VAT in the Digital Age (ViDA) Package: A Comprehensive Analysis

Written By Mathieu Levasseur

VAT in the Digital Age (ViDA) Package: A Comprehensive Analysis

1. Overview of the ViDA Package

Background and Objectives

The VAT in the Digital Age (ViDA) package is a far-reaching reform of EU value-added tax rules, designed to modernize the VAT system for today’s digital economy. It was proposed by the European Commission in December 2022 and formally adopted by all 27 EU Member States on March 11, 2025 (VAT in the Digital Age package formally adopted | Meijburg & Co). The reform comes in response to significant challenges: EU countries lost an estimated €99 billion in VAT revenues in 2020, with roughly 25% of that gap linked to fraud in intra-EU trade (VAT in the Digital Age (ViDA) - European Commission). At the same time, the existing VAT framework has been criticized as burdensome, especially for SMEs, startups, and businesses operating across borders (VAT in the Digital Age (ViDA) - European Commission). The ViDA initiative aims to tackle these issues by leveraging digital tools to fight VAT fraud, boost competitiveness, and ease administrative burdens on businesses (Taxation: Council adopts VAT in the digital age package - Consilium) (Taxation: Council agrees on VAT in the digital age package - Consilium). In the words of the EU’s Finance Ministers, the new rules seek to “make EU VAT rules fit for the digital age” while giving legitimate businesses a simpler, more efficient system (Taxation: Council adopts VAT in the digital age package - Consilium).

Key Legislative Changes Introduced

ViDA introduces a trio of major changes, each addressing a different aspect of the VAT system. The reform is implemented through three pieces of legislation – a Council Directive (amending the main VAT Directive 2006/112/EC), a Council Regulation (amending Regulation 904/2010 on VAT administrative cooperation), and an Implementing Regulation (amending Regulation 282/2011 on VAT rules) (Taxation: Council agrees on VAT in the digital age package - Consilium). The key changes in the package can be summarized as follows:

  • Digital VAT Reporting (E-invoicing): VAT reporting for cross-border transactions will become fully digital by 2030, moving to a real-time reporting system based on electronic invoicing (Taxation: Council agrees on VAT in the digital age package - Consilium). This means businesses will gradually shift from periodic VAT filings to instantaneous e-invoice data submission for B2B sales within the EU.

  • Platform Economy VAT Rules: Online platforms will be made responsible for collecting and remitting VAT on short-term accommodation rentals and passenger transport services when the underlying provider does not charge VAT (e.g. an individual host or driver below VAT registration thresholds) (Taxation: Council agrees on VAT in the digital age package - Consilium). This “deemed supplier” approach effectively makes platforms like home-sharing or ride-hailing apps liable for VAT on those supplies in place of their users.

  • Single VAT Registration (OSS Expansion): The “One-Stop Shop” (OSS) system for VAT will be expanded and improved so that businesses can fulfill VAT obligations across the EU with one registration (Taxation: Council agrees on VAT in the digital age package - Consilium). Firms will no longer need to maintain separate VAT registrations in every Member State where they sell to consumers, reducing costly multi-country compliance.

(VAT in the Digital Age (ViDA) - European Commission) Figure: Official European Commission infographic illustrating the three core pillars of the ViDA reform. It highlights (1) a new real-time digital reporting system based on e-invoicing, (2) updated VAT rules for the platform economy, and (3) a single VAT registration for businesses selling to consumers across the EU (VAT in the Digital Age (ViDA) - European Commission).

In essence, ViDA’s components seek to digitize VAT reporting, level the playing field in the digital/platform economy, and simplify cross-border VAT compliance. According to the Commission’s estimates, these measures could help EU countries collect up to €18 billion more in VAT revenue annually (including about €11 billion from fraud reduction), while also reducing compliance costs for businesses by over €4.1 billion per year in the long run (VAT in the Digital Age (ViDA) - European Commission) (VAT in the Digital Age (ViDA) - European Commission). The next sections provide a closer look at how these changes compare to the previous VAT framework and what they mean for businesses.

2. Comparison with the Previous VAT Framework

ViDA represents the most significant update to EU VAT rules in decades. This section analyzes how each major element of the reform differs from the prior VAT framework:

2.1 Digital Reporting vs. Periodic Filing

Previous system: Under the old rules, businesses engaging in cross-border B2B sales were required to file “recapitulative statements” (EC Sales Lists) every month or quarter, listing the VAT-taxable supplies made to other EU businesses (Taxation: Council agrees on VAT in the digital age package - Consilium). These reports were not real-time; tax authorities often received data with a lag of months, and information was fragmented by each national system. This delay created opportunities for carousel fraud (missing-trader fraud), as authorities couldn’t immediately detect mismatches or fraudulent transactions (Taxation: Council agrees on VAT in the digital age package - Consilium). Moreover, EU law mandated that if a country wished to impose electronic invoicing, it had to seek approval (a derogation) from the EU – paper invoices were the default unless both parties agreed to e-invoicing. This made it cumbersome for Member States to require e-invoices universally, slowing adoption of digital reporting.

Under ViDA: The new rules introduce a real-time digital reporting system for intra-EU transactions, based on mandatory e-invoicing (Taxation: Council agrees on VAT in the digital age package - Consilium). Once implemented, a business selling goods or services to another EU country must issue an electronic invoice and automatically transmit the invoice data to its tax authority, which then shares it with the buyer’s tax authority via a unified EU system (Taxation: Council agrees on VAT in the digital age package - Consilium). This effectively replaces the old periodic recapitulative statements with transaction-by-transaction reporting in real time. Importantly, ViDA removes legal obstacles to e-invoicing – upon the reform’s entry into force, Member States can mandate e-invoicing for VAT without special permission, provided certain conditions (like using the EU’s standard e-invoice format) are met (EU: Adoption of VAT in the digital age (ViDA) package). In practice, this means countries no longer need an EU derogation to require electronic invoices, paving the way for widespread adoption. The timeline is phased: the EU-wide e-invoicing network for cross-border B2B must be in place by 2030, and any national domestic e-reporting systems must become interoperable with the EU standard by 2035 (Taxation: Council agrees on VAT in the digital age package - Consilium). Compared to the old framework, this is a paradigm shift from summary reporting to real-time data sharing, enabling tax authorities to receive complete transaction information almost immediately, and thereby rapidly identify suspicious or fraudulent activity (Taxation: Council agrees on VAT in the digital age package - Consilium) (Taxation: Council agrees on VAT in the digital age package - Consilium). For businesses, it means invoice compliance will be built into the transaction process itself, rather than an after-the-fact reporting obligation.

2.2 Platform Economy: Voluntary to Deemed Supplier

Previous system: Until now, many digital platforms facilitating accommodation or transport services (for example, Airbnb or Uber-style platforms) operated in a VAT gray zone when their users were private individuals or small operators. If a homeowner rented out a flat via an online platform and was below the national VAT registration threshold (or simply unaware of cross-border tax rules), no VAT was charged on that rental under existing law (Taxation: Council agrees on VAT in the digital age package - Consilium). The platform itself had no obligation to levy VAT; at most, it might have to report the income of sellers under certain transparency rules, but it did not act as a VAT collector. The result was that a large volume of services in the “gig” or sharing economy went untaxed, giving those platform-based services a price advantage over traditional VAT-registered businesses (e.g. hotels or licensed taxis) (Taxation: Council agrees on VAT in the digital age package - Consilium). There was also legal unevenness across Member States – some countries might try to enforce VAT on such activities or had differing thresholds, but there was no unified approach.

Under ViDA: The reform introduces a “deemed supplier” rule for platforms: when a platform facilitates a short-term accommodation rental or passenger transport service and the underlying provider (host/driver) does not charge VAT, the platform is deemed to be the supplier for VAT purposes (Taxation: Council agrees on VAT in the digital age package - Consilium). In other words, the platform must collect VAT from the customer and remit it to the authorities, just as if it were selling the service itself (Taxation: Council agrees on VAT in the digital age package - Consilium). This is a major change – platforms become VAT collectors by default in scenarios that previously fell outside the tax net. The new rule aims to ensure these services are taxed similarly to their traditional counterparts, addressing the unfair competition issue and increasing VAT revenues (Taxation: Council agrees on VAT in the digital age package - Consilium). Notably, the Council’s final agreement gives Member States some flexibility: the definition of “short-term” accommodation can be broadened, and countries may choose to exempt small and medium-sized enterprises (SMEs) from the deemed supplier rule in certain cases (Taxation: Council agrees on VAT in the digital age package - Consilium). This means a country could decide that very small home-share hosts remain outside the platform VAT charge, though the platform rules would still apply broadly in most cases. By comparison to the old framework, this is a shift from a largely voluntary or unenforced VAT scenario to a mandatory, platform-mediated collection. Individual providers who were previously not in the VAT system will still not register or charge VAT themselves – but they can no longer offer VAT-free services if using a platform, since the platform will handle the VAT on their behalf. The playing field between online platforms and traditional providers will be leveled, as all accommodation and transport services will bear VAT where applicable (VAT in the Digital Age (ViDA) - European Commission). (It’s worth noting that an initial proposal to extend the deemed supplier concept to all goods sold via platforms was dropped; only the accommodation and transport sectors are covered under ViDA (Taxation: Council agrees on VAT in the digital age package - Consilium).)

2.3 Single VAT Registration: Fragmented to One-Stop Shop

Previous system: The EU’s One-Stop Shop (OSS) was introduced in 2021 for e-commerce, allowing businesses selling goods or digital services to consumers in multiple EU countries to report all their VAT through a single quarterly OSS return in their home country. However, OSS had limits: it primarily covered **cross-border distance sales (shipping goods to consumers in other Member States) and certain services. If a company wanted to operate physically within another Member State – for example, by holding stock in an overseas warehouse and selling locally from there, or doing occasional local trade shows/direct sales – the OSS did not apply. That company would still need to register for VAT locally in the other country and file local VAT returns for those domestic sales (Taxation: Council agrees on VAT in the digital age package - Consilium). Similarly, in B2B transactions, if a supplier was not established in the customer’s country, countries could (but were not required to) use a reverse-charge mechanism to have the buyer self-account for VAT; in many cases, though, foreign suppliers still had to register in the customer’s country to charge VAT or to zero-rate a cross-border transfer of their own goods. This patchwork meant businesses engaging in multi-national operations often held multiple VAT registrations across the EU, with duplicate compliance in each jurisdiction.

Under ViDA: The scope of the OSS is significantly expanded. Businesses will be able to use the OSS to declare not only cross-border distance sales, but also certain domestic sales in a country where they are not established (Taxation: Council agrees on VAT in the digital age package - Consilium). For instance, if a German company moves inventory to France to sell directly to French consumers (from a warehouse or shop in France), under the new rules it can opt to handle the French VAT through OSS via its German tax portal, instead of registering in France (Taxation: Council agrees on VAT in the digital age package - Consilium) (Taxation: Council agrees on VAT in the digital age package - Consilium). The reform specifically mentions extending OSS to domestic supplies of certain goods like electricity or gas when sold in another Member State, and even covers scenarios of “stock transfers” (moving own goods to another country to sell later) which previously forced companies into VAT registration complexities (Taxation: Council agrees on VAT in the digital age package - Consilium). In short, a much wider array of cross-border B2C activity can be centralized through one VAT registration. Complementing this, ViDA mandates a broader use of the reverse-charge mechanism for B2B sales: if a supplier is not established in the Member State where VAT is due, the liability to pay the VAT shifts to the business customer (who will account for VAT in their VAT return) (Taxation: Council agrees on VAT in the digital age package - Consilium). This reverse charge for non-established suppliers was allowed under prior law in some situations, but ViDA makes it a standard rule across the board (Taxation: Council agrees on VAT in the digital age package - Consilium). The effect is that a foreign B2B seller no longer needs to register in the customer’s country simply to charge and remit local VAT – the buyer’s self-assessment fulfills that obligation. Taken together, these changes mean the EU is moving toward a “Single VAT Registration” model where one registration in an EU state can cover all of a business’s EU VAT liabilities for both goods and services. Compared to the old framework, this is a drastic simplification: it reduces the need for multiple VAT numbers, multiple filings, and the associated administrative costs for companies operating in several EU markets (Taxation: Council agrees on VAT in the digital age package - Consilium) (Taxation: Council agrees on VAT in the digital age package - Consilium). It’s important to note that import VAT (for goods entering the EU from outside) is not directly covered by ViDA’s OSS expansion; the idea of making the Import One-Stop Shop (IOSS) mandatory was set aside and will be discussed separately as part of customs reforms (Taxation: Council agrees on VAT in the digital age package - Consilium). Still, ViDA’s changes to intra-EU trade rules mark a clear shift toward one-point-of-contact VAT compliance instead of the fragmented national obligations of the past.

3. Impact on Businesses

The ViDA reforms will have wide-ranging implications for businesses throughout the EU, especially digital platforms, SMEs, and companies involved in cross-border trade. Below, we analyze these consequences in detail, including changes in reporting and compliance obligations and potential administrative or cost impacts.

Impact on Digital Platforms

Online platform operators in the accommodation and transport sectors are among the most directly affected businesses. Platforms facilitating short-term room rentals, ride-sharing, or similar services will need to significantly adjust their systems to comply with the new VAT collection role. Practically, this means platforms must update their checkout and pricing systems to calculate the correct VAT for each transaction in the appropriate Member State, collect that tax from the consumer, and remit it to the tax authorities (Taxation: Council agrees on VAT in the digital age package - Consilium). They will likely need to register for VAT in the EU (or use the OSS) to report these taxes in all the countries where their services are provided. This is a new compliance burden—previously, many platforms did not have to intervene in their users’ tax matters, whereas now they become the de facto taxpayer for VAT on certain transactions. There could be IT and administrative costs to implement these changes: for example, determining the correct VAT rate (which may differ by country or even city, especially for passenger transport where local taxes can apply), issuing VAT invoices to customers, and filing periodic VAT returns in potentially many jurisdictions. On the other hand, the rule can also bring some benefits or clarity. Platforms will no longer have to guess whether a user is supposed to be charging VAT or not – the default will be that the platform handles it if the user doesn’t. This simplifies the tax aspect of platform operations by creating a uniform EU-wide obligation (VAT in the Digital Age (ViDA) - European Commission). It may also protect platforms from facilitating non-compliance inadvertently, as the VAT is transparently accounted for.

For the underlying service providers (hosts, drivers, etc., especially small ones), the impact is mixed. They themselves won’t have to register or file VAT if they were previously exempt – the platform’s intervention means no change in their administrative load. In fact, ViDA explicitly aims to “simplify life for SMEs” who use such platforms, by shifting the VAT compliance burden off of them and onto the platforms (VAT in the Digital Age (ViDA) - European Commission). However, their services will effectively become subject to VAT where previously they might have been VAT-free, which could increase the cost to consumers. Platforms might handle this by adding VAT on top of the price or by treating listed prices as VAT-inclusive (remitting a portion). In either case, consumers may see price increases for accommodation rentals and ride services, as VAT (often around 10–20%) gets incorporated where it wasn’t before. In the longer term, this could narrow the price advantage that some peer-to-peer services had over traditional providers (e.g. hotels or taxi companies that always charged VAT). Business strategy adjustments may be needed: platforms might consider whether to absorb some of the VAT cost to stay price-competitive or pass it entirely to consumers. They will also need to monitor the rules in each Member State, particularly because of the flexibility allowed – for instance, if a country decides to exempt very small providers or delay implementation until 2030, the platform must adapt its VAT handling in that country accordingly (VAT in the Digital Age package formally adopted | Meijburg & Co). Overall, digital platforms should prepare for greater tax compliance responsibilities and potentially coordinate with tax advisors or authorities to ensure a smooth roll-out of these new VAT duties by the 2028 deadline (or 2030 in some cases) (VAT in the Digital Age package formally adopted | Meijburg & Co).

Impact on Small and Medium-Sized Enterprises (SMEs)

SMEs stand to experience both reliefs and new responsibilities from the ViDA reforms. On the positive side, simplification measures like the single VAT registration can significantly reduce bureaucratic hurdles for small businesses. An SME that sells to customers in multiple EU countries (for example, via an online store) currently might face complex VAT registration requirements once its sales exceed certain thresholds. With the expansion of the OSS, such a business will be able to manage all its EU VAT through one portal and in one language, rather than dealing with different tax offices for each country (Taxation: Council agrees on VAT in the digital age package - Consilium). This can save on administrative costs (no need for multiple VAT agents or local filings) and lower the barrier to entry for expanding into new markets. Additionally, if an SME decides to hold stock or do occasional sales events in other countries, the new rules mean those activities can often be covered by OSS rather than triggering a local VAT number. Likewise, the mandatory reverse-charge for B2B transactions involving foreign suppliers can free SMEs from the need to register abroad when selling to business customers – their customer will self-account for the VAT, simplifying the SME’s operations (Taxation: Council agrees on VAT in the digital age package - Consilium).

However, SMEs will also face new compliance obligations, particularly with respect to digital reporting and e-invoicing. By 2030, any SME engaging in cross-border B2B trade will need to issue electronic invoices and submit data for each such transaction. For many smaller companies, this requires investment in e-invoicing software or services and possibly changes to their billing workflow. While large firms may already have automated invoicing, some SMEs still use manual or less digitized processes; these firms will have to upgrade technologically. There could be initial costs for IT systems or service provider fees to comply with e-invoicing standards. The EU is trying to mitigate this by using a common standard (the one already used in public procurement invoicing), and in the long run e-invoicing is expected to reduce compliance costs (by eliminating redundant paperwork, standardizing data, etc.) (VAT in the Digital Age (ViDA) - European Commission). In fact, the Commission projects over €4 billion/year in administrative savings EU-wide from e-invoicing, which suggests that many SMEs will ultimately benefit from more efficient processes (VAT in the Digital Age (ViDA) - European Commission). Nonetheless, the transition period will require education and support – SMEs will need clear guidance on how to adopt e-invoices, possibly incentives or subsidies for going digital, and assurance that the new systems are user-friendly.

Another consideration is the SME exemption threshold for VAT. Many Member States allow small businesses under a certain annual turnover to avoid registering for VAT. ViDA does not abolish these national exemptions; those small businesses can remain outside the VAT system domestically. The platform economy rules, however, mean that even those unregistered businesses could have VAT effectively applied to their sales via a platform. One safeguard in ViDA is that Member States may exempt SMEs from the platform deemed supplier rule (Taxation: Council agrees on VAT in the digital age package - Consilium). If a country uses this option, a small provider on a platform might continue not having VAT applied (preserving their competitive advantage), but this could vary by country. SMEs operating on platforms should watch how each country implements the rule.

In summary, SMEs should benefit from a simpler, more integrated VAT regime when selling across borders, but they must also modernize their invoicing and reporting. Many will likely find the net effect positive – less time spent on multi-country compliance – but only if they adapt to the digital requirements in time. Policymakers are aware of the challenges; hence the long runway until 2028/2030 before full implementation, giving SMEs time to adjust.

Impact on Cross-Border Trade and E-Commerce

For businesses involved in cross-border trade, ViDA is largely a welcome development. The extension of OSS and the push towards a single VAT registration address one of the longstanding complaints of companies doing business in multiple EU states: the need to maintain numerous VAT registrations and comply with diverse local rules. Large e-commerce retailers, for instance, often hold stock in fulfillment centers around Europe to offer fast delivery. Under the old system, if they stored goods in, say, France, Germany, and Spain, they needed VAT numbers and local filings in each of those countries. Going forward, such a retailer could potentially handle all its B2C sales through one VAT return via the OSS, even if goods are delivered locally from warehouses in different countries (Taxation: Council agrees on VAT in the digital age package - Consilium). This reduces duplication and could lower costs for accounting and compliance teams. It also means fewer unexpected VAT registration triggers – companies can expand to new markets or use new distribution models without immediately incurring new VAT admin overhead, as long as they report everything through the unified system.

Cross-border B2B transactions will also see changes. The mandatory reverse charge for non-established suppliers is effectively an EU-wide adoption of what was an optional simplification. Many businesses that supply other businesses in different Member States were already using reverse-charge mechanisms (where the invoice omits VAT and the buyer self-accounts). ViDA makes this uniform, meaning business customers will generally handle the VAT on purchases from foreign EU vendors (Taxation: Council agrees on VAT in the digital age package - Consilium). For cross-border traders, this means no cash-flow VAT to handle on many sales (they don’t charge it, so they don’t later reclaim it) and often no need to register in the customer’s country. It simplifies selling B2B across the EU, though businesses must still ensure their invoices clearly state the reverse charge and that their customers’ VAT numbers are valid, etc. From a trade perspective, these measures should facilitate smoother intra-EU commerce, as VAT becomes less of a trade barrier or logistical complication.

At the same time, companies engaged in cross-border trade will need to comply with the new reporting regime. By 2030, cross-border B2B sales and purchases will be tracked via the real-time reporting system. Traders will have to ensure they can integrate with this system, possibly affecting their Enterprise Resource Planning (ERP) or accounting software. Customs and logistics processes might also intersect with VAT changes; for example, with more data available on transactions, authorities might streamline some controls or, conversely, enforce compliance more strictly if discrepancies are spotted. Businesses that operate e-commerce across borders will want to capitalize on the improved trust and transparency the system provides – for instance, quicker verification of VAT numbers and transactions might mean faster VAT refunds or fewer audits if everything matches up. But they should also be prepared for greater scrutiny: real-time data sharing means mistakes (like incorrect VAT IDs or amounts) could be caught quickly by tax offices. Cross-border firms will need robust processes to get their VAT invoicing right the first time, in real time.

Changes in VAT Reporting and Compliance Obligations

The ViDA package will overhaul several compliance processes that businesses deal with, notably in reporting, invoicing, and registration. Key changes include:

  • Electronic Invoicing Mandate: Businesses will progressively be required to issue e-invoices for intra-EU B2B and B2G (business-to-government) transactions, replacing paper or PDF invoices. This is a substantial change in compliance behavior. Companies must ensure their invoicing systems produce invoices that meet the EU’s standards (such as the EN 16931 semantic data model used for e-invoicing) and are capable of being submitted to tax authorities automatically. For many, this means adopting new software or adapting current systems. The compliance obligation is not just issuing the invoice but also transmitting the required data to the tax authority’s platform (or clearing system) in a timely manner (likely near real-time). Businesses will need to monitor acknowledgments or messages from tax authorities (since some countries might implement a clearance model where the invoice must be approved by the tax system before it is considered issued). All of this introduces an IT compliance component that may be new to companies that have not operated in countries with e-invoicing before. The upside is that the recapitulative statement (EC Sales List) requirements will be phased out – once real-time reporting is live, those periodic reports become redundant. So, one compliance task (monthly/quarterly EC Sales Lists) disappears as another (continuous transaction reporting) comes in. The continuous reporting is more data-intensive but can be highly automated.

  • VAT Returns and Registration Simplification: As OSS and single registration features roll out, businesses will likely deal with fewer VAT returns overall. A company that previously filed separate VAT returns in 5 countries might consolidate most of that into a single OSS return for all its cross-border consumer sales. This reduces the frequency and number of filings, though the OSS return will be correspondingly larger and more complex (covering multiple jurisdictions’ VAT). Businesses must ensure they correctly assign sales to the right country and VAT rate within the OSS filing. Compliance teams will need knowledge of multiple countries’ VAT rates and rules, even if filing through one portal. Another change is that tax payments may need to be centralized – for instance, paying all OSS-declared VAT to the home country tax authority, which then distributes funds to others. Companies will have to manage potentially large consolidated VAT payments and reconcile that with their internal accounts per country.

  • Platform Compliance: Digital platforms, as discussed, will take on new tax compliance workflows. They might have to generate VAT invoices/receipts to customers on behalf of their sellers and keep records of those for the statutory period. They will also have to file VAT returns (perhaps via OSS as well) reporting the VAT they’ve collected for each country. This is a new reporting obligation that will require diligence – errors in these returns could lead to liability or penalties for the platform. Additionally, platforms may need to adapt their vendor onboarding and accounting to distinguish between transactions where the platform must collect VAT and those where it doesn’t (e.g. if a provider is actually VAT-registered and charging VAT themselves, the platform shouldn’t also collect). Thus, a compliance check or declaration from providers might be necessary to see if the provider has an active VAT number above threshold or not.

  • Data Retention and Transparency: With more data being reported to tax authorities, businesses should expect that tax audits or checks will increasingly be data-driven and digital. Tax authorities might use analytics on the new data to send inquiries or discrepancy notices. For compliance, companies will want to keep their digital records organized and consistent with what was reported. This means ensuring that internal sales ledgers, inventory movements, and OSS reports all align. Any differences (for example, forgetting to include a certain sale in the OSS report) could be flagged much sooner by authorities who see the e-invoice went through but maybe didn’t see the VAT declared. The margin for error in compliance is thinner, so companies might invest in compliance software or services to automatically cross-verify their VAT data.

Overall, businesses will experience a shift from static, periodic compliance actions to dynamic, transaction-based compliance. While this may feel more demanding day-to-day, it also promises a more efficient and integrated system. Many routine tasks (like compiling EC Sales Lists or multiple VAT returns) will be eliminated or merged into streamlined processes. The initial adaptation will be significant, but once systems are in place, VAT compliance could become almost an “invisible” part of the transaction flow, handled by software in real time rather than separate manual reporting steps.

Administrative Burdens and Cost Implications

Implementing the ViDA changes will incur upfront costs and administrative effort for businesses, but it also has the potential to reduce costs in the long term. On the cost side in the near term, companies will likely spend resources on:

  • Software and Systems: Upgrading or purchasing e-invoicing and reporting systems, integrating with government portals, and updating point-of-sale or billing systems for new VAT rules. For example, an SME might subscribe to an e-invoicing platform or a large firm might expand its ERP capabilities. There will be one-time setup costs and ongoing maintenance costs for these systems.

  • Training and Change Management: Staff in accounting, finance, and IT will need training on the new requirements. Learning to issue compliant e-invoices or to prepare OSS returns covering multiple countries is a learning curve. Businesses may also need to educate their sales teams or suppliers about new invoice formats or data required (e.g. capturing customers’ VAT IDs accurately for B2B sales).

  • Consultancy and Compliance Support: Especially during the transition, many businesses might consult tax advisors or hire compliance experts to ensure they implement ViDA correctly. This could be an extra expense for complex cases (like a business restructuring its operations to centralize through OSS).

These efforts represent an administrative burden spike around the implementation periods (2025–2030). SMEs might feel this burden more acutely due to fewer resources, which is why phased timelines and possible support measures are critical.

However, the long-term outlook is that ViDA will reduce administrative burdens once fully in place. As noted, the standardization and centralization of VAT compliance can save billions in compliance costs across the EU (VAT in the Digital Age (ViDA) - European Commission). Businesses will spend less time on duplicative reporting and more time can be allocated to value-adding activities. For instance, a company currently juggling six different foreign VAT returns will, in the future, file perhaps one OSS return – that’s less form-filling and fewer chances of error or late filings. Automation through e-invoicing can also cut down manual invoice processing and archiving costs (no papers to mail or store).

From a cash-flow perspective, having the customer account for VAT via reverse charge (for B2B sales) means foreign suppliers avoid the admin of paying VAT and later reclaiming it – improving cash flow and reducing the complexity of cross-border sales. Additionally, by combating fraud more effectively, governments may feel less need to impose heavy auditing on compliant businesses or might avoid raising tax rates, indirectly saving businesses money.

One potential administrative concern is the coexistence of domestic and EU reporting systems in the interim. If a Member State already has or introduces a domestic e-invoicing/reporting system before the EU one is operational, businesses might have to comply with two sets of reporting (one for domestic sales, one for intra-EU sales) until those are harmonized by 2035. This could double reporting work for a period. ViDA aims for eventual harmonization, but the transition could see some duplication of effort for businesses operating in countries that move early on domestic e-invoicing. Companies in such countries (like Italy, France, etc., which are rolling out domestic e-invoicing) will need to maintain compliance with national rules as they evolve and then adjust again to align with the EU-wide system by 2035.

In conclusion, businesses should expect short-term investments and increased administrative tasks to align with ViDA, but these should give way to a more efficient VAT compliance environment by 2030–2035. The cost-benefit equation is likely positive over a multi-year horizon: upfront costs to adapt, followed by recurrent savings from a simpler, fraud-resistant system.

4. Recommendations for Businesses

In light of the upcoming changes, businesses should begin preparing well in advance to ensure a smooth transition. Below are key recommendations for how businesses can adapt to the new VAT rules, along with practical steps and examples:

  • Invest in E-invoicing Infrastructure: Start upgrading your invoicing systems to be e-invoice compliant and capable of real-time reporting to tax authorities. For example, if you currently issue PDF or paper invoices for cross-border sales, explore software that can generate structured e-invoices (XML/UBL format) aligned with the European standard. Practical example: A manufacturing firm selling B2B from France to Germany should implement an e-invoicing solution and integrate it with its accounting software so that by 2030, each invoice to German clients is automatically sent to the French tax portal for EU-wide sharing (Taxation: Council agrees on VAT in the digital age package - Consilium). Early adoption will let you troubleshoot technical issues and train staff before it becomes mandatory. Consider running a pilot program of e-invoicing for some customers to get used to the process.

  • Leverage the One-Stop Shop (OSS) for VAT: Evaluate your current VAT registrations and identify opportunities where the expanded OSS can replace multiple filings. If you operate in e-commerce or deliver services across borders, plan to consolidate your VAT reporting through OSS once the new rules kick in (Taxation: Council agrees on VAT in the digital age package - Consilium). Practical example: A UK-based (post-Brexit, assume it has an EU establishment for VAT) online retailer with warehouses in Spain and Poland currently files local VAT in those countries. Under ViDA, it can choose a single EU country of registration (say, Spain) and use the OSS to report all its EU sales, even those delivered from Poland. The company should consult with tax advisors on how to transition to OSS reporting in 2025–2028 and possibly deregister from certain local VAT obligations when allowed. By streamlining to one registration, businesses will reduce compliance costs. Ensure your ERP system can tag sales by destination country so that your OSS returns correctly allocate VAT to each Member State (Taxation: Council agrees on VAT in the digital age package - Consilium).

  • Adapt Pricing and Platform Strategies: If you run a digital platform or sell through one, prepare your pricing models for the new VAT regime. Platforms should update their terms and pricing to clarify how VAT will be handled and displayed to customers. Practical example (Platform): A home-sharing platform like Airbnb should start building a feature to automatically add VAT to rental prices for stays in EU countries where the host is not VAT-registered. This might involve determining the host’s status (VAT registered or not) and the applicable VAT rate for the rental location, then showing customers a tax-inclusive price. The platform should also communicate to hosts and guests that, from say July 1, 2028, VAT will be charged on bookings in the EU (VAT in the Digital Age package formally adopted | Meijburg & Co). If you are a seller using a platform, be aware that your payouts might effectively face a VAT deduction or your listing price might need to increase. It would be wise to monitor announcements from the platforms you use and adjust your pricing if needed so that your earnings remain acceptable after VAT is applied.

  • Ensure Compliance with Deemed Supplier Rules: Platforms and marketplace operators should establish clear compliance processes for the deemed supplier regime. This includes registering for VAT in the necessary jurisdictions or OSS, setting up periodic filing routines, and keeping excellent records of transactions. Practical example: A ride-hailing app operating EU-wide might choose one country to register under OSS and then report the VAT on rides in all EU cities through that one OSS return. The company should start gathering data on ride transactions by country and ensure it can produce VAT invoices for each trip if requested. Additionally, such a platform should keep documentation of any SME exemptions a Member State applies (e.g. if a country temporarily says small guesthouse rentals under a certain revenue don’t require platform VAT, maintain records of those cases to justify not charging VAT). Implementing a robust tax engine in the platform software will be critical to handle these varying scenarios automatically. Consulting with VAT experts in each major market now (2025–2027) can help the platform design a system that is compliant by the 2028 deadline (Taxation: Council agrees on VAT in the digital age package - Consilium).

  • Train Staff and Update Compliance Knowledge: Educate your finance, accounting, and IT teams about the upcoming VAT changes. Conduct internal workshops or training sessions on topics like how to issue an e-invoice that meets the new requirements, how OSS works, and what the platform economy rules entail for your business model. Make sure your staff knows the key implementation dates – e.g., July 1, 2028 (when platform rules start and OSS expansion takes effect) and July 1, 2030 (when e-invoicing for intra-EU becomes mandatory) (Adoption of the VAT in the Digital Age package - European Commission) (Adoption of the VAT in the Digital Age package - European Commission). Mark these in your compliance calendar and work backward to set internal deadlines (for example, aim to have all cross-border invoicing digital by mid-2029 to be safe). If you have a compliance officer or CFO, they should begin updating internal compliance checklists to include ViDA requirements. For businesses with operations in multiple EU countries, consider appointing a “VAT in the Digital Age” point person in each region to keep track of local adoption (since some states might phase in things slightly differently).

  • Review and Optimize Business Structures: With the new single VAT registration possibilities, businesses might restructure certain operations to take advantage of simplifications. For instance, if previously you avoided storing goods in other countries due to VAT registration hassle, you might now revisit that strategy since OSS will cover it. Practical example: A mid-size retailer based in Italy had avoided opening a distribution center in Austria because of VAT registration and compliance costs there. Now, knowing that from 2028 it can sell from an Austrian warehouse without an Austrian VAT registration (using OSS in Italy), the company can reconsider that expansion. It should start the planning and logistics now so that by the time the rules allow, it can immediately leverage them to grow its business. Similarly, companies should ensure they obtain and validate customers’ VAT IDs for B2B sales, because the expanded reverse charge means those B2B sales (when the customer has a valid VAT number in another country) won’t require foreign VAT registration. Verifying VAT numbers (via the VIES system) will become even more important to apply the reverse charge correctly; businesses should integrate VIES checks into their sales process to capitalize on the registration-saving mechanism (Taxation: Council agrees on VAT in the digital age package - Consilium).

  • Engage with Tax Authorities and Seek Guidance: Many tax administrations will issue guidance, FAQs, or even offer pilot programs as ViDA measures are implemented. Businesses should actively engage with these resources. If there’s a sandbox for e-invoicing or a trial OSS system update, participate in it to give feedback and learn early. Where available, use any grace periods or transitional arrangements. For example, some Member States might roll out e-invoicing requirements to large companies first, then SMEs later – if you qualify for a later phase, use the extra time but don’t procrastinate. It’s also wise to consult official documentation (many of which are listed in Section 5 below) to understand the legal basis and detailed rules. If anything is unclear – such as how a specific type of transaction will be treated under the new rules – consider reaching out to your local tax authority or a VAT ruling service for clarification ahead of time.

  • Monitor Costs and Consider Automation: Track the costs you are incurring to comply (software, training, etc.) and look for efficiencies through automation. Many solution providers are emerging for e-invoicing, OSS filing, and VAT data analytics due to these reforms. Compare options to find a solution that fits your scale – a cloud-based service might suit an SME, whereas an integrated module in your ERP might suit a large corporation. Automation can also help with ongoing compliance: for example, setting up rules so that if a sale crosses a border, it’s automatically flagged for e-invoice reporting and OSS inclusion, reducing manual oversight. This will mitigate the risk of human error and lower the ongoing administrative burden.

By following these recommendations, businesses can turn the ViDA reforms from a compliance challenge into an opportunity. Early and strategic adaptation will not only keep you on the right side of the law, but can also streamline your operations and potentially give you a competitive edge in the more unified EU market. Embracing digital compliance tools and the single market ethos of the reforms will position your business well in the coming years.

5. Legal References and Official Documentation

To navigate ViDA effectively, businesses should familiarize themselves with the legal texts and official guidance underpinning the reforms. Below is a summary of key legal references and documentation related to the VAT in the Digital Age package:

  • Council Directive (EU) .../2025 – Amending the VAT Directive (2006/112/EC): This is the primary directive in the ViDA package, which modifies the EU’s core VAT law. It introduces the legal basis for mandatory e-invoicing and digital reporting for intra-EU transactions, sets out the deemed supplier obligations for platforms in accommodation and passenger transport, and expands the OSS and reverse-charge mechanisms for a single VAT registration across the EU. All Member States must transpose this directive into national law by the stipulated deadlines. (Reference: Proposal COM(2022) 701 final, later adopted by the Council on 11 March 2025 (Taxation: Council agrees on VAT in the digital age package - Consilium).)

  • Council Regulation (EU) .../2025 – Amending Regulation 904/2010 on Administrative Cooperation: This regulation updates the VAT administrative cooperation rules to support ViDA’s new systems. It establishes the framework for data exchange between tax authorities in real time, such as the new IT system that will allow Member States to share e-invoice data and jointly analyze it for fraud detection (Taxation: Council agrees on VAT in the digital age package - Consilium). It also likely covers cooperation procedures for OSS and the platform economy (e.g. how one country’s authority can liaise with another’s when a platform in one country pays VAT to another). Being an EU regulation, these provisions will be directly applicable in all Member States without separate national legislation. (Reference: Proposal COM(2022) 703 final, amending Reg. 904/2010, as per the ViDA package (Taxation: Council agrees on VAT in the digital age package - Consilium).)

  • Council Implementing Regulation (EU) .../2025 – Amending Implementing Reg. 282/2011: This implementing regulation provides detailed rules and definitions to uniformly apply the new VAT measures. For example, it likely contains the technical details on e-invoice content and format requirements, the definition of “short-term” accommodation rental for VAT purposes (e.g. maximum rental duration to qualify) (Taxation: Council agrees on VAT in the digital age package - Consilium), and clarifications on OSS reporting (such as what information a business must provide when using OSS for moving stock or domestic sales in another country). It may also cover how platforms should report their deemed supplier transactions and any record-keeping requirements. This regulation ensures that all Member States interpret and enforce the new rules consistently. (Reference: Proposal COM(2022) 707 final, amending Implementing Reg. 282/2011, per ViDA package (Taxation: Council agrees on VAT in the digital age package - Consilium).)

  • Official EU Press Releases and Communications: The European Commission and Council have published official communications that summarize and explain the ViDA package in more accessible terms. For instance, the Council of the EU’s press release dated 11 March 2025 announces the final adoption of the package and highlights the three main changes (digital reporting by 2030, platform VAT, and OSS expansion) (Taxation: Council adopts VAT in the digital age package - Consilium) (Taxation: Council agrees on VAT in the digital age package - Consilium). Another useful document is the Council’s press release from 5 November 2024 when a political agreement was reached, which provides more detail on the content of the reforms and any compromises made (e.g. the decision not to extend the platform rules to all goods, and the intention to discuss import OSS in the customs context) (Taxation: Council agrees on VAT in the digital age package - Consilium). The European Commission’s “VAT in the Digital Age” webpage and factsheets are also invaluable – they provide background data (such as the VAT Gap figures and expected revenue gains) and explain the objectives of the reform in plain language (VAT in the Digital Age (ViDA) - European Commission) (VAT in the Digital Age (ViDA) - European Commission). These sources are helpful for understanding the rationale behind the legal provisions.

  • European Parliament Opinion: Although VAT legislation is a Member State competence requiring unanimity in Council, the European Parliament was consulted on the ViDA proposals. The Parliament gave its strong endorsement in February 2024, with 589 votes in favor vs 42 against (EU VAT system reform approved by European Parliament). While the Parliament’s opinion is not binding, it signaled broad political support for the reforms. The EP’s report on ViDA (Procedure 2022/0407(CNS)) may provide additional insights or recommendations, such as the emphasis on protecting SMEs and suggestions on timeline (the Parliament advocated for ensuring readiness by 2030, which aligned with the final outcome for e-invoicing). Checking the Parliament’s report can give businesses an idea of the legislative intent and any concerns raised during debates.

  • National Implementation Guidance: As Member States transpose and implement the ViDA provisions, national tax authorities will issue guidance notes, legislative amendments, and possibly pilot programs. Businesses should keep an eye on communications from the tax authority in their country of registration as well as in major markets where they operate. For example, tax authorities may publish specific guidelines on how to submit e-invoices to their system, what format to use, how to register for the OSS or update an existing OSS registration to cover new types of transactions, and how platforms should report VAT. By 2026–2027, many countries will likely have online portals and documentation in place for businesses to begin onboarding to the new systems. Some countries have already been active in digital reporting (e.g. Italy’s SDI e-invoicing system, France’s upcoming e-invoicing mandate); these countries will outline how they plan to transition from their domestic system to the EU-wide system by 2030–2035. Engaging with these official documents early will help businesses anticipate the practical steps required.

In summary, businesses are advised to review the above official documents to gain a thorough understanding of the ViDA reforms. The legal texts (Directive, Regulations) provide the letter of the law – critical for tax professionals to implement changes correctly – while the press releases and guidance provide the spirit and practical explanation of those laws. All these documents are available through EU law databases and the websites of the European Commission (DG TAXUD) and the Council. By consulting the EU’s Official Journal once the final texts are published, companies can see the exact wording of the new provisions and plan accordingly. Always refer to these primary sources when in doubt, and consider seeking professional advice for complex scenarios. The ViDA package is a transformative overhaul of VAT in Europe, and being well-informed through official documentation is the first step to navigating the digital age of VAT successfully.

Sources:

Mathieu Levasseur https://veroskat.com
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