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As the EU inches closer to the sweeping 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, clarity is emerging on how the rules will apply to non-resident businesses.
The latest signal? E-invoicing obligations may not apply to foreign companies without a local VAT Fixed Establishment, but e-reporting still might.
European Commission’s VAT committee offers direction
At its 126th meeting, a group of experts from EU member states and the Commission released non-binding guidance on who should fall within the scope of mandatory 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. under ViDA.
While not legally enforceable, these opinions often guide how member states implement VAT law. Here’s what they said:
- Non-residents (without a fixed establishment) are out of scope for e-invoicing
According to the VAT Committee, businesses that are VAT-registered in a country but don’t have a physical presence there—no branch, warehouse, or office—should not be required to issue or receive structured e-invoices in that country.
- But e-reporting obligations may still apply
Even if a business is exempt from structured e-invoicing, it may still need to report its transactions digitally. Real-time or near real-time e-reporting of invoices to tax authorities could still be mandated at the national level.
This means many non-resident businesses may escape structured XMLExtensible Markup Language is a markup language and file format for storing, transmitting, and reconstructing arbitrary data. invoices, but not the digital compliance burden altogether.
- What counts as a ‘fixed establishment’?
Determining whether a business has a local ‘establishment’ involves a detailed look at Articles 10 and 11 of the VAT Implementing Regulation.
In general, if a company has a local branch, office, warehouse, or team that plays a role in taxable transactions, then that business unit can be in-scope for e-invoicing.
If that local branch sells or purchases goods/services in the country, e-invoicing rules may apply just to those transactions.
Why this matters
As we look ahead to July 2030, when ViDA will mandate structured e-invoicing for intra-EU B2B transactions, businesses – especially non-EU sellers and marketplaces – are urgently trying to map out who’s in, who’s out, and what the compliance game will look like.
What to action
- Understand your establishment status.
- Watch for e-reporting obligations.
- Plan for 2030 and beyond, the ViDA reforms are coming. Use this time to prep your systems, workflows and select vendors.
