ViDA: Your essential guide to VAT in the Digital Age – What is ViDA and what’s changing?

I. Introduction: Navigating the new era of VAT in the EU with ViDA

The rapid expansion of the digital economy has presented considerable challenges to traditional Value Added Tax (VAT) systems across the European Union. As businesses increasingly operate online and across borders, existing VAT rules have struggled to keep pace, leading to complexities, significant administrative burdens, and vulnerabilities to fraud. This evolving landscape underscores the necessity for a modernized approach to VAT, prompting the EU to introduce a comprehensive reform known as VAT in the Digital Age, or ViDA.

The ViDA package represents a pivotal set of legislative reforms initiated by the European Commission. Its fundamental aim is to overhaul the EU’s VAT framework, making it more robust, efficient, and suited to the nuances of digital commerce. For any business engaged in trade with or within the EU, understanding the ViDA initiative is not just beneficial but essential. The reforms are designed to ensure fairer and more efficient VAT collection, simplify compliance particularly for small and medium-sized enterprises (SMEs), and adapt VAT regulations to contemporary digital business models. The changes heralded by ViDA are substantial, marking what many consider the most significant VAT reform since the establishment of the EU Single Market. This indicates a fundamental shift towards the digitalization of tax administration, a trend observed globally as authorities leverage technology for improved compliance and fraud detection. The ViDA initiative, therefore, is not merely a series of minor adjustments but a strategic move to align VAT in the EU with the realities of the 21st-century economy.

II. What is ViDA (VAT in the Digital Age)? Unpacking the EU’s landmark reform

ViDA, an acronym for VAT in the Digital Age, is a comprehensive legislative package first proposed by the European Commission in December 2022. Its core purpose is to modernize and simplify the European Union’s VAT systems. The initiative aims to establish a more efficient, digitally-driven framework for managing VAT obligations, significantly reduce administrative burdens for businesses, and effectively combat VAT fraud. Furthermore, ViDA addresses the distinct challenges posed by the surge in online trade and seeks to create a level playing field between digital platforms and traditional service providers, particularly in sectors like short-term accommodation and passenger transport. The scale of this reform is underscored by its description as the „biggest VAT reform since the Single Market,” signaling a profound transformation in how VAT will operate across the EU.

The impetus for the ViDA package stems from several critical deficiencies in the existing VAT framework. Firstly, traditional VAT systems were ill-equipped to handle the novel business models emerging from the burgeoning digital and platform economy. Secondly, the prevailing VAT rules were often complex and cumbersome, imposing substantial compliance costs, especially on SMEs attempting to navigate cross-border trade within the EU. A third major driver was the alarming rate of VAT fraud; in 2020, the VAT gap – the difference between expected and collected VAT revenues – amounted to an estimated €99 billion, with approximately a quarter of this loss attributed to fraud in intra-EU trade. ViDA’s anti-fraud measures alone are projected to help Member States recover up to EUR 11 billion in VAT revenue annually. This significant projected revenue recovery highlights a strong economic imperative behind ViDA, suggesting that the financial benefits for Member States, particularly through the Digital Reporting Requirements pillar, were a powerful catalyst for the reform’s proposal and subsequent adoption. Finally, while the existing One-Stop Shop (OSS) mechanism had offered some simplification, it contained gaps that ViDA aims to close, further streamlining VAT compliance for businesses. The consistent emphasis on easing burdens for SMEs and helping them compete also points to a deliberate policy objective within ViDA to foster their growth by simplifying the complexities of cross-border VAT.

III. The ViDA schedule: When does ViDA come into effect?

Understanding the vida schedule is crucial for businesses to prepare for the upcoming changes. The journey of ViDA from a proposal to adopted legislation involved several key stages. The European Commission first tabled the ViDA package on December 8, 2022. After extensive discussions and negotiations, a political agreement was reached by the Economic and Financial Affairs Council (ECOFIN) on November 5, 2024. The EU Council formally adopted the ViDA legislation on March 11, 2025, and it was subsequently published in the Official Journal of the European Union on March 25, 2025. Following its publication, ViDA officially entered into force on April 14, 2025, which was 20 days after its appearance in the Official Journal.

The implementation of ViDA is not a singular event but a phased rollout, with different components becoming effective on various dates, extending from 2025 through to 2035. This gradual approach is intended to allow businesses and tax administrations adequate time to adapt.

Below is a summary of the key milestones in the ViDA implementation timeline:

The extended timeline, particularly allowing Member States with established national Digital Reporting Requirement systems until 2035 to fully align, represents a pragmatic compromise. While ViDA aims for harmonization, this deferral acknowledges the significant investments already made by some countries (e.g., Italy’s SdI, Poland’s KSeF). However, this also means that businesses operating in these specific Member States might face a more fragmented DRR landscape for a longer period, potentially increasing compliance complexity in the interim. Similarly, the optional period for the deemed supplier rules for platforms, from July 2028 to January 2030, provides a transition window. Nevertheless, if adoption varies across the EU during this phase, it could lead to temporary competitive imbalances, an issue ViDA itself aims to resolve.

IV. ViDA’s Three Pillars: Reshaping VAT for the Digital Age

The comprehensive reforms introduced by the ViDA package are structured around three central pillars, each designed to address specific challenges and modernize different facets of the EU VAT system. These pillars collectively aim to enhance efficiency, combat fraud, and simplify compliance in the context of an increasingly digitalized economy.

Pillar 1: Digital Reporting Requirements (DRR) – Real-time e-Invoicing takes center stage

The first pillar of ViDA introduces mandatory Digital Reporting Requirements (DRR), fundamentally changing how businesses report VAT on cross-border transactions. This involves the widespread adoption of e-invoicing and the implementation of a real-time, or near real-time, digital reporting system for transactional data submitted to tax authorities. This is considered a cornerstone of ViDA’s anti-fraud strategy.

Mandatory E-invoicing: Effective from July 1, 2030, businesses will be obligated to issue electronic invoices for all cross-border Business-to-Business (B2B) supplies of goods and services within the EU. These e-invoices must conform to the European standard EN16931, ensuring a structured data format rather than simple PDF invoices sent via email. A significant change is the timeline for issuing these e-invoices: they must be issued within 10 days of the chargeable event (e.g., the supply of goods/services or receipt of an advance payment). This is a substantial acceleration compared to previous invoicing deadlines. From early 2025, Member States can mandate e-invoicing for domestic transactions without needing prior EU approval, provided it applies to established taxpayers and allows for invoices compliant with the EN16931 standard. Furthermore, as of January 1, 2030, businesses will no longer need to obtain recipient acceptance for issuing e-invoices for cross-border supplies.

Real-Time Digital Reporting: Alongside e-invoicing, businesses will be required to report transactional data electronically. Suppliers must report this data to their national tax authority at the time the e-invoice is issued or should have been issued (within the 10-day window). Member States may also require customers to report data from received e-invoices within 5 days of receipt. This data will then be transmitted to a new central EU database, known as the Central VAT Information Exchange System (Central VIES), facilitating cross-checking by tax authorities.

Data Elements for E-invoices/Reporting: The e-invoices and subsequent digital reports will need to include new data elements beyond standard invoice information. Crucially, this includes the supplier’s IBAN bank account details and payment terms, enabling tax authorities to track financial flows. For corrective invoices, a reference to the original invoice number will be mandatory. If the triangulation simplification is used, this must also be indicated on the invoice.

Impact and Benefits: This pillar is expected to yield significant benefits. The current system of EC Sales Listings (ESLs) will be abolished from July 1, 2030, replaced by the more immediate DRR system. This shift is projected to enable faster detection of VAT fraud, potentially recovering up to EUR 11 billion annually for Member States, and reduce administrative and compliance costs for EU businesses by up to EUR 4.1 billion per year. It will also promote the standardization of invoicing practices across the Union.

The stringent 10-day deadline for e-invoicing and reporting will necessitate a considerable acceleration of internal business processes, from order-to-cash and procure-to-pay cycles, and demand robust, integrated IT systems capable of handling these new requirements. This transformation extends beyond mere tax compliance, impacting core operational workflows. The mandatory inclusion of bank account details on e-invoices and in digital reports provides tax authorities an unprecedented ability to link transactional data with financial flows, significantly bolstering their capacity to detect discrepancies and combat complex fraud schemes. While the EN16931 standard aims for uniformity in cross-border transactions from 2030, the provision allowing Member States to maintain their domestic DRR systems until 2035 and potentially implement domestic e-invoicing mandates earlier means businesses may still encounter a varied e-invoicing landscape for domestic transactions in the interim. This will require adaptable solutions capable of managing both the EU standard and diverse national requirements.

Pillar 2: Adapting to the Platform Economy – new VAT rules for marketplaces

The second pillar of ViDA introduces significant changes to the VAT treatment of transactions facilitated by the platform economy. It establishes a „deemed supplier” regime for digital platforms (referred to as electronic interfaces) that facilitate short-term accommodation rentals and passenger transport services. Under this regime, the platform itself becomes responsible for collecting and remitting VAT when the underlying service provider (e.g., a host renting out a room or a driver providing transport) does not account for it.

Scope and Deemed Supplier Mechanism: This new rule applies specifically to platforms facilitating short-term accommodation rentals (defined as uninterrupted stays of up to 30 consecutive nights for the same person) and passenger transport services by road. When the deemed supplier rule applies, the platform is considered to have received the service from the actual provider and then, in turn, supplied that service to the end customer. Consequently, the platform becomes liable for accounting for the VAT on the supply to the consumer, unless specific exclusions apply. The supply from the underlying provider to the platform is typically treated as an exempt supply without the right for the provider to deduct input VAT.

Timeline: Member States can opt to apply these deemed supplier rules from July 1, 2028. However, the regime will become mandatory across all EU Member States from January 1, 2030.

Conditions and Exclusions: The deemed supplier rule is not absolute. It will not apply if the underlying service provider furnishes the platform with a valid VAT identification number for the Member State where the VAT is due and explicitly declares that they will be responsible for charging and remitting any VAT due on the supply. Member States also have the option to exclude supplies made by businesses operating under the small business scheme (SME scheme) from this rule. Furthermore, supplies that fall under the Tour Operators Margin Scheme (TOMS) must be excluded from the deemed supplier provisions. Platforms that solely provide services such as listing, advertising, payment processing, or merely redirecting customers to other electronic interfaces are also considered outside the scope of this deeming provision.

Aims and Benefits: The primary objectives of these new rules for the platform economy are to level the playing field between services offered via digital platforms and those provided through traditional channels. They also aim to ensure that VAT is collected on services where it was often previously uncollected, either because underlying providers were unaware of their obligations or were not required to register for VAT. This change is also intended to simplify VAT obligations for many small suppliers, as the platform will take on the responsibility for VAT collection and remittance. Additionally, platforms will be required to maintain records of the supplies they facilitate, even if they are not considered the deemed supplier for those transactions.

This „deemed supplier” model signifies a substantial shift in VAT liability, effectively positioning platforms as quasi-tax collectors. This will necessitate considerable investment by platforms in new compliance systems, robust due diligence processes to ascertain the VAT status of their users, and potentially a re-evaluation of their existing business models and pricing structures. The various exclusions and options available to Member States, such as those concerning SME schemes or the classification of rentals, could introduce a degree of non-uniformity in the application of these rules across the EU. This potential for fragmentation might, at least initially, complicate compliance for platforms operating in multiple Member States, somewhat contrasting with the overarching ViDA goal of simplification.

Pillar 3: Simplifying Cross-Border trade – Single VAT Registration (SVR) and the expanded OSS

The third pillar of ViDA focuses on simplifying VAT compliance for businesses engaged in cross-border trade within the EU. It achieves this primarily through a significant expansion of the existing One-Stop-Shop (OSS) mechanism, moving towards a system often referred to as a Single VAT Registration (SVR). This allows businesses to declare and pay VAT due on a wider range of their EU-wide sales via a single online portal administered by the tax authority in one Member State, thereby reducing the need for multiple VAT registrations across the Union.

Evolution and Expanded Scope of OSS/SVR: The OSS is not entirely new; a version was already in place, notably for B2C e-commerce supplies since July 1, 2021. ViDA builds upon this foundation by broadening its applicability. Effective from July 1, 2028 (unless otherwise specified), the expanded OSS/SVR will cover:

• All Business-to-Consumer (B2C) supplies of goods and services within the EU, accessible through both the Union OSS (for EU-established businesses) and the non-Union OSS (for non-EU businesses).
• Transfers of a business’s own goods between EU Member States (often referred to as stock transfers). This important change effectively replaces the complexities of the current call-off stock simplification rules. (No new call-off stock arrangements will be permitted from July 1, 2027, and all existing ones must be concluded by June 30, 2028).
• Supplies of electricity, gas, heating, and cooling to consumers (this specific expansion takes effect earlier, from January 1, 2027).
• The supply of goods that require installation or assembly by the supplier.
• Sales of goods made onboard ships, airplanes, and trains during passenger transport operations within the EU.
• The ViDA package also reinforces the use of the reverse charge mechanism. It will become mandatory for B2B supplies made by non-established (or non-identified) taxable persons to customers who are VAT registered in the Member State where the supply takes place. This complements the SVR by shifting the responsibility for accounting for VAT to the customer in a broader range of scenarios.

Benefits: The expansion of the OSS towards a more comprehensive SVR system is anticipated to deliver substantial benefits for businesses. It will drastically reduce the need for companies to hold multiple VAT registrations in different EU countries, a common requirement under the old rules. This, in turn, simplifies VAT compliance processes and reporting obligations, leading to lower administrative costs. These simplifications are particularly advantageous for SMEs, making it easier for them to engage in cross-border trade within the EU.

The inclusion of transfers of own goods (stock movements) under the OSS is a particularly significant simplification. Businesses using distributed inventory models, such as e-commerce companies with fulfillment centers in several EU countries, often faced the burden of multiple VAT registrations solely for holding stock. This change will allow them to centralize a major aspect of their VAT compliance, offering considerable administrative relief. The combined effect of an expanded OSS and the mandatory application of the reverse charge for many supplies by non-established businesses aims to create a more robust and streamlined VAT system. This dual approach ensures that VAT is accounted for either through a single point of declaration (the OSS) or by the local customer, thereby minimizing instances where non-EU businesses might inadvertently escape VAT obligations or face overly complex registration procedures.

V. Who will ViDA impact? Understanding your obligations

The ViDA reforms have a broad scope and will affect a wide range of businesses, fundamentally altering how VAT in the EU is managed and reported. A critical aspect to note is that ViDA applies to businesses selling goods or services to customers located in the European Union, irrespective of whether the business itself is established within or outside the EU. This means that companies worldwide engaged in EU trade must pay close attention to these new rules.

Several categories of businesses will be particularly impacted:

• All businesses involved in cross-border B2B trade within the EU: These entities will be at the forefront of implementing the new e-invoicing and Digital Reporting Requirements (DRR).
• Online marketplaces, digital platforms, and intermediaries: These businesses, especially those facilitating short-term accommodation, passenger transport, and general e-commerce, will face new responsibilities under the deemed supplier rules and other platform-specific regulations.
• E-commerce businesses conducting B2C sales across EU borders: These companies are likely to benefit from the simplifications offered by the expanded One-Stop-Shop (OSS) and the move towards a Single VAT Registration.
• Businesses maintaining stock or inventory in multiple EU countries: The extension of the OSS to cover transfers of own goods will offer significant administrative relief to these businesses.
• Small and Medium-sized Enterprises (SMEs): While ViDA aims to simplify VAT processes for SMEs, they will still need to adapt to the new digital requirements, such as e-invoicing and real-time reporting.

Non-EU businesses are explicitly within the remit of ViDA if they trade with EU customers. They will need to carefully assess how the DRR, new platform economy rules, and changes to the OSS affect their operational models and VAT compliance obligations within the EU. The expansion of the OSS may also offer benefits to some non-EU businesses, for instance, by enabling them to report VAT on certain services provided to EU customers through the OSS framework, even if they are not established in the EU.

While the long-term objective of ViDA is simplification, the initial transition phase, especially concerning the implementation of DRR, could present notable challenges and costs. Businesses, particularly SMEs that may lack sophisticated IT infrastructure or in-depth expertise in e-invoicing standards like EN16931, might find the adaptation demanding. The global nature of the digital economy also means that ViDA’s regulations for platforms and e-invoicing will have significant extraterritorial implications. Non-EU businesses will need to proactively monitor and adapt to these evolving EU VAT laws to ensure continued access to the EU market and maintain compliance.

VI. The legal foundations of ViDA: Understanding the framework

The ViDA package does not introduce an entirely new, standalone VAT law. Instead, it comprises a series of significant amendments to the existing, foundational EU VAT legislation. This approach ensures that the reforms are integrated into the established legal structure governing VAT across the Union.

The primary legal acts that ViDA amends are central to the EU’s VAT system:

• The EU VAT Directive (Council Directive 2006/112/EC): This is the principal piece of legislation that lays down the common system of value added tax applicable throughout the EU. Most of the substantive changes introduced by ViDA, such as the rules on mandatory e-invoicing, the deemed supplier regime for platforms, and the expansion of the One-Stop Shop, are enacted as amendments to this Directive.
• Council Implementing Regulation (EU) No 282/2011: This regulation provides more detailed implementing measures for certain provisions of the VAT Directive. ViDA updates this regulation to align with the new requirements, for example, concerning the information needed for specific VAT schemes.
• Council Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of VAT: This regulation governs how EU Member States exchange information and cooperate with each other to ensure the correct application of VAT rules and to fight VAT fraud. The Digital Reporting Requirements and the establishment of the Central VIES database are heavily reliant on the amendments made to this regulation.

The legislative journey of the what is vida package involved several key procedural steps. It was initially proposed by the European Commission in December 2022. The process included consultations with the European Parliament, which provided its opinion on the proposals. Crucially, because taxation matters at the EU level require unanimous agreement among all Member States, the ViDA package had to be approved by the ECOFIN Council, which consists of the finance ministers of the EU Member States. Following this political agreement, the Council of the EU formally adopted the legislation in March 2025. The final step before entry into force was its publication in the Official Journal of the European Union, also in March 2025.

Once adopted at the EU level, amendments to the VAT Directive, which forms the core of ViDA, must be transposed into the national laws of each individual EU Member State. EU Regulations, on the other hand, are generally directly applicable in Member States without the need for national transposition measures. This means that businesses will need to monitor how the specific Member State(s) in which they operate, or with which they trade, implement the ViDA provisions into their domestic legal frameworks.

The fact that ViDA amends existing, fundamental EU VAT laws, such as Directive 2006/112/EC, rather than creating entirely new and separate legislation, underscores its deep integration and intended long-term impact on the EU VAT system. It signifies an evolution of the current legal structure, albeit one with revolutionary practical consequences, ensuring continuity with established legal principles while introducing transformative changes. The requirement for unanimity in the Council for tax matters helps to explain the sometimes lengthy negotiation process and the inclusion of certain compromises within the final ViDA text, such as the extended deadlines for some national systems to align with EU standards. This reflects the inherent balance that must be struck in EU policymaking between overarching harmonization goals and the preservation of national sovereignty in sensitive areas like taxation.

VII. Preparing for ViDA: Key takeaways for your business

The ViDA initiative represents a fundamental transformation of the VAT in the EU landscape, and businesses cannot afford a wait-and-see approach. Proactive preparation is paramount, as many of the changes, particularly those related to Digital Reporting Requirements (DRR) and mandatory e-invoicing, demand significant lead time for adjustments to systems, processes, and data management practices.

To navigate this transition effectively, businesses should consider the following actionable steps:

• Assess Impact: Conduct a thorough assessment to understand precisely which ViDA pillars and specific provisions will affect current business operations, transaction flows, and VAT compliance obligations.
• Review and Upgrade Systems: Evaluate existing Enterprise Resource Planning (ERP), invoicing, and accounting systems to determine their compatibility with the new e-invoicing standard (EN16931) and the requirements for real-time or near real-time digital reporting. Investment in automated solutions may be necessary to handle the increased data volume and processing speed.
• Process Re-engineering: Adapt internal workflows, including order-to-cash, procure-to-pay, and VAT compliance procedures, to meet the new, often tighter, deadlines (e.g., 10-day e-invoicing) and data submission requirements.
• Data Management: Ensure that business systems are capable of capturing, storing, and accurately reporting all newly required data elements, such as the supplier’s IBAN for e-invoices.
• Platform Economy Participants: Businesses operating as digital platforms, or those utilizing such platforms for sales, must gain a clear understanding of the new deemed supplier rules to determine their VAT collection and remittance responsibilities.
• Leverage OSS Simplifications: Companies involved in cross-border B2C sales or those managing stock transfers between EU Member States should develop plans to utilize the expanded One-Stop-Shop (OSS) to simplify their VAT obligations.
• Stakeholder Engagement: Foster collaboration between internal departments, including tax, legal, finance, IT, and relevant business units, to ensure a coordinated approach to ViDA implementation.
• Stay Informed: Continuously monitor updates and guidance issued by the European Commission and national tax authorities regarding the specific implementation details and timelines in relevant Member States.

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While the transition to ViDA will undoubtedly require effort and investment, the long-term benefits are designed to be substantial. These include a significant reduction in VAT fraud, the establishment of fairer competitive conditions, lower administrative burdens for compliant businesses, and an overall more streamlined and efficient VAT system for those operating within or trading with the EU. Indeed, the changes mandated by ViDA can serve as a catalyst for broader digital transformation and operational efficiency improvements within businesses that embrace the new requirements proactively.

The widespread adoption of ViDA, particularly its DRR component, is likely to stimulate further innovation in the field of tax technology. This will create a larger market for sophisticated solutions capable of handling standardized e-invoicing, real-time reporting, and complex multi-country VAT compliance. Businesses that move early to adapt to ViDA and invest in their digital transformation are well-positioned to gain a competitive edge. This advantage will stem not only from ensuring regulatory adherence but also from enhanced operational efficiency, better data insights for financial management, and improved risk controls. Conversely, businesses that delay their preparations may face operational disruptions, increased compliance risks, and potential penalties in the new digital VAT environment.

VIII. Conclusion: Embracing VAT in the Digital Age

The ViDA (VAT in the Digital Age) package marks a transformative step for the European Union’s VAT system. It is a comprehensive modernization effort, essential for ensuring that VAT rules function effectively and efficiently in an increasingly digitalized global economy. While the transition to these new requirements will present challenges for businesses, the long-term objectives—reducing fraud, simplifying compliance, and creating a fairer system—are poised to benefit both tax authorities and compliant enterprises across the EU.

ViDA sends an unequivocal signal about the future direction of tax compliance: it will be increasingly digital, operate in closer to real-time, and be fundamentally data-driven. Businesses are encouraged to view the ViDA reforms not merely as a new set of compliance burdens but as a strategic opportunity. This is a chance to modernize their own financial and operational processes, enhance efficiency, and gain deeper insights from their transactional data. As the vida schedule unfolds, proactive engagement and preparation will be key to successfully navigating this new era of VAT in the EU. The successful implementation of such a comprehensive digital tax reform by a major economic bloc like the EU could also serve as an influential model, potentially prompting other countries or trading blocs to adopt similar measures, thereby contributing to a greater standardization of digital tax compliance globally.