and payment of VAT, the OSS and IOSS are helping businesses to 
comply  with  their  VAT  obligations  on  e-commerce  sales.  The  e-commerce  package’s  goal  to 
facilitate  VAT  compliance  is  recognised  by  the  respondents  to  the  public  consultation  as  an 
important  achievement  of  this  intervention.  This  recognition  is  reinforced  by  the  high  number  of 
traders that registered for these schemes. The e-commerce package has simplified and clarified the 
VAT  rules  for  businesses  which  has,  in  turn,  strengthened  the  European  Single  Market  and 
contributed  to  a  level  playing  field,  thereby  helping  European  businesses  to  compete  in  domestic 
and global markets. 

In  these  times  of  recovery  following  the  pandemic,  the  VAT  e-commerce  package  has  also 
contributed to the protection of Member State VAT revenues, which is evidenced by the fact that 
the OSS and IOSS have been used for the collection of almost EUR 8 billion of VAT in the first 6 
months of application of the new rules. The cost-benefits analysis of the implementation shows the 
real  added-value  of  this  intervention  as  the  estimated  costs  represent  only  0,01  %  of  the  EUR  8 
billion of VAT that has been collected during the period covered by this evaluation.   

Moreover, the replacement of the different Member State’s distance sales thresholds by a uniform 
and  lower  EU-wide  threshold  has  better  ensured  taxation  at  the  place  of  consumption  and  has 
significantly reduced the risk of non-compliance with the previous disparate and complicated VAT 
rules and has, thus, helped to improve overall compliance levels. The ability to monitor compliance 
has  been  supported  by  new  record  keeping  obligations  that  have  been  introduced  for  the 
traders/deemed suppliers registered in the schemes, including for platforms that facilitate supplies. 
Together, these new measures will help to support and bolster the audit and control processes used 
by tax administrations and businesses who engage in e-commerce activity. 

The  functioning  of  the  OSS  and  IOSS  has  proved  to  be  efficient  taking  into  account  the  high 
number  of  registered  traders  and  the  amount  of  VAT  collected.  Although  there  are  no  major 
operational issues, Member States have expressed the need to stabilise the system. They have also 
listed a number of improvements to the functioning of these schemes that will be taken forward in 
the  proposal  to  further  extend  the  schemes  in  the  framework  of  the  VAT  registration  part  of  the 
VAT in the digital age initiative. 

The  VAT  e-commerce  package  is  also  fully  in  line  with  the  SME  strategy  towards  a  sustainable 
Europe, as it simplifies the process of distance sales into the EU by decreasing the need to register 
in different Member States. The VAT e-commerce package’s coherence with the European digital 
single market  policy is  also  well recognised in  light  of the fully digitalised solution  that the OSS 
and IOSS provide. Moreover, the enforcement of the new administrative co-operation rules for e-
commerce are relatively straightforward as they are consistent with the practices that were already 
developed and provided for in the EU Administrative cooperation regulation in the field of indirect 

176 

 
taxation. In fact, the functional processes of the OSS/IOSS are, in essence, based on interoperability 
between the Member States.  

Finally, the changes introduced by the VAT e-commerce package underscore the need to also adapt 
the  customs  rules  and  processes  so  that  they,  too,  are  fit  for  purpose  and  able  to  meet  the  new 
challenges that have emerged as a result of the digital age. This process is ongoing and its outcome 
could impact the rules as defined in the VAT e-commerce package. 

The  objectives  of  modernisation/digitalisation  and  of  simplification  of  the  VAT  collection  on  the 
cross-border  supplies  of  goods  and  services,  as  achieved  by  the  implementation  of  the  OSS  and 
IOSS,  continue  to  be  of  high  importance  to  all  relevant  stakeholders.  In  this  regard,  Member 
States251  and  businesses  continue  to  support  the  Commission’s  intentions  to  propose  further 
simplifications to improve the efficiency of taxation of EU cross-border trade, which is expected to 
lead to a further reduction of administrative burdens for businesses as well as tax authorities. The 
VAT in the Digital Age initiative seeks to build on the success of the actions already taken to-date. 
In  particular,  as  part  of  the  VAT  Registration  pillar  of  the  proposal,  the  Commission  aims  to 
develop new policy options to enhance the fight against VAT fraud and further simplify the VAT 
obligations of non-established traders who engage in e-commerce activity by further reducing the 
number of situations in which those traders need to register for VAT in different Member States. 

251 6534/22 FISC 52 ECOFIN 164 Council conclusions on the implementation of the VAT e-commerce package. 

177