VAT in the Digital Age (ViDA)

What does it mean for your business?

On November 5, 2024, the European Council reached a political agreement to implement VAT in the Digital Age (ViDA). This reform package aims to modernize the VAT system, combat VAT fraud, and align with the needs of the digital economy. Scheduled for gradual implementation from 2025 to 2035, ViDA focuses on three key pillars:

1. E-invoicing and Digital Reporting Requirements (DRR);
2. Changes for the platform economy;
3. Single VAT Registration (SVR).

1. E-invoicing and Digital Reporting Requirements (DRR)

ViDA introduces mandatory e-invoicing for intra-EU B2B (and B2G) transactions starting July 1, 2030. Businesses will be required to issue e-invoices within 10 days after a transaction or pre-payment and report transaction data in near real-time. These e-invoices must comply with the European standard.

Key changes:

• The periodic EC Sales List will be replaced by transaction-based reporting, requiring near real-time submission of transaction data;
• Summary invoices will be allowed only in specific cases, provided they meet certain conditions;
• Member States with existing national e-invoicing systems must harmonize them with EU standards by January 1, 2035.

Impact on businesses:

• System updates: businesses must update their invoicing and reporting systems to comply with the new EU standards;
• Compliance risks: failure to comply could result in penalties and loss of VAT recovery rights, highlighting the urgency of early preparation.

2. Platform economy

ViDA introduces significant changes in accommodation rentals and passenger transport via platforms to ensure fair VAT treatment in these sectors, positioning platforms as central compliance players.

Key changes:

• Deemed supplier rule: platforms facilitating services like accommodation rentals or passenger transport will be treated as “deemed suppliers.” This means they must collect and remit VAT unless the service provider meets specific VAT registration requirements;
• Exemptions for small businesses: Member States may apply exemptions for small enterprises or unregistered suppliers, with implementation varying by country;
• Implementation timeline: mandatory application for member states begins July 1, 2030, with an optional early start on July 1, 2028.

Impact on businesses:

• Platforms: platforms must revise contracts, systems, and internal processes to ensure VAT compliance. They also need to verify whether service providers are VAT-registered;
• Service providers: unregistered providers may need to register for VAT to avoid platforms deducting VAT on their behalf. The measure potentially has a large impact on competition as well as net turnover, especially if countries do not exempt small businesses.

3. Single VAT Registration (SVR)

Currently, businesses operating in multiple EU countries may need to register for VAT in each country, leading to significant administrative burdens. ViDA introduces Single VAT Registration (SVR) to streamline this process.

Key changes:

• Expansion of the One Stop Shop (OSS): from July 1, 2028, businesses can use a new OSS-registration to report intra-EU movement of their own goods. Further, the current OSS is extended to report domestic B2C supplies and installation supplies and (already from 1 January 2027) supplies of electricity, gas, heath, cold;
• Phase-out of call-off stock: the current call-off stock arrangements will be eliminated by June 30, 2028, as the new OSS will fully replace the current regulations;
• Enhanced reverse charge mechanism: For domestic B2B supplies and locally-taxed services by non-established businesses to VAT-registered customers, EU Member States must implement reverse charge mechanism so VAT registration is not required.

Impact on businesses:

• Administrative efficiency: SVR reduces the need for multiple VAT registrations, saving time and costs;
• Strategic planning: businesses must carefully consider which registrations can be eliminated and update processes to align with the new requirements.

What can you do now?

The implementation of ViDA introduces fundamental changes that will affect nearly all businesses operating in the EU. It is essential to prepare early to ensure compliance when the new rules take effect. It is important to take the following steps:

1. Assess the impact: Evaluate how ViDA affects your organization, including operational and technological changes;
2. Upgrade systems: ensure your invoicing software supports e-invoicing and digital reporting;
3. Monitor national developments: many Member States have or will introduce e-invoicing and reporting obligations before 2030. Stay informed to avoid unexpected challenges.

How we can help

At DTS, we are committed to helping you navigate the transition to the new VAT era. Whether you need strategic advice, a detailed impact analysis, or support with implementation, we offer tailored solutions to meet your business needs.

Have questions about how ViDA affects your business or need help with a smooth transition? Contact us today and let us future-proof your VAT processes!