European Union: Council Introduces Electronic VAT Exemption Certificate 

| Image credits: EU Council

The Council of the European Union has reached a political agreement on a new directive that paves the way for replacing paper VAT exemption certificates with an electronic version. This modernization effort aims to simplify processes, improve efficiency, and reduce administrative burdens.

KEY FEATURES OF THE DIRECTIVE

Electronic VAT Exemption Certificate:

• Replaces current paper certificates used for VAT exemptions on goods imported by embassies, international organizations, and armed forces.

• The exact format and IT specifications will be defined by the European Commission through implementing acts.

Transition Period:

• Member states can use both electronic and paper certificates during the transitional phase.

• The transition period is shortened from four years (2026-2030) to just one year (2031-2032).

Scope of Mandatory Use:

• Limited to cases involving two member states where the VAT exemption is not granted via a refund process.

Amendments by Member States:

• Adjustments made to the Commission’s original proposal to address implementation challenges.

• Key elements added to guide the development of the electronic certificate format.

Coordination with VIDA Package:

• Implementation aligns with IT investments required for the VAT in the Digital Age (VIDA) package, ensuring a synchronized modernization rollout.

NEXT STEPS

Technical Review:

• The directive will undergo technical and linguistic checks.

Formal Adoption:

• The Council will formally adopt the directive.

Publication:

• The directive will be published in the EU’s Official Journal and enter into force.

BACKGROUND

Commission Proposals:

On July 8, 2024, the Commission presented two proposals:

• A directive amending Directive 2006/112/EC to introduce the electronic VAT exemption certificate.

• An implementing regulation amending Regulation (EU) No 282/2011 to allow the use of both paper and electronic certificates during the transition period.

European Parliament:

• The European Parliament delivered its opinion on the directive on November 13, 2024.

This initiative marks a significant step towards modernizing VAT systems across the EU, making processes more efficient and reducing reliance on paper documentation.

SOURCE/ RECOMMENDED READ: 

• Taxation: Council introduces electronic VAT exemption certificate - Consilium