ViDA (VAT in the Digital Age) and the future of the tax return

The ‘General Approach to VAT in the Digital Age’ reflects the European Union’s efforts to modernise its VAT system and adapt it to the challenges arising from the digital transformation, cross-border trade and e-commerce. Here are the main findings:

VAT in the digital age (ViDA): What is it?

The new regulations should be understood in the context of the ‘VAT in the digital age (ViDA)’ initiative, published by the European Commission on 08/12/2022, for the modernisation of VAT. These aim to make the EU VAT system more efficient for businesses and prevent VAT fraud. It is expected that advance VAT returns for businesses in Europe will be digitised in the future. First drafts of the project are currently being discussed at EU level.

Real-time VAT returns

ViDA (‘VAT in the Digital Age’) is the name of a package of measures that will revolutionise VAT reporting for businesses. In this electronic system, B2B transactions will be reported in real time to the relevant tax authorities. As planned, the current summary declarations could disappear by 2028. Some countries, such as Italy, Spain and Poland, have already established or are working on mandatory systems.

Step by step, ViDA will unify advance VAT declarations at European level and handle them directly with the tax authorities. In addition, only a single VAT registration will be required within the EU, eliminating the need for multiple registrations in different member states, as is currently the case.

Efficiency and combating VAT fraud

Real-time declarations will relieve both businesses and tax authorities. Reducing the use of paper will also have a positive impact on the environment, which is a great advantage. However, the fundamental reason for digitising the advance VAT return is its resistance to fraud. The standardisation of processes aims to reduce the vulnerability to fraud in the VAT systems of EU Member States, as well as to prevent manipulation and corruption.

How will VAT work in the digital age?

Unified VAT registration system (VAT One-Stop Shop).
- The scope of the existing One-Stop Shop (OSS) and Import One-Stop Shop (IOSS) system will be extended.
- Businesses will be able to use a single VAT register across the EU, simplifying compliance for cross-border transactions.
- Reduced administrative burden and costs, especially for small and medium-sized enterprises (SMEs).
Real-time digital reporting for intra-EU trade.
- Mandatory digital reporting will be introduced for intra-EU transactions, paving the way for real-time e-invoicing.
- Current summary declarations will be replaced by faster and more accurate data exchange between tax authorities.
- The aim is to reduce VAT fraud through greater transparency and efficiency in tracking transactions.
E-invoicing mandates
- E-invoicing will be standardised across member states and aligned with wider EU efforts to achieve digital standardisation.
- Interoperability will be supported and the audit capabilities of tax authorities will be improved.
- It will provide businesses with a single framework to comply with invoicing regulations.
Adapting VAT to the digital economy
- Review of VAT rules to better address services in the digital economy, including platform-based transactions and the temporary work economy.
- New measures will be introduced to ensure that VAT is effectively levied on digital services.
Fighting VAT fraud
- Improving mechanisms to detect and prevent VAT fraud, which could cost the EU billions annually.
- The integration of digital tools should reduce fraud in both domestic and cross-border transactions.

Timetable for the implementation of ViDA

The timetable for the implementation of the ‘VAT in the digital age’ initiative is designed to allow for a gradual phasing-in, giving businesses and tax administrations time to adapt to the new rules. Below is an overview of the proposed timetable, based on suggestions from the European Commission:

E-invoicing
- 2024-2028: Member States will start implementing mandatory e-invoicing.
- 2028: Mandatory e-invoicing for intra-EU trade is expected to be fully implemented. This includes the elimination of the current reporting system (summary declarations).
Digital Reporting Requirements (DRR)
- 2025: First steps to introduce real-time digital reporting obligations for intra-EU transactions.
- 2028: Full introduction of DRR across the EU.
Single VAT registration
- 2025: Businesses to register for the extended VAT One-Stop Shop (OSS) system.
- 2028: Full implementation of the single VAT registration system, which will ensure that businesses will no longer need multiple registrations in member states.

Transitional regulations

The European Commission has foreseen transitional regulations to ensure a smooth transition to the new systems, allowing both businesses and tax authorities to test and integrate digital reporting tools and systems.

Final approval

The exact timelines may change slightly, as the proposals must go through the legislative process in the EU Council and Parliament, and member states must transpose these changes into their national laws.

What can affected businesses do?

To ensure a smooth transition, we recommend that you start familiarising yourself with the upcoming changes and adapt your invoicing to e-invoicing as soon as possible.

Find the right e-invoicing provider

The solutions provided by B2Brouter in the field of e-invoicing will help you to comply with all the requirements in the European context, also in relation to the future regulations of electronic VAT reporting obligations. B2Brouter already offers similar services to ViDA in Italy, Spain and soon also in France.

Whether you connect your ERP system via an interface with B2Brouter or use our convenient online platform, it is important to keep in mind that at the end of the year, many companies will need a solution, which could cause overload. Preparing in advance will help to comply with regulations on time. The time and costs saved can make a decisive difference in the competition between companies.