VIDA

Pillar 2 of ViDA – The Platform Economy

In January this year we wrote about the ‘VAT in the Digital Age’ or ‘ViDA’ package which was formally adopted by the EU Commission on 11 March 2025. ViDA is a legislative package introduced with the aim of modernising the VAT system of the European Union, combating VAT fraud and addressing the challenges of the platform economy.

There are three main pillars:

Pillar 1: Digital reporting requirements: making mandatory electronic invoicing (e-invoicing) and introducing real-time digital reporting for cross-border trade to help reduce the VAT gap through more effective fraud detection and prevention.

Pillar 2: VAT treatment of the platform economy: introducing the deemed supplier scheme for online platforms that facilitate short-term accommodation and passenger transport services.

Pillar 3: Single VAT registration: extending the One Stop Shop (OSS) and the Import One Stop Shop (IOSS) to avoid multiple VAT registrations within the European Union.

In this short article we consider Pillar 2 – The Platform Economy.

As mentioned in our previous article, at the moment, many providers of online short-term accommodation rental and passenger transport services are not registered for VAT as they are trading below the registration threshold in their own countries of establishment.  In some cases, they may even be unaware they need to register for VAT.  This leads to VAT revenue being lost and creates an unfair advantage for online providers compared to traditional providers of accommodation or passenger transport  (think AirBnB not collecting VAT on the rental of properties vs. hotel chains having to collect VAT).

Under the ViDA proposal, platform operators will be responsible for collecting and remitting VAT in cases where their service providers are not VAT registered. The platform operators will charge and collect the VAT directly from the end customer and remit it to the tax authorities.  The idea being greater VAT revenues and a more level playing field for both online and traditional providers.

We now have some further details around timing and implementation of the package, as well as some of the potential issues already identified.

Timing

30 June 2028 – Member States must adopt and implement the new rules in national legislation.

1 Jan 2026 – draft explanatory notes

1 Jan 2027 – final explanatory notes

1 July 2028 – deemed supplier rules enter into force, but member states can delay the implementation.

1 January 2030 – Member States that have delayed the implementation must apply the rule.

Possible issues – what the explanatory notes need to address

One of the major issues is that there will seemingly be no unified definition of what ‘short term accommodation’ is.  The generally accepted definition of ‘short-term’ will be 30 days or less, but member states will still be able to add further conditions on a national level.  This could lead to confusion for platforms and whether do or do not fall under the new rules.  Further, how will businesses be able to check the particular rules of each member state?  Ideally, the process will need to be automated so clear Member State definitions will be required.

Travel Agents currently operating under TOMS are supposed to be exempted, but could in theory be unwittingly captured by the new rules.  The TOMS is due to be considered at EU level, but in the meantime, clear guidance will be needed to ensure travel companies can apply the rules correctly.

The application of the SME exemption in particular may be challenging i.e. how Member States which avail themselves of this option will allow the SME to demonstrate to the platform that they are using the SME scheme. For example, under the SME rules, a VAT registration may not be required based on the country’s VAT registration threshold.  How will that SME be able to validate its status to the platform?  How will the platform manage the tracking of the SME threshold?

Other charges such as tourist taxes, booking fees, and ancillary services (e.g. cleaning fees) may apply outside of the platform. How these are handled is yet to be clarified.

There is also still some doubt as to whether there will be sufficient time for businesses and member states to adopt the new rules and ensure that adequate systems can be put in place. There will be 18 months between the final explanatory notes being published and the implementation date, and there are seemingly a lot of clarifications still yet to be made.

We shall update this article in early 2026 once the draft explanatory notes are produced.

In the meantime, if you have any questions on the provision of short-term accommodation or passenger transport services, please contact us on:

Contact@essentiaglobalservices.com  

Team Essentia.