European Parliament: VAT Obstacles in the EU Single Market -A Growing Barrier to Cross‑Border Business

• VAT remains the most frequently reported tax obstacle affecting cross‑border business operations within the EU single market. Despite harmonisation through the VAT Directive, national administrative procedures diverge significantly, creating substantial compliance burdens for companies operating in multiple Member States.
• A major challenge is VAT registration in other Member States, where businesses face inconsistent documentation requirements, language barriers, and varying levels of digitalisation. In some jurisdictions, registration processes are manual, slow, and unpredictable, causing legal uncertainty, delays, and increased administrative costs. Once registered, companies must also comply with differing reporting and payment obligations across countries, often requiring reliance on local tax advisors.
• The EU’s upcoming reforms under VAT in the Digital Age (ViDA)—particularly the expansion of the One‑Stop Shop (OSS)—will help reduce the number of required VAT registrations, but will not eliminate them entirely. Activities outside the OSS scope and cases where firms need fast input VAT recovery will continue to require national VAT numbers.
• New economic models introduce additional VAT complexities. The growing “servitisation” of the economy—where goods and services are bundled in subscription‑based or hybrid offerings—clashes with the VAT system’s strict distinction between goods and services. This creates uncertainty in place‑of‑taxation rules and increases the risk of disputes between Member States over taxing rights.
• Overall, VAT fragmentation continues to hinder cross‑border business activity by raising compliance costs, creating legal uncertainty, and slowing the functioning of the single market. While upcoming reforms will alleviate some friction, significant administrative and structural challenges remain.

Source europarl.europa.eu