ViDA: Preparing for VAT in the Digital Age

The VAT in the Digital Age proposal promises a major overhaul of the VAT regime in operation across the EU. Janette Maxwell and Fadi BouKaram delve into the details

On 5 November 2024, EU Finance Ministers at the Economic and Financial Affairs Council (ECOFIN) unanimously agreed on the VAT in the Digital Age (ViDA) proposal.

Although some formal procedures will need to be completed before the proposal is fully implemented, this agreement is expected to pave the way for significant changes to the VAT system across the European Union.

The ViDA initiative comprises a series of significant reforms to the common VAT rules in the EU.

Its goal is to enhance VAT compliance, combat tax fraud and modernise VAT regulations to better align with the demands of the digital age.

The latest ViDA package has three pillars:

1. E-invoicing and digital reporting
2. Platform economy
3. Single VAT registration

E-invoicing and digital reporting

For the supplier, electronic invoicing will be established as the standard method for issuing invoices and possessing a valid e-invoice will ultimately be a key requirement for VAT recovery.

Invoices should generally comply with the European Standard (EN16931) and its specified syntaxes, but Member States may allow other formats under certain conditions.

Electronic invoices for cross-border transactions must be issued no later than 10 days following the chargeable event.

The e-invoice must be digitally reported to the relevant tax authorities by the supplier directly after the e-invoice has been issued (or within five days if the customer issues the e-invoice under a “self-billing” arrangement).

The customer, however, is required to digitally report information from the e-invoice within five days of receiving it from the supplier. Member States may waive this digital reporting requirement for customers.

The requirements above will apply from 1 July 2030.

Platform economy

From 1 July 2028, a taxable person who uses an electronic platform to facilitate short-term accommodation rentals (max 30 nights) – and/or passenger transport by road – will be regarded as the supplier of those services for VAT purposes and will therefore be liable to account for VAT, unless: 

• The underlying supplier provides its VAT identification number to the platform operator; or
• The underlying supplier informs the operator that they will charge the VAT due on that supply.

Member States may decide not to designate the platform as a deemed supplier if the underlying supplier qualifies for and chooses the small and medium-sized enterprise (SME) VAT regime.

Member States must implement the rules by 1 January 2030 at the latest.

Single VAT registration

The Single VAT Registration (SVR) pillar aims to minimise the requirement for non-established traders to register for VAT in an EU Member State where they are not established.

The One-Stop-Shop (OSS) has been expanded to include additional types of supplies, such as domestic business-to-consumer transactions including the supply of electricity and natural gas, supply and installation contracts, as well as domestic supplies of goods and services.

A new OSS module will allow businesses to report the movement of their own goods between EU Member States.

Currently, moving goods usually requires VAT reporting and registration in both the country of dispatch and the country of arrival, with some exceptions.

From 1 July 2028, businesses can choose to report these movements through the OSS, which means they will not be required to report acquisition VAT in the destination country.

Time to prepare

The time to prepare for these changes is now. Businesses need to review their IT systems and start thinking ahead as to how these changes will impact their day-to-day operations and related invoicing processes.

Janette Maxwell is International Indirect Tax Director at Grant Thornton Ireland

Fadi BouKaram is Director of Tax at Grant Thornton