VAT in the Digital Age (ViDA) – An agreement has been reached; the revolution begins
Two years after the first ViDA (VAT in the Digital Age) proposal was released by the European Commission, Member States have finally reached a political agreement on the new package of rules that will be gradually implemented within their domestic jurisdictions as part of what has been described, from a compliance perspective, as the most dramatic reform of the EU VAT system.
Details regarding the new rules have yet to be fully defined. The Economic and Financial Affairs Council (Ecofin) confirmed during its meeting on 5 November 2024 that an agreement has been reached, but the initial text has undergone substantial amendments. Therefore, it must now be submitted for consultation with the European Parliament, and the relevant process will be initiated shortly after the meeting.
As a reminder, the expected changes can be summarised as follows1:
- Digital Reporting and E-Invoicing: ViDA introduces a standardised approach to e-invoicing for cross-border transactions.
- One-Stop Shop (OSS) and Single VAT Registration: To simplify VAT compliance, the proposal expands the ambit of the OSS mechanism.
- Platform Economy: The proposal also addresses VAT collection for digital platforms that facilitate short-term accommodations and passenger transport services.
ViDA is expected to lead to a revolution in VAT by standardising and digitalising VAT compliance across the EU. It is also specifically aimed at ensuring efficient and accurate VAT collection, especially concerning the platform economy.
The changes introduced by ViDA will require businesses to review their internal systems and processes. However, compliance may not be the only issue to focus on. Contractual documentation, including liability clauses and terms and conditions, will, in some cases, need updates – especially for actors within the platform economy. Additionally, with tax authorities gaining automated access to reporting information, an increase in compliance-related issues and scrutiny is anticipated.
Our team of expert Indirect Tax lawyers at DLA Piper is available to answer any questions regarding this reform and provide legal advice as needed.
1Please refer to our previous publications for more details: VAT in the Digital Age (ViDA) – A revolution is underway and VAT in the Digital Age (ViDA) – The revolution is unfolding.
