Extension of reduced VAT rates and Excise Duties relief; ViDA on the horizon

This article highlights the extension and changes to the most recent cost of living support measures recently published and broader VAT developments about digital reporting.

The latest cost of living support measures

The temporary reductions in VAT on gas and electricity, from 13.5% to 9%, will be extended to 31 October 2023. This extension is being adopted to continue support for hard-pressed businesses and consumers in the face of inflated global energy costs.

Despite active discussion and support for removal from several quarters, the temporary reduction in VAT on tourism and hospitality, from 13.5% to 9%, will be extended to 31 August 2023. This provides certainty and continued business support for the sector for the upcoming tourist season.

A phased restoration of the rates of excise on petrol, diesel and marked gas oil will take place in three stages over the coming eight months:

  • On 1 June 2023, an increase of 6 cents per litre of petrol, 5 cents per litre of diesel and 1 cent per litre of marked gas oil;
  • On 1 September, these rates will increase by a further 7 cents for petrol, 5 cents for diesel, 1 cent for marked gas; and
  • Rates will then be fully restored on 31 October with a final increase of 8 cents for petrol, 6 cents for diesel, and 3 cents for market gas oil.

ViDA on the horizon

While more associated with the Latin hit song sung by Ricky Martin ‘Livin’ La Vida Loco’, the European Commission launched its long-awaited proposals to modernise the VAT rules within the EU. Known as the ‘VAT in the Digital Age’ package (ViDA), it will cover several areas, including

  • digital reporting and e-invoicing;
  • the platform economy; and
  • and the single VAT registration.

Although it won’t become a reality until 2025 at the earliest, there is still a substantial body of work to be carried out in advance of the complex changes in terms of reporting systems preparation.

The adoption of real-time reporting is already progressing or being adopted in several European Member States, including Spain, Italy, Hungary and Poland. The UK have already introduced digital regimes which affect VAT reporting.  

The position in Ireland

While here in Ireland, the adoption of real-time reporting up to now is primarily seen with payroll tax reporting and with Customs, the Revenue Commissioners have flagged their support and intention to develop and adopt real-time VAT reporting.    

Why are these proposals being implemented?

The proposed changes are reflective of a fundamental shift in how data is being collected and examined by the tax authorities – there is a continued move away from information being reported to taxation authorities post-event towards a position where it is being required by them in real-time. This aligns with the EU Commission and Member States’ efforts to improve collection and reduce VAT fraud.

Costs and benefits for business

Experience demonstrates that significant costs will be imposed on businesses adopting and implementing these changes. Timely planning is critical.

This requires systems to be updated to reflect this real-time requirement and ensure that data capture is accurate and complete while being processed correctly to reduce the risk of a tax audit or penalty sanction.

In addition, it would be timely to consider the engagement of advisory support in terms of carrying out VAT reporting health checks, as the proposed changes are likely to be accompanied by the adoption and rigid implementation of sanctions in the case of misreporting.  

Similar to the Brexit challenges businesses encounter, competitive advantage can be garnered by better preparation and upfront investment in advance of the anticipated changes.

Mazars will be publishing future pieces of advice and actively engaging with clients and businesses on planning for these changes as they are confirmed.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars VAT team.

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