EU Parliament approves ViDA: Ushering in a new era for digital VAT

On 12th February, the EU Parliament delivered a decisive nod to the VAT in the Digital Age (ViDAViDA or 'VAT in the Digital Age', is an EU initiative proposed by the European Commission that seeks to modernise and harmonise VAT processes for member states, by embracing new technologies. It is aimed at updating processes for the management of VAT, and reduce the VAT gap and fraud. The proposal also aims to address challenges in the area of VAT raised by the development of the platform economy.) reforms.

This landmark approval follows a November 2024 political agreement reached by Finance Ministers across member states. The reforms aim to modernise VAT administration, streamline digital reporting, and curb fraud through a three-pillar strategy.

The three pillars of ViDA

The comprehensive reform package is built on:

• Digital Reporting and e-Invoicing: Mandating standardised digital reporting of intra-community transactions and the issuance of structured e-invoices.
• Platform economy regulations: Introducing new rules for ride-sharing and accommodation platforms, which will soon assume VAT collection responsibilities as deemed suppliers.
• Single VAT registration: Expanding the One Stop-Shop (OSSOSS (One-Stop Shop): An EU VAT system allowing businesses to report and pay VAT for cross-border sales in a single EU member state.) system to cover cross-border movements, reducing the need for multiple VAT registrations and simplifying compliance for both e-commerce and B2B enterprises.

Next steps

With the EU Parliament’s approval now in place, several key actions are set to unfold over the coming months.

These include the European Commission finalising its working papers for each pillar; outlining the regulations, notes and timetables that businesses must adhere to.

Additionally, the ViDA reforms will be formally ratified by the European Council in March 2025, a Peppol pilot is underway and will continue to test digital reporting and e-invoicingElectronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing. solutions, and talks are taking place on issues such as the IOSS changes due under the 2028 EU Customs reforms.

On 8^th April 2025, a three-day workshop will kick off in Vienna, giving stakeholders an opportunity to discuss ViDA implementation details and fine-tune the reforms.

Confirmation of the completion of these steps is expected in the months ahead.

Future timeline: Key dates for your diary

Early 2025: Domestic e-invoicing

Member states will be allowed to introduce their own e-invoicing schemes. Businesses should prepare to transition as e-invoices will soon become the standard, no longer requiring customer approval.

January 2027: E-commerce package updates

Modifications originally slated for 2026 are postponed to 2027. These include changes to the thresholds for distance sales, tax point rules, and the integration of natural gas and electricity supplies into the OSS reporting framework.

July 2028:

• Single VAT registration (Pillar 3): The OSS system will be extended to cover movements of own stocks, eliminating the need for separate VAT registrations across member states.
• Voluntary launch for Platform Economy (Pillar 2): A voluntary phase will begin for ride-sharing and accommodation sharing platforms, with early adopters expected to set the pace.

January 2030: Mandatory Platform Economy rules

Ride-sharing and short-term accommodation platforms will be required to act as deemed suppliers, collecting VAT on behalf of their underlying service providers. Exceptions will apply for SMEs and businesses with dedicated VAT identification numbers.

July 2030: Digital reporting & e-invoicing (Pillar 1)

Mandatory digital reporting of intra-community transactions will commence. A new structured e-invoice format—based on an updated EN16931 standard—will replace many of the legacy reporting methods, streamlining cross-border VAT processing.

July 2032: Legacy VIES phased out

The current VIES system will be gradually decommissioned in favour of a new Central VIES database managed by the European Commission, enhancing transparency and data integration.

January 2035: Harmonisation of Domestic Reporting

Member states that have implemented their own e-invoicing systems before 2024 will need to align with the new ViDA standards by 2035, ensuring full harmonisation across the EU.

Looking Ahead

The approval of ViDA by the EU Parliament marks a significant leap forward in digitising VAT administration.

As member states and the European Commission work together on the final details, businesses across Europe should anticipate a phased rollout that will simplify compliance, improve transparency, and strengthen the fight against VAT fraud.

This transition, while complex, promises a more efficient and unified tax system across the EU – a crucial step in adapting to the digital age.