VAT in the Digital Age (ViDA): A guide for businesses

Discover how ViDA will transform e-invoicing, VAT compliance, and cross-border trade – and what your business must do to stay ahead.

Is your business ready for VAT in the Digital Age (ViDA)?

The digital economy has changed how we trade, send invoices, and report taxes. Because of this, the European Commission has introduced a new legislative package called VAT in the Digital Age (ViDA). 

For businesses, VAT compliance is about to change dramatically. There will be a strong focus on e-invoicing, real-time reporting, and digital tools. But what does ViDA mean, and how will it affect you? 

By the end of this guide, you'll understand how ViDA impacts your business and how to prepare for the changes. We’ll explain the law in simple terms, cover its three main pillars, and ensure you’re ready to adapt. 

What is ViDA?

ViDA is a proposed reform by the European Commission to modernize VAT rules for businesses operating within the European Union (EU). Its primary goal is to:

  • Reduce VAT fraud, particularly within cross-border transactions.
  • Simplify VAT compliance for businesses, especially in the digital economy.
  • Close the VAT gap, which costs EU countries billions annually.

By leveraging e-invoicing, digital reporting tools, and updated platforms, ViDA will create a modern, unified VAT system across the EU.

 

The three pillars of ViDA

The proposal focuses on three key pillars:

  1. Digital reporting requirements (DRR) and e-invoicing
  2. The VAT treatment of the Platform Economy
  3. A single VAT registration across the EU

Let’s break down each pillar and what it means for businesses.

Key benefits of VAT in the Digital Age (ViDA)

ViDA doesn’t just benefit tax authorities—it brings tangible benefits to businesses too.

  • Reduced compliance costs: E-invoicing and single registration simplify VAT management.
  • Increased efficiency: Automation reduces manual invoicing and reporting work.
  • Better cash flow: Faster VAT refunds and payments through digital tools.
  • Transparency: Real-time reporting eliminates uncertainties in VAT compliance.
  • Less fraud: Standardized reporting reduces VAT fraud and improves tax fairness.

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Pillar 1: E-invoicing and digital reporting requirements (DRR)

Pillar 1 of the ViDA reform updates VAT reporting and invoicing in the EU. It does this by mandating digital VAT processes and electronic invoicing. This initiative aims to address inefficiencies, reduce fraud, and standardize VAT processes across Member States.

The challenges of digital reporting and electronic invoicing

Businesses face several obstacles under the current system:

  • Fragmented rules: Different Member States have unique digital reporting and e-invoicing requirements, creating complexity for cross-border businesses.

  • VAT fraud: Issues like carousel fraud cost the EU billions annually, with existing systems unable to detect fraud effectively in real-time.

  • Outdated invoicing systems: Summary VAT returns are slow and inefficient at identifying fraud.

  • High compliance costs: Businesses bear significant administrative burdens to comply with varying national requirements.

What’s changing?

ViDA introduces standardized digital reporting and mandatory e-invoicing to simplify VAT compliance. These changes affect all cross-border B2B transactions in the EU. Member states must adopt a standard system and a common e-invoicing format.

Mandatory e-invoicing

Cross-border B2B transactions must use structured e-invoices that follow a common EU e-invoicing standard, ensuring consistency and compatibility across Member States.

Standardized reporting

Businesses must submit VAT data to tax authorities in real-time or near real-time, replacing fragmented national systems with a unified EU approach.

No recapitulative statements

Traditional recapitulative statements for intra-EU transactions will be replaced by real-time reporting, enabling faster fraud detection.

Benefits of these changes

The reform provides significant benefits for both businesses and tax authorities. By using digital reporting and e-invoicing, businesses can improve their operations and cut costs. They can also meet compliance needs and help create a clearer and more efficient VAT system.

 

Faster fraud detection

Real-time reporting helps authorities identify and prevent fraud more efficiently.

Simplified compliance

A standardized system replaces fragmented national rules, reducing complexity for businesses.

Accurate insights

Real-time data provides tax authorities with timely, precise information to combat VAT fraud.

Reduced costs

E-invoicing cuts compliance time and costs by eliminating outdated methods.

Supports digitalization

Encourages businesses to adopt modern digital tools, aligning with broader EU digitalization goals.

Enhanced transparency

Digital reporting increases VAT transparency and improves efficiency for all stakeholders.

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Pillar 2: VAT treatment of the platform economy

Pillar 2 aims to improve VAT compliance and reporting in the platform economy. This includes e-commerce platforms, ride-sharing apps, and short-term rental services. Examples are Uber, Airbnb, and delivery apps.

The challenge with the platform economy

The rapid growth of the platform economy has exposed several VAT-related issues:

  • Underreporting of VAT: Many transactions facilitated by digital platforms go unreported, leading to significant VAT revenue losses.

  • Unclear responsibilities: Determining whether platforms, sellers, or service providers are liable for VAT has been inconsistent.

  • Complex rules for SMEs: Small businesses and individuals using platforms often face burdensome VAT obligations.

Key changes for platforms

ViDA introduces new rules to streamline VAT collection and reporting for platforms. These changes aim to make tax rules clearer, reduce confusion, and create a fairer system for everyone involved. Any platform that facilitates these transactions in the EU is affected by these rules, regardless of where the platform itself is established.

Platforms will handle VAT

If a business is not registered for VAT or uses a special tax scheme, the platform will collect and pay the VAT for them. This makes the process smoother and ensures the right amount of VAT is paid.

Platforms must keep records

For services like short-term rentals (e.g., AirBnB) and passenger transport, platforms must collect and keep records. This is necessary even if they are not responsible for the VAT.

Benefits of these changes

The updated rules bring benefits for both businesses and tax authorities. ViDA’s updates make sure the platform economy follows clear, fair, and efficient VAT rules. This helps businesses, platforms, and tax authorities.

 

Simplified compliance

Sellers, especially small businesses and individuals, will have fewer VAT-related obligations as platforms take on the responsibility.

Standardized processes

Platforms can adopt consistent procedures to meet EU VAT requirements.

Increased transparency

Tax authorities gain better visibility into VAT collection within the platform economy.

Fair competition

Ensures a level playing field between traditional businesses and platform-based services.

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Pillar 3: Single VAT registration (SVR) across the EU

Pillar 3 of the VAT in the Digital Age (ViDA) simplifies VAT compliance for businesses operating in multiple EU countries. By expanding the One-Stop Shop (OSS) framework, businesses can handle all their VAT duties in the EU with one registration.

The challenges of VAT registration

Currently, businesses selling goods or services across the EU face several obstacles:

  • Complex and costly compliance: Businesses must register for VAT in each Member State where they operate, creating a time-consuming and expensive process.

  • Limited OSS coverage: The existing OSS only applies to specific transactions, such as cross-border B2C sales. B2B goods supplies and other activities still require multiple VAT registrations.

  • Non-compliance and fraud risks: Complex registration systems discourage compliance, particularly for SMEs, and create opportunities for VAT fraud, such as incorrect reporting.

  • Barriers to trade: Small and medium-sized enterprises (SMEs) often avoid cross-border markets due to the complexity of VAT registration and reporting.

What’s changing?

ViDA introduces a single VAT registration system that simplifies the process for businesses. These changes cover intra-EU B2B goods transactions, the movement of goods, and other activities that previously required multiple VAT registrations.

Expanded OSS scope

The OSS will now include intra-EU B2B sales of goods and the movement of stock across EU borders, allowing businesses to report these activities under one registration.

Single VAT registration

Businesses no longer need to register in every EU country where they sell goods. Instead, they can fulfill all VAT obligations through the OSS.

IOSS integration

The Import One-Stop Shop (IOSS), which simplifies VAT on low-value goods imports, will integrate more closely with the OSS framework.

Benefits of single VAT registration

The new system provides significant advantages for businesses. ViDA’s single VAT registration system represents a major step forward in simplifying VAT compliance, enhancing transparency, and fostering cross-border trade across the EU.

 

Improved compliance

A unified system reduces errors and opportunities for VAT fraud.

Lower operational costs

Eliminating multiple registrations streamlines processes and reduces overhead.

Simplified administration

Managing VAT obligations through a single system saves time and reduces costs.

Market access for SMEs

Easier compliance encourages smaller businesses to expand into EU markets.

Focus on growth

Simplified VAT processes allow businesses to prioritize growth over regulatory complexities.

Accurate VAT collection

The system ensures VAT is reported and collected consistently across the EU.

How to prepare your business for ViDA

1. Understand your obligations

Assess how ViDA will impact your business. Are you trading cross-border? Do you use digital platforms? Are you ready for e-invoicing?

2. Implement e-invoicing solutions

Invest in compliant e-invoicing software that meets EU requirements.

3. Partner with experts

Work with VAT and tax experts to ensure a smooth transition.

4. Leverage technology

Adopt digital reporting tools that automate compliance tasks.

5. Stay informed

ViDA implementation timelines may vary, so keep up to date with the latest developments.

ViDA implementation timeline

The VAT in the Digital Age proposal is expected to roll out in phases. Businesses should start preparing now to avoid last-minute challenges.

 

2025

  • ViDA comes into force.
  • Member States begin requiring e-invoices for domestic transactions without prior approval from the European Commission.
  • The EU clarifies VAT rules for live streaming events to establish the place of supply.

 

2026

  • Authorities enforce new mandatory invoice references for cash accounting invoices starting January 1.
  • The EU launches Platform Economy requirements.

 

2027

  • Updates to the 2021 e-commerce package are planned for January.
  • The One-Stop Shop (OSS) system expands to include electricity supply.

 

2028

  • Reverse charge rules are extended, requiring VAT to be accounted for when foreign sellers transact with VAT-registered customers.
  • OSS coverage broadens to include movements of goods across EU borders and B2C sales made abroad.
  • Additional expansions to the OSS system make the reverse charge mechanism mandatory.

 

2030

  • Simplifications to existing e-commerce VAT rules shift under EU Customs reforms.
  • Cross-border transactions require e-invoicing at the EU level.
  • Digital Reporting Requirements replace existing ESL returns for B2B intra-community transactions.
  • Member States may extend these requirements to domestic transactions if aligned with EU standards.
  • New rules affect the platform economy and introduce specific requirements for short-term accommodation rentals and passenger transportation services.

 

2035

  • The EU aims to harmonize domestic digital reporting models across Member States.

Why ViDA matters

VAT in the Digital Age represents the most significant update to EU VAT rules in decades. While the changes may require initial effort and investment, they pave the way for a streamlined, efficient, and fraud-free VAT system.

For businesses, ViDA offers an opportunity to modernize operations, improve cash flow, and gain a competitive edge in the digital economy.

Stay ahead with e-invoicing

ViDA is transforming how businesses approach VAT compliance, and e-invoicing lies at the heart of this change. Simplify your processes, reduce errors, and gain peace of mind knowing your business meets all requirements effortlessly with Continia.

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