VAT in the Digital Age (ViDA): A New Era for EU Tax Compliance

Why ViDA?

The EU VAT system has long struggled with complexity, fraud, and inefficiencies—particularly in cross-border trade. In 2020 alone, EU countries lost an estimated €99 billion in VAT revenues, with a significant portion attributed to fraud. ViDA aims to close this gap while reducing administrative burdens and improving fairness for businesses operating digitally.

The Three Pillars of ViDA

1. Real-time Digital Reporting based on E-Invoicing

Starting 1 July 2030, pillar 1 of the ViDA reform introduces real-time digital reporting and mandatory e-invoicing for cross-border B2B transactions within the EU. Real-time Digital reporting will require businesses to report intra-community transactions within 10 days after issuing of the invoice.

The goal is to modernize VAT compliance and replace outdated systems like the EC Sales List.

These changes are expected to reduce VAT fraud by up to €11 billion annually and cut compliance costs by over €4 billion per year.

2. Platform Economy Regulation

From 1 July 2028, digital platforms facilitating services like ride-sharing and short-term accommodation will be treated as deemed suppliers. This means:

• Platforms will be responsible for collecting and remitting VAT.
• A uniform VAT treatment across all EU countries.
• Optional application in 2028, with mandatory enforcement by January 2030.

3. Single VAT Registration

Pillar 3 focuses on simplifying VAT compliance for businesses operating across multiple EU countries. Currently, companies often need to register for VAT in several Member States, creating administrative complexity and cost. Under this reform:

• The One Stop Shop (OSS) and Import One Stop Shop (IOSS) systems will be expanded to cover more transactions, including the movement of own goods between EU countries.
• Businesses can declare and pay VAT through a single EU-wide registration, reducing the need for multiple national VAT numbers.
• The reform also strengthens the reverse charge mechanism for B2B transactions, further minimizing cross-border VAT obligations.

The goal is to cut compliance costs, reduce bureaucracy, and make cross-border trade easier, especially for SMEs and digital businesses. Implementation is planned progressively, starting around 2028, with full effect by 2035.

What Businesses Should Do Now

Although full implementation is years away, businesses should begin preparing now:

• Assess current invoicing systems for compatibility with e-invoicing standards (e.g., EN16931).
• Review platform operations to understand new VAT obligations.
• Evaluate VAT registration needs and consider transitioning where applicable.

Final Thoughts

ViDA represents a significant shift in how VAT is administered across the EU. While the changes may pose short-term challenges, especially for SME’s, they also offer long-term benefits in terms of efficiency, transparency, and reduced fraud. Staying informed and proactive will be key to navigating this new digital VAT landscape.

For more information, visit the European Commission’s official ViDA page.