VAT in the Digital Age (ViDA) – Transforming Taxation for the Digital Economy
The rapid evolution of the digital economy presents both opportunities and challenges for tax authorities globally. To address the complexities of VAT collection in an increasingly digital world, the Council of the European Union has formally adopted the VAT in the Digital Age (ViDA) package on 11 March 2025. This legislative package aims to modernize VAT systems to better suit the digital landscape, ensuring efficient tax administration and reducing fraud.
The legislative package will enter into force on the 20th day following its publication in the Official Journal of the EU and will be gradually implemented from 2025 to 2035.
The ViDA package consists of the following 3 measures:
1. Digital Reporting Requirements (DRR)
The new system introduces uniform real-time digital reporting for VAT purposes based on e-invoicing, which will provide Member States timely with the valuable information they need to step up the fight against VAT fraud. E-invoicing will furthermore accelerate business transformation in the digital age by streamlining operations, ensuring compliance and security, enabling data-driven decision-making and supporting scalability for future growth and innovation.
Implementation timeline
- 2025 (upon entry into force of the ViDA package): Member States may introduce mandatory domestic e-invoicing for business to business (B2B) and business to consumer (B2C) transactions without approval from the European Commission.
- By 1 July 2030:
- Harmonization of domestic DRR obligations of Member States with the EU standard or use interoperable formats.
- Mandatory e-invoicing for all intra-EU transactions (both goods and services) and obligation of taxpayers to undertake real-time reporting of the e-invoice data to national tax authorities, who will share the data with the Central VIES database operated by the European Commission.
- By 1 January 2035: Member States that had already implemented a form of domestic DRR or received a derogation before 2024 must align with the EU standard.
2. Updated rules for the platform economy and deemed supplier regime
Platforms facilitating supplies in the passenger transport and short-term accommodation sectors will become responsible for collecting and remitting VAT to tax authorities on behalf of the suppliers using their services. This measure will ensure a uniform approach across all EU countries and will contribute to a better level playing field between online and traditional short-term accommodation and transport services. It will also simplify the compliance obligations for the underlying hosts and drivers, who currently need to understand and comply with the VAT rules, often in different EU countries.
Implementation timeline
- As from 1 July 2028: Voluntary implementation of deemed supplier regime.
- By 1 January 2030: Mandatory implementation of deemed supplier regime.
3. Single VAT registration
This initiative will further reduce the need for multiple VAT registrations in different Member States, expanding the already existing ‘VAT One Stop Shop' model to also enable the reporting of cross-border transfers of own goods under a single VAT number.
The Union OSS return will encompass all B2C supplies of goods and services made by a business, including domestic supplies of goods within the Member State.
Member States will also be required to introduce a domestic reverse charge mechanism for non-established suppliers. The reverse charge mechanism will be expanded, shifting VAT liability to the customer when suppliers are not VAT registered in the relevant Member State.
Implementation timeline
- As from 1 January 2027: Implementation of a specific measure aimed at facilitating cross-border electric vehicle charging.
- As from 1 July 2028: Extension of the existing OSS and mandatory reverse charge for non-VAT registered suppliers.
Benefits of ViDA
For Tax Authorities: Enhanced ability to monitor and collect VAT, reducing the VAT gap and ensuring fair competition.
For Businesses: Simplified compliance, reducing administrative burdens and costs associated with multiple VAT registrations and reporting obligations.
For Consumers: Improved transparency and trust in e-commerce transactions.
Challenges and Considerations
Implementation Complexity: Adapting to real-time reporting and electronic invoicing may require significant changes to current systems and processes for businesses and tax authorities. This would also require financial investment in developing new systems or enhancing the existing ones.
Data Privacy: Ensuring the security and privacy of sensitive business transaction data in digital reporting systems.
Cross-Border Coordination: Achieving harmonized implementation across different Member States with varying levels of digital infrastructure and legislative frameworks.
Authors
Christos Papamarkides
Partner, Indirect Tax Services Leader
Email: cpapamarkides@deloitte.com
Elli Iosif
Director, Indirect Tax Services
Email: eliosif@deloitte.com
Margarita Stavri
Manager, Indirect Tax Services
Email: mstavri@deloitte.com