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Taxation and Customs Union

VAT for the Platform Economy

On 8 December 2022, the European Commission proposed a series of measures to modernise the EU’s Value-Added Tax (VAT) system. The new measures will introduce a more level playing field between online and traditional short-term accommodation services.

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The platform economy has boomed in recent years, with online platforms acting as an intermediary between the suppliers of certain services and consumers. Under current VAT rules, it is the underlying providers of services, e.g. the person renting out an apartment, who is obliged to collect and remit VAT to the tax authorities.

But many underlying suppliers – whether an individual person or a small business - are unaware that they may be liable for VAT on the services they offer. Even when aware, it can be difficult to acquaint themselves with the VAT system and to comply with their VAT obligations

At the same time, the economies of scale and sheer number of users of these platforms, particularly in the accommodation and passenger transport sectors, mean that these providers are now in direct competition with traditional VAT registered suppliers such as hotels and private transport companies.

How will it work in practice?

Under the current VAT rules, a hotel in a large European city, for example, faces competition from a platform which may facilitate thousands of listings in the same city, many of which are not taxed.

The proposed new rules clarify definitively that the short-term rental of accommodation is not exempt from VAT in the EU and that intermediary platforms in the short-term accommodation and passenger transport sectors must ensure VAT collection and remittance on the sales they facilitate when the underlying supplier has not done so, for example because they are a small business or individual provider. This will remove the current inequality in the area of VAT suffered by traditional operators in these sectors.

In addition, estimates show that this simple change should bring in up to €6.6 billion per year in additional VAT revenues for Member States over the next ten years. Similar provisions are already up and running in other parts of the world, including in Canada, and are operating smoothly. In parallel, and by standardising the information that must be provided to authorities, the platforms themselves will collectively save €48 million per year over the same 10-year period.

SMEs who rent property in another Member State through an online platform, and who may be required to register and charge VAT in that Member State, will also benefit. Under the new rules, the platform will be able to account for this VAT on behalf of the SME.

Learn more

Press release on the VAT in the Digital Age proposals 

Q&A MEMO on the VAT in the Digital Age proposals

Factsheet on the VAT in the Digital Age proposals

More information and legal texts