EU ViDA Agreement Stalled Again at ECOFIN Meeting

An eleventh-hour attempt by Belgium, holding the rotating presidency of the EU Council, to bridge the divide failed to win over Estonia's rejection of Pillar 2, which governs online marketplaces. This marks the third hurdle for the EU's VAT in the Digital Age (ViDA) reforms. The first two pillars, Digital Reporting & e-invoicing (Pillar 1) and Single VAT Registration (Pillar 3), were greenlit at the May ECOFIN meeting and will move forward according to schedule.

The debate on Pillar 2 will pick up again during the upcoming gathering of finance ministers on July 16, 2024. This meeting will be led by Hungary, taking over the rotating presidency of the EU Council. To pave the way, tax experts from the Council will convene for a preparatory session on July 11. If a consensus isn't achieved in July, the next chance will be the October 8 meeting.

Following an agreement, the proposals will bounce back to the EU Parliament for a rubber-stamp approval due to the extended timeline. Afterward, it will head to the Council for final endorsement.

Estonia's Opposition to Pillar 2 on Digital Platforms

Estonia remains a sticking point regarding Pillar 2. They object to the rule forcing online platforms to handle VAT for their sellers. This, they argue, disrupts neutrality and harms smaller businesses that haven't reached the VAT registration threshold.

The proposed compromise allowed countries to exempt small and medium-sized enterprises (SMEs) and offered platforms a database of qualified traders based on the upcoming 2025 SME scheme. However, despite removing administrative hurdles for the SME option, Estonia stuck to its veto, favoring the DAC7 reporting requirements as a way to address non-compliance.

Estonia found allies in France, Czechia, Poland, and Denmark. Meanwhile, Slovakia, Latvia, Spain, Greece, and Germany backed the Belgian compromise.

There’s more you should know about global e-invoicing changes – learn more about the new and upcoming regulations.