VAT in the Digital Age (VIDA) – Frequently Asked Questions
What is the VIDA (VAT in the Digital Age) initiative and what are its main objectives?
- VIDA is a European Commission initiative aimed at modernising and digitalising the VAT system within the EU. The primary objectives are to enhance tax collection, combat fraud (particularly intra-community fraud), ensure the proper functioning of the Internal Market, simplify VAT compliance for businesses, adapt VAT regulations to the digital economy, and optimise tax reporting through digitalisation. It aims to create a fairer and more efficient VAT system suitable for the digital age.
What are the three key pillars of the VIDA reform package?
- The VIDA reform package is built upon three fundamental pillars: Digital Reporting Requirements (DRR), which focuses on implementing e-invoicing and digital reporting systems; addressing the challenges related to the Platform Economy by enhancing the role of digital platforms in VAT collection (particularly for short-term accommodation and passenger transport); and expanding the One-Stop Shop (OSS) system to enable businesses to manage their VAT obligations throughout the EU with a single registration.
When will mandatory e-invoicing and Digital Reporting Requirements (DRR) be implemented for intra-EU B2B transactions, and what are the key requirements?
- Mandatory e-invoicing and DRR for intra-EU B2B transactions are scheduled to come into effect on July 1, 2030. Key requirements include the issuance of structured e-invoices in a standard EU format, the transmission of data in real-time and invoice issuance within ten days of the supply of goods or services (or upon payment, if earlier). National e-invoicing systems (excluding those established before 2024) will also need to be harmonized with EU standards by this date, and those systems established before 2024 harmonised by January 1, 2035.
How will the VIDA package affect online platforms, particularly those involved in short-term accommodation and passenger transport?
- From January 1, 2030, (optionally from July 1, 2028) the “deemed supplier” rule will be introduced. Digital platforms facilitating short-term accommodation (up to 30 days) and passenger transport services will, in most cases, be responsible for collecting and remitting VAT on behalf of the suppliers. The platforms collect the VAT directly from customers and remit it to tax authorities. Platforms not subject to the deemed supplier rule must retain records of transactions for ten years.
What changes are being made to the One-Stop Shop (OSS) system under the VIDA package, and when will these changes take effect?
- Starting July 1, 2028, the VIDA package expands the scope of the One-Stop Shop system to include B2C sales of products like electricity or gas within a Member State and stock movements within the EU intended for direct sales to consumers at a later stage. The reverse charge mechanism will also be implemented for non-established suppliers. These changes aim to reduce the administrative burden on businesses operating across multiple EU Member States.
What happens to the call-off stock regime and register/recap statements under VIDA?
- The current VAT rules for call-off stock will gradually be phased out from January 1, 2027, to June 30, 2029, and apply only to stock in place before June 30, 2028. Then, as of July 1, 2028 the call-off stock rules will be replaced by a new scheme for transferring own goods, treating such transfers as a supply for consideration. Effective July 1, 2029, the requirement for a register for transfers of goods and related reporting in the recap statement will be eliminated.
What are some of the anticipated benefits of the new European VAT system, according to the VIDA report?
- The VIDA report anticipates several benefits, including a reduction of tax compliance costs (estimated savings of €4.3 million), savings in handling costs (estimated €1.9 billion in postal shipments alone), acceleration of digital transformation, increased efficiency of tax control, increased tax collection (estimated between €135 billion to €177 billion), reduction of tax fraud, faster introduction of digital reporting requirements, improved cross-border trade, and an improved environmental impact.
Besides platforms, who else will be impacted by the VIDA regulations and what do they need to do?
- The new system will affect both businesses subject to VAT and EU member states. Companies must prepare for mandatory e-invoicing, digital reporting, and potentially changes to how they handle VAT for intra-community supplies and sales through platforms. Member states will need to transpose the new measures into their tax systems, establish systems for real-time data transmission and take measures to audit electronic invoices between companies. Businesses should assess their digital infrastructure, accounting processes, and VAT compliance procedures to ensure they are ready for the upcoming changes.
