Adoption of the VAT in the Digital Age package

What is the ViDA Package?

The ViDA package is a significant reform introduced by the European Commission aimed at modernising the Value Added Tax (VAT) system in the context of the increasingly digital and cross-border economy. As businesses continue to expand globally, the VAT system needs to evolve to reflect digital transactions, simplify compliance, and enhance the efficiency of tax collection. ViDA is designed to address gaps and inconsistencies within the current VAT system, which can lead to fraud, confusion, and increased administrative burdens for businesses operating across multiple jurisdictions.

The main purpose of the ViDA package (for more info visit: BDO Newsletter: VAT in the Digital Age)  is to modernise and harmonise VAT processes within the EU by introducing new rules, digital tools, and innovations. The goal is to create a more streamlined, fraud-resistant, and transparent VAT system that works effectively in the digital age.

The ViDA package focuses on three main pillars:
 

• E-invoicing and digital reporting

• The platform economy

• The single VAT registration

Timeline of the changes

• 11 March 2025 – Adoption of the ViDA Package
  • The European Commission officially adopts the ViDA package, marking the start of the transformation of VAT rules to meet the demands of the digital economy. The ViDA package sets the stage for a series of reforms, indicating a shift toward more streamlined, digital-first VAT systems across the EU.
  • The directive, regulation and implementing regulation enter into force on the twentieth day following their publication in the Official Journal of the EU. Member States would then need to transpose the provisions of the directive into the national law.

 

• Immediately Upon Entry into Force (expected April 2025)
  • Domestic e-invoicing (subject to conditions) - Member States are allowed to introduce at a domestic level obligatory e-invoicing for businesses under certain conditions. This reform ensures all invoices are processed digitally, reducing errors, fraud, and administrative complexity.
  • Improvements to the Import One Stop Shop Scheme aimed to help Member States to further prevent VAT fraud on the importation of goods into the Union. 

 

• 1 January 2027 – Legislative updates to the One Stop Shop Schemes (OSS and IOSS)
  • A clarification to the threshold of €10,000 applicable to cross-border supplies of telecommunications, broadcasting and electronic (TBE) services and intra-community distance sales of goods is to be made in order to explain that such threshold includes only intra-community distance sales of goods that are supplied from the Member State where the taxable person is established (with no change to the provisions concerning TBE services).

 

• 1 January 2028 – Digital Platforms as VAT Collectors (Deemed Supplier Rules)
  • Digital platforms facilitating the supply of short-term accommodation rentals and passenger transport services would be considered as deemed suppliers for EU VAT purposes and as such would be liable to account for VAT. However, if the underlying supplier provides the platform its local VAT number in the Member State where VAT is due and declares that it will charge and pay VAT on that supply, the platform operator would not be liable for the collection and payment of the VAT due.
  • Member States are allowed to exclude digital platforms from the deemed supplier rules if the underlying supplier qualifies and opts for the small and medium enterprise VAT schemes.
  • Member States may opt to delay implementation of this measure until 1 January 2030.

 

• 1 July 2028 – Single VAT registration
  • The OSS will be expanded to include further supplies of goods subject to VAT in a Member State other than the Member State where the supplier is established, such as domestic sales, the supply of goods with installation or assembly, the supply of goods on board of ships, aircrafts or trains. This change will allow e-commerce businesses to reduce their administrative costs for foreign VAT registration and improve their cash-flow management by reporting and remitting VAT to a single authority.
  • However, businesses should take into consideration that the OSS Schemes cannot be used to recover input VAT incurred in Member States other than the Member State of the establishment. In such instances, unless the foreign VAT registration is retained, a request for a VAT refund should be made through the local portal of the Member State of establishment (under the Council Directive 2008/9/EC – the 8th Directive).
  • The OSS Scheme is also set to facilitate reporting of movements of own goods between EU Member States leading to the withdrawal of the current call-off stock arrangements by 30 June 2028.
  • Member States will be obliged to allow the VAT reverse charge mechanism if a supplier is a non-established business that is not registered for VAT in the Member State where VAT is due, provided that the customer is VAT registered.

 

• 1 July 2030 – Mandatory Digital Reporting Requirements
  • Cross-border e-invoicing – Businesses will be required to issue a structured e-invoice for cross-border B2B transactions. Such invoice must be issued within 10 days of the date when the taxable event takes place and needs to comply with the EU standard format. This change will promote standardisation, reducing the use of paper invoices and minimising human error, as well as streamlining VAT compliance for businesses.
  • The supplier should directly report certain data from the electronic invoice in real-time, i.e. immediately after an invoice is issued. In the case of self-billing, the reporting needs to be done by the customer within five days from the issuance of the invoice. As a consequence, the requirement for periodic submission of recapitulative statements (EC sales list) will be withdrawn. 

 

• By 1 January 2035 – Member States should align their domestic digital real-time transaction based reporting with the new EU model.

 

The Future of VAT Compliance and The Importance of ViDA 

The VAT in the Digital Age (ViDA) Package represents a crucial step forward in adapting the EU VAT system to the needs of a rapidly changing digital economy. By introducing digital tools such as real-time reporting, electronic invoicing, and platform VAT collection, ViDA aims to combat VAT fraud, particularly in cross-border transactions. 

These changes, phased in over the next few years, will significantly reduce administrative and compliance costs for businesses by simplifying VAT processes, streamlining reporting requirements, and ensuring that tax is monitored, collected and paid in a more transparent and efficient manner. For businesses, this means less time spent navigating complex VAT regulations across different Member States, and more time focusing on their core operations.

Ultimately, the ViDA package will create a more efficient, fraud-resistant, and user-friendly VAT system that benefits both businesses and tax authorities.

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