ViDA stands for VAT in the Digital Age. ViDA is a comprehensive legislative package adopted by the EU Council to modernize the VAT Directive. Its primary goals are to close the VAT Gap through better fraud detection, adapt rules for the platform economy, and transition cross-border reporting from outdated aggregate lists to transaction-based digital reporting.
EU Guide to VAT in the Digital Age (ViDA)
How do VAT and ViDA impact global tax legislation and compliance? The digital economy has changed how we do business globally, requiring VAT technology to adapt to emerging regulations.
What is VAT and why does it exist?
Value Added Tax (VAT) is a broad-based consumption tax assessed on the value added to goods and services. In the EU, it serves as a core revenue stream for Member States and a component of the EU’s own resources. VAT operates on a fractional collection basis. Taxable persons account for VAT on their sales (Output VAT) and recover VAT incurred on business costs (Input VAT). The mechanism ensures that the tax is levied at each stage of production and distribution, but only on the increment of value created. This neutrality prevents the cascading tax effects seen in older sales tax regimes.
What is VAT in the Digital Age?
VAT in the Digital Age (ViDA) is a comprehensive legislative package adopted by the EU Council to modernize the Directive 2006/112/EC. It addresses the inefficiencies of the current system in a digitized economy.
Impact of Digitalization on VAT
Digitalization has fundamentally altered supply chains, challenging traditional place-of-supply rules. The rise of the platform economy and remote digital services created compliance blind spots, contributing to EU's VAT Gap (estimated at over €99 billion annually across the EU). ViDA seeks to harness digital tools to combat this while simplifying compliance for businesses.
What are the key components of ViDA?
The ViDA proposal can be split into these three key components below.
Timeline for Implementation
The VAT in the Digital Age timeline is split up into different phases of implementation.
Pre-2028: Member States may voluntarily impose domestic e-invoicing without seeking EU derogation.
1 July 2028: The Single VAT Registration (SVR) and expanded OSS go live. The 'Deemed Supplier' rule for platforms becomes available for Member States to apply voluntarily.
1 January 2030: The 'Deemed Supplier' rule for platforms becomes mandatory across the EU.
1 July 2030: Mandatory B2B e-invoicing and Digital Reporting Requirements (DRR) come into force for intra-Community transactions. Summary invoices remain permitted for supplies within the same calendar month.
1 January 2035: Full harmonization requires all domestic reporting systems to align with the EU standard (EN 16931).
ViDA will affect all businesses that wishing to trade with EU member states, as well as crossing certain thresholds, thus making them liable for VAT.
So how can businesses prepare for new ViDA regulations?
What are the best practices and compliance strategies? And can these help minimise liabilities? Here’s some ideas to get you started:
- Assess whether your VAT processes meet new regulatory standards. If not, start researching solutions, making sure to assess solutions with your business and its needs in mind.
- Prioritise VAT record-keeping and audit-preparedness.
- Keep on top of the latest news and developments regarding ViDA.
- Don’t leave your ViDA transition strategy to the very last minute. Plan and act as soon as possible!
ViDA's Impact on EU Member States
Member States must undertake significant IT infrastructure projects to handle the influx of real-time data from taxpayers. They retain autonomy over domestic reporting rates but must accept e-invoices compliant with EU standards for cross-border trade. The reform shifts the audit approach from retrospective checks to near real-time data matching, significantly enhancing fraud detection capabilities.
How can businesses prepare for new ViDA regulations?
Preparation requires a strategic audit of current ERP and invoicing capabilities. Businesses must ensure their systems can generate and receive structured e-invoices (e.g., UBL/XML) rather than just unstructured PDFs. Supply chains involving call-off stock or cross-border inventory transfers must be reviewed ahead of the 2028 SVR changes. Furthermore, platforms in the accommodation and transport sectors must prepare for the deemed supplier liability by updating their merchant onboarding and tax determination engines.
How can Vertex help you with ViDA?
At Vertex, we have tax solutions ready to go to help your business support ViDA compliance. Automate your end-to-end tax process and say goodbye to manual filings.
Vertex VAT Compliance
Streamline VAT administrative tasks, helping you save time, money, and resources.
Vertex e-Invoicing
Easy-to-implement e-invoicing software to support your domestic and cross-border invoicing requirements.
FAQ's
The most significant change is the shift to Digital Reporting Requirements (DRR). For intra-Community B2B trade, businesses must issue structured e-invoices and report transaction data to tax authorities within 10 days. This moves compliance from a retrospective monthly summary to a near real-time, transaction-by-transaction obligation.
Beyond compliance, mandatory structured e-invoicing (based on the EN 16931 standard) eliminates manual data entry and OCR errors. It allows for data accuracy, accelerated input VAT recovery and automated reconciliation of AP/AR ledgers.
Italy was the pioneer with its SdI system in EU. Poland (KSeF), Romania (RO e-Factura), and Belgium are all introducing mandates, while France and Germany have legislated domestic B2B requirements. ViDA will eventually harmonize these diverse domestic systems for cross-border trade by 2030.
ViDA abolishes the legacy Recapitulative Statement (EC Sales List). It replaces it with a unified Digital Reporting Requirement (DRR), where data is exchanged automatically between Member States via a central system, significantly reducing the administrative burden of filing multiple summary reports.
DRR is the mechanism requiring businesses to digitally transmit details of cross-border transactions to tax authorities almost immediately after the supply. It is the core of ViDA’s anti-fraud strategy, giving Member States visibility of the transaction chain to prevent carousel fraud.
Absolutely. Because ViDA requires structured data formats (XML/UBL) and strict reporting deadlines, manual compliance is no longer feasible. Automation software handles the data validation, format conversion, and secure API transmission required to meet these new EU-wide standards.
Failing to meet e-invoicing standards means an invoice is legally invalid—meaning your customer cannot recover the VAT, and you may face penalties for late reporting. In a digital regime, errors are detected instantly by the tax authority, increasing the likelihood of automated audits and fines.
Stop relying on paper and/or PDF invoices. Audit your business' ability to generate structured data (XML) and assess your supply chain for cross-border transactions. Implementing a tax engine or e-invoicing solution now ensures you are ready for the domestic mandates (like Germany 2025) that precede the full 2030 ViDA rollout.
Request a tailored demonstration to witness the Vertex platform in action. We will show you specifically how our software automates the critical components of the new regime, from generating compliant e-invoices to managing real-time reporting and ensuring your business is future-proofed against EU digital tax mandates.