Viva la ViDA? Will the EU’s new grand plan for VAT be as revolutionary as we’re told?

In December last year, the European Commission unveiled one of the biggest VAT reform proposals of the 21st Century. Called ‘VAT in the Digital Age’ (ViDA), the three-part proposal intends to not only take a hardened stance on VAT fraud, but also improve VAT efficiency through real-time reporting and e-invoicing. Add to this a significant extension of platform VAT liabilities and a reduced admin burden through single VAT registration, and ViDA could result in major modernisation. The current VAT system is already several decades old, and despite some recent upgrades, it has not kept pace with technological developments, the digital economy or the evolution of business models.

In addition, EU trade has a major VAT gap problem, with 2020’s figures showing that the VAT gap stands at €93 billion (approximately $100 billion). Taking advantage of new technology, the proposal intends to allow member states to recoup €11 billion more every year, allowing them to be more resilient in times of economic uncertainty.

To get a better understanding of the proposal and the impact it will have on EU trade, we explore the three pillars of the EU’s new grand plan (VAT reporting obligations and e-invoicing, VAT treatment of the platform economy, and single EU VAT registration) and whether the proposal will be as revolutionary as we’re told it will be.