In accordance with the plans of the European Commission communicated in the draft amendment to the VAT Directive published on December 8, 2022, entitled "VAT in the Digital Age", VAT settlements in the European Union are to be further digitized and Member States' budgets are to be better protected against fraud.
One of the main assumptions of this directive is to modernize VAT reporting obligations by introducing Digital Reporting Requirements (DRR). The goal is to standardize the information on most transactions that taxpayers will have to submit to the tax authorities in electronic form. At the same time, the use of e-invoicing in cross-border transactions will be imposed. All these obligations will apply to B2B transactions and will probably be introduced from 2028.
Those requirements oblige taxable persons identified for VAT purposes to submit to tax authorities information on each intra-Community supply of goods, on each intra-Community acquisition of goods, and on each supply of a service that is taxable in a Member State other than that in which the supplier is established.
The European Commission is proposing the creation of a central electronic VAT information system (central "VIES"). Using it will enable Member States to communicate VAT information that is held nationally to all others, helping to combat VAT fraud. The central VIES system would be able to aggregate the information provided by Member States on each taxable person in relation to their cross-border B2B transactions. This will also allow cross-checking of reported intra-Community supplies with reported intra-Community acquisition data.
The new or updated information should be entered into the central VIES without delay, but no later than one day after the collection by the domestic tax administration. In order for a kind of real-time reporting to be fulfilled, taxpayers will be required to document an intra-Community transaction within two days, rather than the current 45 days.
The information will be stored in the central VIES system for a period of five years, and will be available to authorized officials to control the correct application of VAT rules and combat VAT fraud.
Along with introducing mandatory e-invoicing and DRR, recapitulative statements (better known as EC Sales List or ESL) will be withdrawn.
We also have to bear in mind that the public consultation showed that European Union businesses are very concerned about the very short time allowed for sending e-reports, i.e. within two days, and asked that consideration be given to extending it to two weeks.