Beyond ViDA: Brussels Signals the Next Wave of VAT Reform — Financial Services, Circular Economy, Platforms & Digital Reporting”
Summary
- Two major studies set the reform agenda. The Commission unveiled its Study on the Taxation of the Financial Sector (published 30 June 2026) and the Study on the Challenges of VAT Beyond ViDA, mapping out modernisation of the financial-services exemption, reduction of non-deductible (“hidden”) VAT, extended One-Stop-Shop refunds, split-payment scenarios, and a “greener” VAT system covering second-hand goods, donations vs. destruction, and passenger-car deductions.
- Explanatory Notes on Platforms and Digital Reporting move forward but need refinement. The second draft on the Platform Economy and the third draft on Digital Reporting Requirements (DRR)/e-invoicing were both welcomed as steps in the right direction, yet participants flagged legal-certainty gaps (e.g., the underlying supplier’s VAT-number obligation, Art. 28 vs. 28a, deemed-supplier rules in chain transactions, VAT-group numbering, invoice rectification and interoperability). Written comments are due by 31 July 2026.
- Business concerns centre on duplication, cash flow and neutrality. Delegates warned that automation savings evaporate if underlying VAT rules stay fragmented, cautioned that split payment could disrupt retailers’ working capital, called for ~12 months’ lead time to validate VAT IDs across 27 Member States, and questioned the use of VAT as an environmental tool for corporate fleets. The next online GFV/VEG meeting is set for 19 November 2026 to finalise the Notes for 2027 publication.
Article
Brussels charts the post-ViDA VAT landscape
On 25 June 2026, the Group on the Future of VAT (GFV) and the VAT Expert Group (VEG) held a joint (non-public) meeting in Brussels, bringing together DG TAXUD Unit C1 officials, group members and external sector experts. The minutes — issued as GFV No 160 / VEG No 139 — reveal a Commission that is already looking well beyond the ViDA package toward a broader, more structural rethink of the EU VAT system.
- Rethinking VAT on financial services
The headline item was the presentation of the Study on the Taxation of the Financial Sector, launched in summer 2024 and due for publication on 30 June 2026. The contractor structured the findings in three parts: an assessment of the current situation (Part A), the problems and policy objectives (Part B), and an impact assessment of the options (Part C). Three building blocks emerged:(I) modernisation and simplification of current VAT rules;(II) measures to reduce non-deductible VAT for the sector; and(III) revisiting the VAT exemption for financial services plus harmonising sectoral taxes.
Debate crystallised around three themes:
- Outdated exemption definitions — broad consensus that the concept of “financial services” must be adapted to the digital era, though several warned against replacing it with a new Financial Activity Tax that ignores companies’ characteristics.
- Cross-border competitiveness — particular concern for Fintechs and start-ups, and the need to tighten VIES registration compliance if reform hinges on B2B-vs-B2C status.
- Structural rules — recognition that the option to tax and VAT grouping practices need review and harmonisation, potentially via Explanatory Notes.
- VAT “beyond ViDA” — simplification, digitalisation, circular economy
The second study, Challenges of VAT Beyond ViDA, builds on the VEG’s earlier“VAT After ViDA” report and targets three focus areas: simplification, digitalisation, and consistency with the circular economy. It highlighted significant fiscal upside from eliminating exemptions and broadening deduction, additional revenue from e-invoicing/e-reporting (with costs concentrated on micro-businesses and SMEs), and “greening” ideas such as the VAT treatment of second-hand goods, donations versus destruction, and passenger-car deduction rules.
Key discussion points:
- Cross-border refunds — automation and extended One-Stop-Shop procedures, but only if VAT treatment is genuinely harmonised; otherwise “automation savings” are offset by bookkeeping complexity.
- Digitalisation — support tempered by fears of duplication with ViDA; e-commerce in particular needs clarity on place of supply and real-time rate application.
- Split payment — warnings that separate VAT bank accounts and upfront VAT could disrupt retailers’ cash flow and working capital.
- Circular economy — difficulty defining recycled/used/refurbished goods (fraud-prone), and neutrality concerns over using VAT for environmental ends, especially corporate fleets.
- Exemptions and hidden VAT — calls to consider limiting the scope of exemptions, not just abolishing them. The Commission stressed the study is not a proposal but will shape future options.
- Explanatory Notes: Platform Economy (2nd draft)
The second draft on the Platform Economy was seen as an improvement, but delegates sought refinements on: the underlying supplier’s obligation to provide a VAT number and declaration (felt to lack a clear Directive basis); the burden of validating VAT IDs across 27 Member States (business asked for ~12 months’ lead time); clearer drafting on price reductions, SME examples and Article 46a; the distinction between Articles 28 and 28a; and, in chain transactions, which platform is the deemed supplier where several are involved.
- Explanatory Notes: Digital Reporting Requirements (3rd draft)
The third draft on e-invoicing and DRR also advanced. Participants raised: practical problems with VAT-group single-number use; the rule that rectificative invoices must reference all corrected invoices; the different reference points for reporting vs. invoicing in the transitional period; more precise definitions of invoice issuance/transmission/reception; interoperability requirements; stakeholder involvement and best-practice recommendations; clarifying real-time reporting; VAT rate/amount reporting (cross-border vs. domestic); optional (not mandatory) cancellation of reporting; sensitive goods; dual-currency invoices (Art. 230); and hybrid invoices — with the principle that an invoice compliant with the European standard should not be rejected.
Next steps
Written comments on both sets of Explanatory Notes are due by 31 July 2026. An online joint GFV/VEG meeting on 19 November 2026 will finalise the Notes ahead of 2027 publication, with sector experts invited.
Source
Sse also
- GFV 52nd Meeting: Financial Services Study, VAT Beyond ViDA & DRR Explanatory Notes – VATupdate
- VAT Expert Group 43rd Meeting Mirrors GFV Agenda – VATupdate
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