VAT in the Digital Age: Your Guide
VAT in the Digital Age (ViDA) will substantially change how trade within the EU is conducted and reported.
This proposal will ultimately digitize the European VAT system. Details regarding the changes may be complex. This guide will help you:
Keep track of the latest updates
Understand the potential impacts
Evaluate and benefit from these changes
What is VAT in the Digital Age?
Simply put, ViDA is a proposal that will enable EU countries to use technology to improve the current VAT system and better prevent fraud. When enacted, this will mean significant changes to how you operate in these countries.
As expected, changes of this size and scope are generating a lot of questions among businesses that conduct operations in the EU. Everything from process costs to technology needs is being evaluated as more information on ViDA becomes available.
To assist your business in navigating the uncertainty surrounding VAT in the Digital Age, Sovos has created this HUB, which will serve as your comprehensive resource for everything ViDA. Bookmark this page and stay up to date.
We will be maintaining and updating this HUB frequently as new information and assets become available.
Timeline of VAT in the Digital Age
The EU Commission first proposed the VAT in the Digital Age plan in January 2022. At that point, they issued a call for feedback, which ended in May 2022.
The Commission adopted the proposal on 8 December 2022 and issued a follow-up feedback period that ran until April 2023.
On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed to adopt the ViDA package.
Due to the extensive scope of changes, the proposal was forwarded to the European Parliament. On 12 February 2025, the Parliament approved the ViDA proposal, bringing it one step closer to official adoption. The proposal is now headed to the Council of the EU for final approval.
Once officially adopted changes will potentially begin impacting businesses from 2025 through until 2035.
eBook: What is VAT in the Digital Age (ViDA)?
This eBook provides you with a high-level overview of all things ViDA.
VAT in the Digital Age for digital reporting and e-invoicing
Mandatory e-invoicing and Digital Reporting Requirements (DRR) will be introduced for all B2B transactions across the EU. This means that all suppliers and customers will need to submit intra-community cross-border data to their local tax administration in real-time and near real-time after e-invoice issuance. Each tax authority will channel the data to a central database.
Member States will also be able to introduce mandatory e-invoicing for domestic transactions, without EU authorization, as soon as ViDA is adopted.
ViDA for the single VAT registration
The EU has proposed changes that will reduce the VAT compliance burden for companies that conduct business internationally. This measure will allow them to only register once across all EU countries reducing the burden and administrative issues of having to file in each country independently.
The platform economy and VAT in the Digital Age
The increasing popularity of the platform economy business model has created a new set of challenges for the VAT system. The ‘VAT treatment of the platform economy’ only relates to the supply of certain services via a platform.
How VAT in the Digital Age affects your business?
All invoicing and related processes will be impacted. This includes any accounts payable and accounts receivable processes and the associated information systems that support them. You can read the full Q&A with Christiaan van der Valk on how businesses will be impacted here.
How Sovos can help you with ViDA
ViDA, at its core, is about data. The EU is saying that after the fact tax filings that only provide insight into aggregated data for a month or longer are no longer going to be enough.
By leveraging technology, tax administrations can now receive authenticated transaction data detailing every sale and purchase straight from companies source systems. Tax is now an always on function, not an afterthought. For more, please speak with one of our experts.
Frequently Asked Questions
ViDA is an EU initiative to modernize and simplify the VAT system across the block, aligning it with the growth of the digital economy, technological advancements, and improving fraud prevention.
To modernize the EU VAT system, protect revenue and shrink the VAT gap which has been a major issue of economic concern for all countries within the EU. The 2024 Report on the VAT Gap released by the European Commission estimates that EU Member States lost €89.3 billion in Value-Added Tax (VAT) revenues in 2022.
ViDA is broken down into three main coverage areas:
- VAT digital reporting obligations and e-invoicing
- VAT treatment of the platform economy
- Single EU VAT registration
KPMG has estimated that the overall savings in administrative cost currently borne by taxpayers is €51 billion over a 10-year period between 2023 and 2032. The total cost of implementation for businesses and national administrations is estimated to be €13.5 billion for the same period.
The EU Commission estimates that moving to e-invoicing will help reduce VAT fraud by up to €11 billion a year and bring down administrative and compliance costs for EU traders by over €4.1 billion per year over the next ten years.
Cross-border transactions between EU countries will be subject to mandatory e-invoicing and a new real-time reporting with ViDA (Digital Reporting Requirements – DRR), replacing the current requirements for a recapitulative statement.
Additionally, ViDA will build on the already existing ‘VAT One Stop Shop’ model. This will allow businesses selling to consumers in other Member States to register only once for the entire EU, even when moving stock to another Member State for future direct sales to consumers. Businesses will be able to fulfil their VAT obligations via a single online portal in one single language. Estimates show that this move could save businesses, especially SMEs, some €8.7bn in registration and administrative costs over ten years.
