VAT in the Digital Age (ViDa)

What is ViDA?

The ViDA initiative aims to modernise the European VAT system and simplify the obligations for businesses trading across the EU. It is made up of three sets of changes to the EU VAT system, known as the three ‘Pillars’:

1. Digital reporting and e-invoicing requirements.
2. Making digital platforms responsible for collecting VAT.
3. Introducing a way for businesses to operate in the EU with a single VAT registration.

The EU Commission agreed changes in principle during November 2024. Changes will be implemented and will gradually become mandatory between 2028 and 2030.

First Pillar - Digital Reporting and E-Invoicing

From 1 July 2030, digital reporting and e-invoicing will become mandatory for the following transactions:

1. Cross-border B2B EU supplies.
2. Movements of business assets between EU Member States.
3. Supplies subject to the reverse-charge mechanism.

Businesses will be required to issue e-invoices within 10 days of the supply and the customer will need to be able to receive the e-invoice.

What is an E-Invoice?

An e-invoice is an invoice that is produced digitally according to a standard electronic structure. This means it can be created easily and consistently and then processed automatically by the recipient. E-invoices are normally communicated between businesses using an e-invoicing portal or software linked to it. They often take the form of an “XML”. Under ViDA, e-invoicing will need to follow a standard structure, which has been laid down in the EU Directive 2014/55/EU.

What is Digital Reporting?

Digital Reporting is how e-invoices will be communicated to the Tax Authorities of EU Member States. When a taxpayer issues an e-invoice, it will be received by the customer and the Tax Authorities in the relevant Member State.

When a recipient receives an e-invoice, it will also be received by the Tax Authorities of the recipient’s Member State. E-invoicing and e-reporting enable EU Member States to generate VAT returns that self-populate. This may also lead to the abolition of EC sales listings, since this information will be received automatically by Tax Authorities.

Second Pillar - VAT Collected by Platforms

Online platforms will become responsible for collecting VAT on behalf of businesses selling short term accommodation rental and passenger road transport services. The online platform will be considered to have supplied the services to the end customer following a supply from the business providing the services to the platform. The platform will collect and pay VAT on these supplies, but the provider will not be required to charge VAT to the platform.

If a business chooses to register for VAT or use the “OSS” VAT registration in the relevant jurisdictions instead, an exception will apply.

Where the platform is the supplier, businesses supplying through the platform will not be allowed to deduct VAT on any local costs they incur.

Third Pillar - Single VAT registration

B2C Suppliers – What are the changes?

Historically, businesses have had to register in all EU countries where they made taxable supplies. Since 2021, businesses making supplies to consumers have been able to simplify these obligations by using the One-Stop-Shop (OSS) to report VAT to multiple EU Member States in a single return. The role of the OSS will expand further.

The OSS will no longer be just for EU cross-border supplies but will also apply to VAT payment on the following supplies:

• Local B2C supplies.
• Transfers of business assets (stock) from one Member State to another.
• B2C supplies of goods with installation.
• B2C supplies of goods on board vehicles.
• B2C supplies of electricity, gas, cooling and heating.

B2C Suppliers – Where will I have to register?

A B2C supplier will no longer need to register in all the countries where they hold their stock. They will be able to choose a single EU Member State of Identification and fulfil all their EU reporting obligations from there for goods stored as stock across multiple EU member states. This will reduce both the complexity and the cost of staying compliant when shipping B2C goods throughout the EU.

Businesses holding goods in multiple EU Member States will have greater flexibility to choose which country to register in. If they continue to hold goods there, a business will retain the option to choose their favoured VAT regime as their Member State of Identification.

B2B Suppliers – What are the changes?

The domestic reverse charge for non-established suppliers for B2B supplies of goods and services will become mandatory in the EU. A reverse charge is where the customer becomes liable for the VAT instead of the supplier. Many EU Member States already apply this, but under the new changes, the reverse charge will apply in all EU Member States if the following applies:

1. The supplier is not established in the Member State where the supply takes place
2. The supplier is not registered for VAT there
3. The customer is registered for VAT in that Member State

EU Member States will have the option to choose whether the reverse charge should apply if the supplier is already registered for VAT. They will also be allowed to force the customer to register for VAT if neither the supplier nor the customer holds a VAT number in the Member State where the supply takes place.

B2B Suppliers – Where will I have to register?

A business that only buys and sells locally throughout the EU will require fewer registrations, possibly just one. If they purchase from locally established businesses and sell locally to businesses, they may have the opportunity to avoid registering for VAT in the EU altogether.

Businesses that trade B2B cross-border in the EU may be able to conduct business with a single VAT registration if no other registration obligations are triggered. Businesses in this position may use a combination of triangulation and the reverse charge for non-established suppliers to conduct supplies of goods throughout all of the EU.

B2B Suppliers – How will I get back VAT?

If your business no longer needs a registration in the EU Member State where supplies are made, you may be eligible to claim a refund of import VAT or VAT from suppliers by making a 13^th Directive refund claim (for Non-EU businesses) or through the EU VAT Refund Scheme (for EU businesses). It will be important to check eligibility and ensure that your business has not triggered a registration obligation in the Member States where you wish to claim a refund.

In Summary

When are the changes coming?

Pillar 1 will be mandatory from 1 July 2030. Pillars 2-3 will be mandatory from 1 July 2028. It is important to note that some EU Member States could start (and have begun) to introduce some of these changes before the deadlines.

How will the changes affect your business?

Each of the three ‘pillars’ of VAT will mean businesses need to consider new factors when looking to trade in the EU.

1. VAT compliance in the EU is becoming much more technology driven. Businesses trading in the EU will need to be equipped to issue and receive digital invoices, and to report these invoices digitally to Tax Authorities.
2. Certain businesses may not need to register at all. Digital platforms will be required to collect and pay VAT more often on behalf of the businesses using them.
3. Businesses looking to trade in the EU will need to consider where registrations are needed and how to reclaim VAT incurred from their suppliers. Non-EU businesses trading in the EU will often have to wait longer for relief from VAT on purchases if they claim refunds of VAT through 13^th Directive refund claims or via the EU VAT Refund Scheme.

Why choose Fiscal Solutions to guide you through these changes?

Through the rapidly evolving EU VAT landscape, Fiscal Solutions can be your trusted partner. With our deep expertise and flexible approach, we can help businesses adapt seamlessly to the changes that ViDA will bring. Whether you’re refining existing operations or entering the EU market for the first time, we provide tailored advice to meet your needs.

As the ViDA implementation approaches, we’ll closely monitor how each Member State adopts these changes and ensure our clients stay compliant. Our team will:

• Recommend the right software and tools for seamless e-reporting.
• Review VAT set-ups to identify efficiencies and deregistration opportunities under the new rules.
• Support VAT recovery via alternative routes, ensuring clients maximise available reliefs.

Prepare for ViDA with confidence. Contact Fiscal Solutions today to future-proof your business in the EU VAT market.