A New Era for European VAT

On March 11, 2025, the European Union adopted a significant modernization of the EU VAT system: the “VAT in the Digital Age” (ViDA)-package. This extensive reform, initially proposed on December 8, 2022, will drastically change the VAT landscape in Europe and will be introduced in phases between 2025 and 2035. This article provides a comprehensive overview of the three pillars of the ViDA package, the implementation timeline, and its impact on businesses within and outside the EU.

The Three Pillars of the ViDA Package

The ViDA package consists of three main components designed to future-proof the VAT system and combat fraud:

1. Real-time Digital Reporting via e-Invoicing

One of the most significant changes is the introduction of a real-time digital reporting system based on electronic invoicing for cross-border B2B trade within the EU. Businesses will be required to:

• To issue e-invoices according to the European e-invoicing standard EN 16931
• To report invoice data to tax authorities almost in real time
• To issue e-invoices within 10 days after the transaction (instead of the originally proposed 2 days)

The transition to mandatory e-invoicing offers significant advantages:

• An estimated €11 billion less VAT fraud per year
• A reduction of administrative burdens for businesses by over €4 billion annually
• Faster detection of carousel fraud due to up-to-date transaction data

A key detail: the requirement for customer consent for electronic invoicing is eliminated, meaning businesses must be able to receive e-invoices once a member state mandates it.

2. Updated VAT Rules for the Platform Economy

The second pillar focuses on digital platforms, particularly in the passenger transport and short-term accommodation sectors. Platforms such as Uber and Airbnb will, in certain cases, be designated as “deemed suppliers.” This means that:

• Platforms become responsible for charging and remitting VAT on services when the actual providers fail to do so
• VAT is collected from the consumer and paid directly to the tax authorities
• A more level playing field is created between online platform services and traditional services

This measure ensures that passenger transport and short-term rentals within the EU are effectively subject to VAT unless the individual provider registers for VAT and remits it independently. This standardizes the approach across the EU and simplifies compliance for small rental providers.

3. Single VAT Registration

The third pillar expands the existing One Stop Shop (OSS) system:

• More businesses selling to consumers in other EU countries can handle all their VAT obligations through a single online portal and one registration
• The Import One Stop Shop (IOSS) is being improved and even made mandatory for certain platforms that facilitate sales from outside the EU
• Extension of the reverse charge mechanism for B2B transactions involving non-established sellers
• New sectors and situations are covered through the OSS (including domestic B2C sales of electricity/gas and stock deliveries)

This reform drastically reduces administrative complexity for cross-border trade and simplifies operations for businesses active in multiple EU markets.

ViDA Reform Rollout and Timeline

The ViDA package will be phased in between 2025 and 2035. Here is an overview of key milestones:

Spring 2025

• A few weeks after the official entry into force, Member States may introduce national e-invoicing obligations for domestic transactions without requiring an EU derogation
• The European Commission no longer needs to approve this, provided it only concerns domestic VAT-registered businesses
• Special measures are expected to combat fraud through the IOSS

January 1, 2027

• First extensions of OSS and e-commerce rules
• Addition of, for example, EV charging points and utility supplies to the OSS

July 1, 2028

• Introduction of the Single VAT Registration
• Extension of the OSS to all B2C supplies (including stock transfers between Member States for later sale)
• Introduction of mandatory reverse charge for non-established suppliers in B2B transactions
• From this date, Member States may choose to already apply the platform economy rules (“opt-in”)

January 1, 2030

• Platform economy: by this date at the latest, all Member States must have implemented the “deemed supplier” rule for platforms
• Platforms will then be liable for VAT across the EU on intermediary services provided by non-VAT-registered suppliers

July 1, 2030

• Start of the mandatory Digital Reporting Requirements (DRR) for all intra-EU B2B transactions and for transactions under the mandatory reverse charge mechanism
• Businesses must issue and report their B2B invoices electronically in a standardized format
• National e-invoicing systems established after 2024 must comply with the common EU standard

January 1, 2035

• By this date at the latest, all older existing (pre-2024) national e-invoicing and reporting systems must be fully harmonized with EU standards
• This marks the final harmonization: by 2035, there will be a uniform framework for e-invoicing and VAT reporting across the entire EU

Impact on Businesses Inside and Outside the EU

EU-businesses– challenges and opportunities

The ViDA reforms have significant effect for companies within the EU:

Challenges:

• Businesses must adapt their invoicing and accounting systems to issue e-invoices and report data in near real time
• Investments in IT (ERP updates, e-invoicing software) are necessary
• Process changes are required to send invoices within 10 days and transmit data automatically
• Business processes related to invoicing, data exchange, and VAT reporting must be automated

Opportunities:

• Thanks to the Single VAT Registration, businesses selling across the EU no longer need to register separately in each Member State
• Administrative costs are reduced, and expansion into other EU markets becomes easier
• VAT fraud prevention is improved, benefiting legitimate businesses
• More uniform rules and the elimination of complex VAT registrations are advantageous for SMEs
• Timely investment in e-invoicing technology can lead to more efficient operations

Non-EU Businesses (Suppliers from Outside the EU)

For non-EU businesses dealing with EU customers, ViDA introduces both stricter controls and new compliance options:

• E-commerce sellers from outside the EU will more often have to use an Import One Stop Shop (IOSS) or operate through platforms
• Platforms that facilitate sales by non-EU sellers will be required to remit VAT on behalf of the seller (the “deemed supplier” extension)
• For direct deliveries to EU businesses (B2B), non-EU companies will face stricter reporting of their transactions by the EU purchaser
• For providers in the platform economy outside the EU, the new regulation means they will have fewer VAT obligations themselves, as the platform will take over these responsibilities

Impact on Government & Oversight

Governments of Member States, in turn, must ensure they can process and effectively use the flow of data:

• Each Member State will need to implement a digital reporting system or connect to an EU-wide network
• Investments in ICT infrastructure and data analysis capacity within tax authorities are necessary
• Tax audits will become increasingly data-driven: transactions will be instantly matched between supplier and buyer
• According to the European Commission, up to €18 billion in additional VAT could be collected annually, with a significant reduction in intra-Community fraud
• Governments must take privacy and security into account when processing large volumes of business data in real time

Compliance and technological requirements

Both EU and non-EU companies will need to invest in compliance technology:

• Implementation of e-invoicing software that complies with EU standards
• Integration with certified Peppol Access Points or government portals for invoice transmission
• Many businesses will engage external providers or use ERP modules
• Non-EU companies wishing to comply through IOSS or OSS registrations may need to appoint an EU intermediary
• Real-time system integration (e.g. via APIs to the tax authority) will become the norm
• Multinationals will deploy advanced solutions capable of handling various global e-invoicing mandates

To conclude

The “VAT in the Digital Age” package represents the most significant reform of the EU VAT system since the introduction of the internal market. With phased implementation between 2025 and 2035, it provides businesses with time to adapt to the new requirements, while governments prepare their systems to process real-time invoice data.

Although the initial implementation poses challenges, particularly for businesses that need to invest in e-invoicing technology, the ViDA package promises substantial long-term benefits: reduced fraud, lower administrative burdens, simplified compliance for cross-border trade, and a more level playing field for all market participants.

Businesses should start preparing for these changes by assessing their invoicing and reporting systems and adapting them to the new digital requirements. By acting proactively, they can not only comply with the new regulations but also benefit from the efficiency improvements that come with the digitalization of the VAT process. Consultancies like Solventis can assist with such evaluations and provide recommendations based on your application landscape to ensure you are ViDA-ready.

If you are specifically looking to implement e-invoicing solutions using the Peppol network, Peppol.nu is a website worth keeping an eye on.