Briefing document & Podcast: VAT in the Digital Age (ViDA) – Platform Economy

Platform Economy Reforms under EU’s “VAT in the Digital Age” (ViDA)

Key Provisions of the Platform Economy Pillar

• If an apartment host or driver does not provide a VAT number and does not personally charge VAT (for example, an individual renting out a flat or a small operator under a VAT exemption threshold), then the platform must collect the VAT from the customer and pay it to the tax authorities. [grantthornton.nl], [consilium.europa.eu]
• If the underlying provider is VAT-registered and confirms they will charge VAT, the platform is not deemed the supplier for that transaction. In such cases the original provider remains responsible for VAT, and they give their VAT identification number to the platform and declare that they will handle the VAT on the sale. [eur-lex.europa.eu], [globaltaxnews.ey.com] [globaltaxnews.ey.com]

• SME Exclusion Option: A Member State may choose to exclude supplies made by small enterprises under its domestic SME VAT exemption regime from the deemed supplier rule. For example, if a country believes very small-scale hosts or drivers pose minimal distortion in its market, it can decide that the platform need not charge VAT on those particular supplies. This was a compromise to address concerns (notably raised by Estonia) about burdening micro-entrepreneurs. If exercised, the Member State must set conditions (e.g. confirming the provider’s status as an exempt small business) and inform the EU VAT Committee of this choice. Importantly, even if a Member State exempts SME-based supplies, platforms still carry the general obligation to comply with the new rules for all other cases in that country. [eur-lex.europa.eu], [grantthornton.nl] [en.wikipedia.org], [consilium.europa.eu] [eur-lex.europa.eu], [eur-lex.europa.eu]
• Definition of Short-Term Rental: While the baseline definition is rental up to 30 days, Member States can introduce specific criteria or conditions for what counts as “short-term” accommodation in their jurisdiction. For instance, a country could impose additional rules (perhaps about rental frequency or licensing) as long as they inform the European Commission, which will publish a list of each state’s criteria by end of 2028. [eur-lex.europa.eu], [eur-lex.europa.eu] [eur-lex.europa.eu]
• Transition Period: The directive acknowledges that a transition period is needed for these changes. Although the formal EU implementation date is mid-2028, states may delay applying the deemed supplier rule until 1 January 2030 at the latest. This gives a short grace period if a country needs extra time to adapt its laws or if it initially believed there was no competitive distortion domestically. All Member States must adopt the necessary national laws by 30 June 2028, even if they opt to enforce them later. [en.wikipedia.org], [vatcalc.com] [eur-lex.europa.eu], [eur-lex.europa.eu] [eur-lex.europa.eu], [vatcalc.com]

• The underlying supplier’s supply to the platform is deemed an VAT-exempt supply. This means when, say, a host “sells” their rental service to the platform (fictionally), that supply is exempt from VAT so that the host doesn’t have to charge VAT to the platform. However, this exemption comes without the right to deduct VAT on inputs for that underlying supplier. In practical terms, an individual host or driver usually wouldn’t be VAT-registered or incurring input VAT in a business capacity anyway. But if they are a small business with some VAT-bearing costs, choosing not to handle VAT and letting the platform do it means they forego claiming VAT on those costs. This provides an incentive for any larger providers to register for VAT themselves (so they can deduct input VAT) rather than relying on the platform’s deemed supplier treatment. [globaltaxnews.ey.com], [bdo.global] [bdo.global]
• The platform’s supply to the final customer is treated as a normal taxable supply of the service. The platform must add VAT at the applicable rate of the Member State where the service is deemed supplied. For example, if a ride is taken in Country X with a 20% VAT rate on transport, the platform will charge the rider 20% VAT on the fare and later remit that to Country X’s tax authority. The platform’s right to deduct input VAT on its own expenses (e.g. its service fees, marketing costs) is preserved – the law explicitly states the deemed supply mechanism does not affect the platform’s deduction rights. In other words, making the platform the collector of VAT doesn’t penalize it in terms of VAT recovery. [globaltaxnews.ey.com]
• Exclusion of Special Schemes: Transactions covered by the Tour Operators’ Margin Scheme (TOMS) are explicitly kept outside the platform deeming rules. This avoids overlap in cases where a platform might otherwise fall under travel agent rules. Similarly, genuine travel agents and tour operators using TOMS won’t suddenly be treated as “platforms” under the new rule. [globaltaxnews.ey.com] [eur-lex.europa.eu], [eur-lex.europa.eu]

Implications for Businesses and Digital Platforms

• Previously unregistered individuals: Many casual hosts or ride-share drivers are private individuals or very small-scale operators who have until now done business without charging VAT (legally, because they fell under exemptions or thresholds, or sometimes simply out of ignorance of obligations). With the platform stepping in to charge VAT on their transactions, their services will effectively become VAT-taxed to the consumer. This could reduce the net earnings for those providers or make their service pricier, potentially affecting their income. On the other hand, these individuals will not need to register or file VAT returns themselves, which spares them administrative hassle. The platform takes over that compliance burden. In essence, the reform formalizes and taxes the informal supply, bringing it into the tax system with minimal action required by the individual provider. This might slightly reduce the competitive edge that non-taxed peer-to-peer services had over traditional taxed businesses, fulfilling the “level playing field” goal. For example, a part-time host on a booking site might find nightly rates a bit higher for guests due to VAT, narrowing the gap with hotel pricing, but the host doesn’t have to do any tax paperwork personally. [consilium.europa.eu]
• Small businesses under national VAT exemption: Many EU countries have a VAT registration threshold or a simplified scheme for small businesses (the SME special scheme). Such providers (e.g. a small B&B owner under a threshold) could optionally remain outside VAT if their country decides to exempt SME supplies from the platform deeming rule. If exempt, then even after 2028 the platform wouldn’t charge VAT on their rentals/rides. This means some small providers might continue business as before (no VAT in price), at least in certain countries. However, if a country does not exercise this exemption, even tiny businesses will have VAT added via the platform. Those who want to avoid having the platform add VAT might consider opting into VAT voluntarily or providing their VAT number if they have one. For those already in business and VAT-registered (like a professional property manager or a taxi firm using a platform to get customers), the change simply means they must share their VAT ID and charge VAT themselves to keep the platform out of it. If they do so, nothing really changes in their economic VAT situation – except they’ll need to ensure the platform knows they are handling the VAT. [eur-lex.europa.eu], [grantthornton.nl] [eur-lex.europa.eu]
• Ability to deduct VAT: A provider who remains outside VAT and lets the platform handle it will not charge VAT, but also cannot deduct VAT on expenses (since from their perspective their supply to the platform was “exempt without credit”). For many casual providers, this is a non-issue (they might not incur significant VAT on costs). Larger providers, however, will likely prefer to be VAT-registered themselves. The rules effectively encourage any serious business operating via platforms to register for VAT and thus declare their own sales, because otherwise the platform’s involvement denies them input VAT recovery. For example, a property rental agency renting many apartments via platforms would likely provide its VAT number to avoid the platform deeming. That way, it charges VAT to the guests directly and still can reclaim VAT on its costs (cleaning services, utilities, etc.). [bdo.global]

• Increased Revenue and Reduced VAT Gap: The primary driver for these rules was the substantial VAT revenue lost in the platform-based economy. Many small providers did not charge VAT, creating what the European Commission viewed as an “unjustified distortion of competition” and contributing to the overall VAT gap (the EU’s VAT gap was estimated at €93–99 billion in 2020). By shifting the responsibility to a limited number of large platforms, authorities expect to capture VAT that was previously going uncollected. For example, every apartment rented via a platform in Paris by an individual owner will now produce 10% VAT for France (or 20% if it’s a furnished rental considered a hospitality service) which the treasury was likely not receiving before. This should bolster public revenues. The Commission projected that across all ViDA measures, about €18 billion in additional VAT could be collected annually, with a significant portion directly from anti-fraud and platform provisions. [eur-lex.europa.eu], [en.wikipedia.org] [consilium.europa.eu] [en.wikipedia.org], [en.wikipedia.org]
• Simplified Enforcement: Instead of trying to monitor and audit millions of small, often part-time service providers, tax offices can focus on a handful of major platform companies. It is far more efficient to enforce compliance among large, sophisticated entities that have formal accounts and IT systems, than among the fragmented long tail of individuals. Platforms can be expected (and legally required) to cooperate, providing data and ensuring VAT is charged by default. This outsourcing of VAT compliance to platforms effectively turns those companies into tax intermediaries, which eases the administrative burden on authorities. Tax authorities will also benefit from the data sharing provisions – platforms must keep transaction details and provide them on request, enabling audits and cross-checks. In combination with the administrative cooperation enhancements (Council Regulation (EU) 2025/517, adopted alongside the directive, will facilitate information exchange among tax administrations), authorities will be better equipped to detect evasion. For instance, if a provider claims to be charging VAT (to avoid the platform doing so) but isn’t remitting it, the platform’s records and cross-border data exchange could help catch that. [consilium.europa.eu] [eur-lex.europa.eu]
• Short-Term Complexity, Long-Term Uniformity: Tax authorities do face an implementation challenge: updating national VAT laws by 2028, educating domestic businesses, and adapting their IT systems to new reporting from OSS and platforms. They also must clarify how the optional provisions (like the SME exclusion) will be applied nationally. Some authorities might initially see increased rulings requests or questions – e.g. “Is my business considered short-term accommodation under the new rules or not?” Hence, the Commission is preparing Explanatory Notes (guidance) in consultation with Member States (a draft is expected by early 2026) to ensure consistent interpretation across the EU. Once in place, however, the rules aim for harmonization. By explicitly defining the VAT treatment for these platform services EU-wide, it reduces divergent national approaches. This uniform treatment helps tax authorities by closing loopholes (no arbitrage between countries’ VAT rules) and by making compliance more straightforward for companies that operate in multiple EU states. [vatcalc.com], [vatcalc.com]
• Effect on Traditional Sectors: Finally, tax authorities anticipate a fairer competitive environment between the platform-facilitated sector and traditional VAT-compliant businesses. Taxi firms and hotels, for example, have long argued that they must charge VAT while their peer-to-peer competitors effectively enjoyed a tax break. With platforms charging VAT on rides and short stays, authorities neutralize that complaint. This may indirectly help sustain the tax base of traditional sectors as well (preventing an exodus of consumers purely due to VAT-induced price differences). [eur-lex.europa.eu], [consilium.europa.eu]

Timeline of Development and Implementation

• 2020 – 2022: Initiative and Proposal
  The concept of updating VAT for the digital/platform economy was introduced as part of the European Commission’s Tax Action Plan 2020. After study and consultations, on 8 December 2022 the Commission unveiled the ViDA legislative proposals, which included proposed rules to “update VAT rules for the platform economy”. The proposal targeted a July 2027 implementation for platform deeming, but this was subject to change during negotiations. [en.wikipedia.org], [en.wikipedia.org] [vatcalc.com]
• Late 2022 – 2024: Negotiations and Political Agreement
  Because EU VAT legislation requires unanimous agreement of all Member States, extensive negotiations took place throughout 2023 and 2024. A key point of contention was the mandatory VAT role for platforms in accommodation and transport. Estonia in particular raised objections, arguing against an obligatory EU-wide approach (in part due to concerns for its home-grown platform company Bolt). This led to protracted discussions. Compromises were made: the implementation date was pushed from 2027 to 1 July 2028, and Member States were allowed the option to delay until 2030 and to exempt small suppliers. On 5 November 2024, EU finance ministers (ECOFIN Council) reached unanimous political agreement on the final ViDA package, including the Platform Economy pillar with these adjustments. The agreement was hailed as a major step in modernizing VAT and balancing Member States’ concerns. [en.wikipedia.org] [en.wikipedia.org], [en.wikipedia.org] [bdo.global], [bdo.global] [consilium.europa.eu], [consilium.europa.eu]
• March 2025: Formal Adoption
  Following European Parliament consultation, the Council formally adopted the VAT in the Digital Age laws on 11 March 2025. The package comprises Directive (EU) 2025/516 (amending the main VAT Directive 2006/112/EC) and accompanying regulations for administrative cooperation and implementation. The laws were published in the EU Official Journal on 25 March 2025 and entered into force on 12 April 2025. From this date, Member States had the green light to begin transposing the rules into national law. [en.wikipedia.org]
• Transposition and Member State Implementation (2025–2028):
  Under the directive’s timetable, Member States must transpose the Platform Economy measures by 30 June 2028 and apply them from 1 July 2028. However, a special clause allows that the core deemed supplier rule (Article 28a of the VAT Directive) need not be applied until 1 January 2030 at the latest. This gives flexibility if a country needs a bit more time or wants to phase in the change. It’s expected that most Member States will target the 2028 date or soon after, to boost revenues and align with EU partners, but they have the legal right to hold off until 2030 if justified. [eur-lex.europa.eu] [eur-lex.europa.eu], [vatcalc.com]
• As of early 2026, Member States are in preparation mode. They are likely drafting legislation and considering how to implement options. For instance, each country must decide whether to use the SME exclusion option (and define what it considers a small enterprise under that rule). Tax authorities are also working through practical aspects: updating OSS systems, gearing up VAT registration processes for possibly many platform companies, and collaborating on the upcoming Commission Explanatory Notes. In September 2025, a Fiscalis workshop with all Member States and stakeholders was held to discuss implementation challenges for the platform rules. These discussions highlighted issues like how to handle complex supply chains, how exactly to determine a provider’s status, and how to avoid double taxation in tricky scenarios. Feedback from such meetings will feed into detailed guidance. A draft Explanatory Notes document is expected by Q1 2026 to guide Member States and businesses on applying the new rules uniformly. [eur-lex.europa.eu], [grantthornton.nl] [vatcalc.com], [vatcalc.com]