"VAT in the Digital Age" (ViDA) is a European Commission initiative aimed at modernizing the VAT system to address the challenges posed by the digital economy. The main goals of ViDA are to combat VAT fraud, simplify VAT compliance for businesses and adapt the VAT system to the evolving digital landscape. The initiative seeks to improve the efficiency, fairness, and resilience of the VAT system in the context of digital transformation.

What is ViDA?

The ViDA package is structured around three main pillars:

  • Digital Reporting Requirements (DRR): Pillar I involves the implementation of mandatory e-invoicing for intra-community transactions and a real-time digital reporting system. The goal is to enhance the transparency and efficiency of VAT reporting and to combat VAT fraud more effectively​.
  • Platforms as Deemed Suppliers: Pillar II expands the deemed supplier regime to cover certain supplies of goods and services (like short-term accommodations and passenger transport) facilitated through digital platforms. This change ensures that platforms are responsible for collecting and remitting VAT on behalf of their users​.
  • Single VAT Registration (SVR): Pillar III proposes the introduction of a comprehensive One-Stop-Shop (OSS) mechanism that covers all cross-border B2C transactions and, eventually, B2B transactions (including changes to call-off-stock procedure). This aims to simplify VAT compliance for businesses operating across multiple EU countries by allowing them to manage their VAT obligations through a single registration.

Progress of work on ViDA

The proposed changes has been published by the European Commission on 8 December 2022.

On 31 October 2023, the European Parliament's Economic and Monetary Affairs Committee (ECON) presented its proposals for amendments to the ViDA package, which were accepted by the European Parliament on 22 November 2023.

The Economic and Financial Affairs Council (ECOFIN) discussed the solutions proposed in the VAT law reform at its meeting on 14 May 2024, but failed to reach an agreement on all areas. The Estonian representatives raised concerns about the deemed supplier regime proposed for digital platforms operating in the short-term rentals and passenger transport services sectors. The main doubts relate to compliance with the basic principle of the VAT system - tax neutrality - and the issue of absence of right to deduct VAT for SMEs providing services through platforms, which will lead to an increase in their operating costs. Consequently, compromise amendments to the ViDA package have been prepared, but work on them is still ongoing.

If the changes are adopted as currently proposed, the rules on digital platforms and single VAT registration (Pillar II and III) will come into force in principle on 1 July 2027 - with some changes expected to come into force as early as 2026 (the original assumption was 1 January 2025). However, the rules on e-invoicing and digital reporting (Pillar I) will not take effect until 1 July 2030 (which is a delay of two years from the original proposal). Countries that have already introduced digital reporting obligations at national level will have time until 1 January 2035 to align their regulations with EU e-invoicing.

Of the three pillars of the ViDA package, the new e-invoicing and digital reporting requirements appear to be the most relevant for businesses operating in the EU. Businesses will need to review their processes and transactions carried out to determine their new EU e-invoicing and digital reporting obligations. Businesses will need to verify whether their systems contain all the required details and allow them to report data within the timeframes provided under the ViDA package. An important aspect will also be to understand how the mandatory e-invoicing planned in Poland (KSeF) interacts with the new EU requirements.

This is also a good time to make sure that your systems contain all the data required for mandatory e-invoicing and which requirements would need special attention in the context of your business model before implementing mandatory KSeF on 1 February 2026.