Key ViDA updates for e-commerce and marketplaces

The recent updates to the VAT in the Digital Age (ViDA) proposal by the Council of the European Union bring important changes for businesses operating across Europe, particularly in e-commerce and digital marketplaces. These changes introduce sweeping reforms to VAT reporting, platform responsibilities, and registration processes. Gunjan Tripathi, a tax technology thought leader at Vertex, examines how these developments impact the digital economy and how businesses can leverage advanced solutions to stay compliant.

The ViDA proposal, amended by the European Council on November 5, 2024, marks a substantial shift in VAT compliance, with implementation phases extending through 2035. These amendments aim to streamline VAT administration across the EU, reflecting the evolving nature of digital commerce.

Platform economy adjustments: deemed supplier obligations

One of the most significant aspects of the ViDA update involves new "deemed supplier" obligations. Online marketplaces facilitating transactions for short-term accommodation rentals and passenger transport services will now be held responsible for collecting VAT on behalf of non-VAT-registered suppliers. This extension of liability to platforms means that marketplaces as facilitators need to revamp their processes to ensure they are accurately capturing supplier information and fulfilling VAT obligations.

Vertex’s solutions for eCommerce and Marketplaces, including tools like Invoice IQ and VAT Validator, are designed to help platforms navigate complex VAT responsibilities, such as determining transaction liability. These tools can enable marketplaces to support their increasingly complex requirements, minimizing the risk of costly errors and keeping transactions compliant with EU and countries who have implemented Marketplace regulations.

Expanding the single place of registration

The updates also modify the “single place of registration” concept, specifically through expansions to the One Stop Shop (OSS) scheme. Businesses involved in cross-border transactions will now find more streamlined processes but must also manage new threshold requirements and adhere to destination country tax obligations.

Vertex’s various solution options provide enhanced OSS functionality, allowing businesses to meet reporting obligations across multiple jurisdictions. This ensures compliance for businesses navigating cross-border e-commerce by simplifying registration and streamlining VAT calculations.

Enhanced digital reporting requirements and the reverse charge mechanism

As ViDA introduces expanded OSS reporting obligations, including categories like intra-Community gas and heat supplies, businesses need to update their transaction reporting to include these details. Additionally, new requirements extend the reverse charge mechanism, meaning that VAT liability shifts to the recipient for certain cross-border B2B transactions. This places a greater need on businesses to accurately track transaction types and understand VAT liability in each Member State as both sellers and buyers.

Vertex’s VAT compliance solutions are designed to simplify the reporting and documentation required to stay compliant with these obligations. By automating VAT reporting, businesses can more effectively manage the increased specificity required by ViDA, freeing up resources that would otherwise be dedicated to complex compliance tasks.

Preparing for a phased implementation

The phased rollout of these changes, extending to 2035, requires businesses to prepare for an extended period of compliance adjustments. The introduction of structured electronic invoicing standards, expanding definitions, and digital reporting requirements will all require significant shifts in VAT processes over the coming years.

Vertex’s technology solutions provide a future-ready approach, adapting to each stage of the ViDA proposal as it comes into effect. With tools that simplify real-time reporting, automate VAT calculations, and streamline compliance management, Vertex enables businesses to stay agile amidst regulatory change.

As the European VAT landscape evolves with ViDA, Vertex remains committed to supporting businesses in e-commerce and digital marketplaces with scalable, efficient solutions. Visit my previous blog for further insights into the ViDA initiative and its implications for global tax compliance.