Tax and Technology

S. 3871. Introduction

1.1. Scope of the study

A digital platform, also known as multi-sided platform, is an important business model in the era of digitalization because it is the primary driver of rapid growth in the e-commerce industry and can generate revenue in multiple countries simultaneously without a physical presence in those countries. In 2003, the OECD’s e‑commerce guideline recommended a mechanism requiring the non-resident supplier to register, collect, and remit VAT in accordance with the rules of the jurisdiction in which the consumer resides as current VAT law faces challenges in efficiently taxing the supply transactions relevant to digital platforms. The European Union (EU) Commission is also concerned about these issues as stated in the proposal to modernize VAT for cross-border B2C e-commerce: “the current system is not neutral as EU businesses are at a clear disadvantage to non-EU businesses which can legitimately and through high levels of non- compliance make VAT-free supplies into the EU”.

Thereafter, EU VAT Directive was amended in 2017 and 2019 by Council Directive (EU) 2017/2455 and Council Directive (EU) 2019/1995, respectively, in order to collect VAT on a suppl...