WHAT TO KNOW: UPDATED VAT RULES IN THE EU

The European Union’s recent approval of updates to VAT rules, known as the ‘VAT in the Digital Age’ (ViDA) package, will significantly impact UK businesses engaged in cross-border transactions with the EU. By 2030, online platforms will be required to collect VAT on services provided through them, addressing market distortions where similar services in traditional sectors are already VAT-subject. This change primarily affects sectors like short-term accommodation rentals and road passenger transport. Treasurers at UK businesses offering services through EU-based online platforms will need to adjust their pricing and enhanced VAT forecasting and planning will be crucial to mitigate the financial impact of these changes. Treasurers will need to adapt to potentially stricter VAT controls when doing business in the EU, ensuring that their financial strategies are robust and compliant. Secondly, by 2030, VAT reporting for cross-border transactions will be fully digitalized, requiring businesses to issue e-invoices for B2B transactions and automatically report data to tax authorities. UK companies engaged in B2B transactions with EU entities will need to implement systems capable of generating e-invoices and integrating with EU tax reporting platforms—a costly change that will likely impact profit margins. We would talk to local treasurers and market experts about how this will impact businesses and their financial strategies.