Navigating the Digital Frontier: Unravelling ViDA’s Impact on VAT

Navigating the Digital Frontier: Unravelling ViDA’s Impact on VAT

On the 21st of March 2024, the Group on the Future of VAT of the European Commission gathered for their latest meeting. Among other topics, they discussed the further developments of the VAT in the Digital Age (ViDA) package.

In this article, we aim to be your trusty guide through the maze of ViDA, shedding light on its intricacies and potential impacts.

What is ViDA?

In December of 2022, the EU took the next step into the digital realm with the ViDA proposal. This seeks to modernize VAT rules in response to the rapid technological advancements shaping our economy.

This long-awaited reform has been inevitable. The current system has become complex and onerous on taxpayers while also leaving gaps allowing for fraud. If successful, ViDA will streamline VAT reporting processes and associated expenses for businesses, making it more adaptable to technological change while simultaneously clamping down on fraud.

How will ViDA achieve this goal?

ViDA stands on three pillars, which are briefly summarised below.

Pillar One: Real-time Digital Reporting Requirements (DRR)

The first pillar mandates e-invoicing as the new industry standard by July 2030.

All taxpayers will be required to generate e-invoices for intra-community B2B supplies, including reverse charge supplies. These e-invoices will be stored within a newly sophisticated VAT Information Exchange System (VIES), allowing for enhanced transparency and easily detected discrepancies between customer and supplier reporting.

This newly proposed “Central VIES” system also aims to replace the current recapitulative statements (EC sales listings).

Many countries have already implemented mandatory e-invoicing, with others soon to follow. Additionally, when signed in, ViDA will allow Member States to implement domestic e-invoicing systems without prior approval from the European Commission.

DRR will streamline reporting processes, marking a significant leap forward in VAT regulations.

Pillar Two: Updated VAT Rules for the Platform Economy

The rise of digital platforms has ushered in a new era of commerce, but it has also raised concerns about fairness and tax compliance.

ViDA’s second pillar aims to ensure fairness between VAT-exempt individuals/SMEs using digital platforms and traditional VAT-registered businesses. It achieves this by imposing stricter VAT obligations on platform-based businesses, ensuring that everyone contributes their fair share of taxes.

An area where this deemed supplier platform concept is already implemented is on Amazon.

Pillar Three: Single VAT Registrations

Bid farewell to the days of juggling multiple VAT registrations across the EU.

This third pillar aims to serve as an extension to the scope of the current OSS (One-Stop-Shop) reporting regime, whereby e-commerce and own stock movements intra-EU will be included. A single VAT registration will consolidate all tax reporting obligations under one roof, streamlining cross-border transactions and ushering in an era of administrative simplicity. This will enable hundreds of thousands of e-commerce sellers and B2B businesses to significantly cut their number of foreign VAT registrations and associated costs.

How does ViDA affect your business?

If your business operates within the EU, brace yourself for a seismic shift in VAT compliance. From invoicing to reporting, ViDA will leave no aspect untouched.

Getting ahead of the trend is key in ensuring a smooth transition into the future.

How can we help?

At VAT IT Compliance, we’re more than just experts—we’re trailblazers in the digital frontier of VAT compliance. With our blend of expertise and cutting-edge technology, we’re here to guide you through the maze of ViDA, ensuring a smooth transition into the digital age.

Our eezi e-invoicing and e-VAT reporting platform also offers you an all-you-need cloud solution for electronic invoicing. Whether early or mandatory adoption, we provide the tools and know-how to help companies succeed in the transition to e-invoicing compliance.

Reach out to us today, and let’s embark on this journey together.