‘VAT in the Digital Age’: the new ViDA rules are coming!

On 5 November 2024, ECOFIN (the European Council on Economic and Financial Affairs) adopted the proposal ‘VAT in the Digital Age’. The new rules are intended to make the levy of VAT in the EU simpler and more resistant to fraud.

Agreement finally reached after repeated delays due to political disagreement

The ‘VAT in the Digital Age’ proposal (also known as ViDA) dates back to 2022. However, political disagreement led to multiple changes and repeated delays. This is striking because there is broad agreement in Europe about the weaknesses of the current VAT system, which have been the subject of debate for decades.

VAT fraud in particular is a thorn in the European Commission’s side: every year, cross-border tax evasion structures (including ‘carousel fraud’) result in billions in losses for the treasuries of the EU and its member states. Furthermore, the current rules are complex and confront companies with a relatively high administrative burden.

With the package of new policies, the EU now aims to overhaul the VAT system to solve these problems. Although the policy package still has to be presented to the European Parliament for consultation, this ECOFIN decision marks the most important step. We therefore expect final adoption of the proposed measures soon.

Core of the new VAT rules

• ‘Deemed supplier regime’ for the platform economy: (online) platforms such as Airbnb and Uber will be required to charge VAT to the end consumer if the service provider (accommodation, transport) does not do so itself.
• E-Invoicing: from 1 July 2030, electronic invoicing will become the general rule in the EU.
• Digital Reporting: new reporting and invoicing rules to make the VAT system more fraud-resistant will apply from 1 July 2030. In short, from that date onwards, business owners will have to send transaction data to the government.
• Single VAT Registration: to simplify the system, the number of VAT registrations required from businesses is to be reduced. For example, there will be a mandatory reverse charge mechanism for domestic B2B deliveries by suppliers not established and registered in the EU member state of supply to customers registered there for VAT purposes.

If you would like to know more about ViDA, please read this article by our Baker Tilly International network partners in the Netherlands.

Prepare your business for ViDA in time

The most far-reaching changes will not take effect until 1 July 2028 at the earliest. That may seem far away, but don’t underestimate the preparation required. For instance, in many cases business processes such as invoicing and ERP configuration will have to be adjusted to comply with the new e-invoicing rules. The new digital reporting requirements will also quite a few business challenges.