EU Ecofin Council

EU agreement on VAT reform, Airbnb will also have to pay it

5 November 2024

3' min read

Key points

Modifications to three different aspects of the VAT system
Progressive application
EU e-invoicing in full from 2035

3' min read

The EU Ecofin Council reached agreement on new measures for value added tax (VAT) in the digital age. There will be new rules on electronic invoices and real-time data communication, as well as on activities carried out via digital platforms, with the aim of combating tax fraud, supporting businesses and promoting digitisation.

One of the innovations will affect online platforms on short-term accommodation such as Airbnb and others, and platforms on passenger transport: they will have to pay VAT in most cases where individual service providers do not charge it now.

Modifications to three different aspects of the VAT system

The EU reform includes a directive, a regulation and an implementing regulation. Together they make changes to three different aspects of the VAT system. They make VAT reporting requirements for cross-border transactions fully digital by 2030; require online platforms to pay VAT on short-term accommodation and passenger transport services in most cases where individual service providers do not charge VAT; and improve and expand online VAT one-stop shops so that businesses do not have to make costly VAT registrations in every member state in which they operate.

"After almost two years of negotiations, the Council has reached an agreement on the VAT package," commented Hungarian Finance Minister Mihaly Varga, holding the EU Presidency. "This is a cornerstone for the digital transition and a significant step towards improving the EU's competitiveness. The new rules will update our VAT systems to reflect the digitisation of our economies, help combat VAT fraud and simplify administrative obligations for small businesses and individual service providers," he concluded, thanking all delegations "for their constructive approach and hard work".

The Council agreed that the EU system should be operational in 2030 and that all existing national systems should become interoperable with the EU system by 2035. It also gave more flexibility than the Commission's proposal by broadening the definition of short-term rental housing for tax purposes and by giving member states the possibility to exempt small and medium-sized enterprises from supplier rules. More generally compared to the initial reform proposed by the Commission in December 2022, there are several changes. On all three acts the Council was unanimous. The EU Parliament had given its opinion in November 2023, but given the substantial changes to the directive, the EP will be consulted again on the agreed text, which will then have to be formally adopted by the Council before being published in the EU Official Journal and entering into force.

Progressive application

The transition to the new system will therefore be gradual. Particularly in the short rental sector, on which a regulatory and fiscal reorganisation is also underway at national level and which has its centre of gravity in the introduction of the national identification code (Cin), the key steps will essentially be two. From July 2028 the VAT collection and payment regime for platforms will be optional, and then become mandatory from January 2030. Consequently, there will be a VAT liability profile of platforms in all those cases where the party offering the leases is not a party with a VAT position.

EU e-invoice in full from 2035

On the electronic invoice, too, a step-by-step path has been planned to achieve uniform adoption throughout the EU from 2035. A gradual adjustment with intermediate steps to enable all financial administrations in the Union to adapt, with an initial interoperability hub linked to the communication of intra-Community transactions ready to take off in the second half of 2030. The aim is then to achieve large-scale simplification for economic activities also thanks to systems for pre-compiling declarations and payment forms. An experience (as well as on the electronic invoice) in which Italy has already played a pioneering role.