You will find below some of the most significant 2023 VAT developments throughout Europe.
Many governments throughout the world, including those in Europe, have taken preemptive efforts to reduce the effects of the present inflation situation. The economic crisis caused by the COVID epidemic and the Ukraine War resulted in high global inflation rates.
What do these steps entail? From a VAT standpoint, the emphasis was on VAT rates. Numerous nations have lowered the VAT rates on energy and fundamental goods, such as food and medication. This was accomplished by either using one of the nations’ lower rates or by creating new reduced rates.
Below are some examples:
Spain temporarily decreased the value-added tax rate on electricity and other energy goods from 10% to 5%. This new lower VAT rate necessitated the modification of existing VAT return forms for reporting reasons.
Poland has temporarily decreased the value-added tax (VAT) rates on a number of energy goods and granted a zero rate for essential foods and fertilizers.
Ireland temporarily cut the VAT rates applicable to gas and electricity to 9 percent, along with tourism and lodging. In addition, this nation agreed to a zero-permanent VAT rate on some pharmaceutical and health-related items.
Luxembourg reduced its relevant VAT rates by 1 percent. The new VAT rates will apply only in 2023 and will affect all VAT rates except the 3% rate, which will stay intact.
Other nations, like Belgium and Portugal, have also temporarily reduced their VAT rates.
In contrast, some nations have agreed to increase their VAT rates in 2023 or 2024. This is the situation in Switzerland and Romania.
The rise in interest rates in various European nations, as well as the tightening of the fines and surcharges systems for noncompliance, is a further VAT trend tied to the present economic climate.
This is the situation in Poland, which has revised the interest rate applicable to late tax payments, including late VAT payments, many times during the year.
In September 2022, Malta made a similar statement and hiked the interest rate.
Sweden has raised the interest rates related to late VAT payments in the nation, among others. The revised tariffs will take effect in November 2022.
It is more crucial than ever for businesses to ensure that they are VAT compliant in light of the changes in VAT rates and the tightening of interest rates and penalty systems in Europe.
Finally, the United Kingdom announced a significant modification to the fines and surcharges system, beginning with the January 2023 reporting period.
Expansion of Tax Technology
The growth of e-invoicing, real-time, and SAFT requirements will be the primary trend in European nations in the following year.
E-invoices are invoices provided electronically in a standardized format. It must be communicated, issued, and received in XML format.
Although many nations now mandate e-invoicing for all transactions with the government—often known as B2G transactions—the adoption for B2B transactions is taking longer.
Some European nations, like Italy and Portugal, have used e-invoicing or certified billing in B2B transactions for years.
Other nations, such as Poland and France, are already far along in the implementation process, and e-invoicing will soon be required under specific situations in these nations.
The effective dates for the adoption of B2B e-invoicing in Spain have yet to be determined, despite the recent announcement of its implementation. Germany has requested approval from the European Commission to adopt the required B2B, making it the last nation to be added to the growing list.
The Standard Audit File for Tax (SAF-T) is an internationally standardized XML file intended to ease the transmission and handling of tax information. The ultimate objective is to eliminate VAT fraud and make tax audits easier for tax officials. Also, once implemented and operational, the automatic reporting of VAT data simplifies business procedures.
In Poland and Norway, the SAF-T duty has been in force for years.
In Portugal and Romania, this duty will become obligatory in 2023. In Portugal, international enterprises must also comply with the SAF-T requirement beginning in January 2023; however, in Romania, owing to the slow implementation, foreign companies are not projected to be required to comply until 2025.
Finally, Hungary is planning to introduce SAF-T in the near future. There is currently no formal confirmation; however, it is anticipated that it will be confirmed by mid-2023.
Real Time Reporting
Real-time reporting, or RTR, is the automatic, near-real-time (or real-time) transmission of data to the tax administration.
This requirement is less commonly adopted than electronic invoicing or SAF-T.
In 2017, Spain implemented its real-time reporting requirement. This is also known as Suministro Inmediato de Información in the native language.
In addition, Hungary has a similar requirement.
The RTR duty applies to overseas enterprises registered for VAT purposes in both countries under specific circumstances.
VAT in the Digital Age: The European Union and Tax Technology
The regulation of VAT in the digital age intends to foster harmonization in the context stated above of an increasing use of tax technology at the EU level.
The legislative proposal remains in the draft phase. It seeks to address: VAT reporting requirements and e-billing VAT treatment of the platform economy.
Eco-taxes are yet another significant tax trend for 2023. Extended Producer Responsibility, or EPR, regulations are growing across European nations. These rules are directly related to the management of waste from particularly polluting products. The WEEE Directive regarding the disposal of electrical and electronic devices is one example.
Countries like Germany and France have lately extended their EPR regulations to marketplace vendors.
In addition, a number of nations are adopting particular tariffs designed to curb the manufacture and consumption of single-use plastic: the United Kingdom adopted its plastic tax in April 2022.
The introduction of Spain’s plastic tax has been authorized for 2023. Due to the substantial administrative burden imposed on businesses and the paucity of assistance offered, the Spanish plastic tax is extremely unpopular.
Italy had intended to implement its plastic tax in 2023; however, they have just announced a delay until 2024.
These new taxes are a major trend for the next few years, as an increasing number of nations seek to put comparable green levies on plastics and other polluting items.