VAT in the Digital Age (VIDA) package finally adopted

Pillar one: Digital reporting

The EU aims with pillar one to transition from hardcopy (and digital) invoicing to mandatory electronic invoicing (e-invoicing) and (near) real-time digital reporting for VAT purposes. The primary purpose of this transition is to combat VAT fraud. From April 14 2025, EU MS will have the option to implement e-invoicing and e-reporting requirements for domestic supplies.

The EU VAT Directive stipulates that EU MS must treat e-invoices as invoices, putting them on equal footing with paper invoices. However, the issuance of an e-invoice is currently subject to acceptance by the recipient. As recently noted by the EU VAT Committee, such provision restricts EU MS from putting in place the mandatory use of e-invoices.

In light of the foregoing, one of the changes enacted by VIDA is that the usage of e-invoicing will no longer be subject to acceptance by the recipient as of January 1, 2030. This means that following such date businesses will no longer be required to ask their counterparties to accept receiving an e-invoice. Furthermore, from July 1, 2030, the following changes will apply:

• E-invoicing will become the standard for EU cross-border business-to-business (B2B) and business-to-government (B2G) supplies. A new definition for e-invoice will be introduced requiring the invoice to comply with the EU standard (EN16931). This means that the e-invoices must be in a structured format and that unstructured formats (e.g. a PDF) will not qualify as an e-invoice. Hybrid invoices (i.e. a PDF with embedded structured XML) should however be acceptable as an e-invoice.
• The e-invoice must be issued within 10 days of the date of the supply (or date of payment, if earlier). Certain data from the cross-border invoices must be reported in real time (i.e. when the e-invoice is or must be issued) to the relevant tax authorities and within five days if a self-billing arrangement is used. As a result, EC sales listings, as is currently in use for intra-EU supplies of goods and services, will no longer be required.
• The use of a summary invoice will under conditions be permitted, provided the supplies are made in the same calendar month (i.e. monthly summary invoices). These monthly summary invoices must be issued within 10 days following the end of the month.
• EU MS will be allowed to prescribe that holding a valid e-invoice is required to be entitled to deduct/reclaim VAT.
• Additional data items are to be included on the e-invoice such as an indication if the triangulation simplification is used, payment details and a reference to the original invoice in case of a corrective invoice. As of January 1, 2027, the invoice must include an indication if the cash accounting scheme is applied.

EU MS which have already implemented digital reporting for domestic supplies before 2024 (e.g. France, Italy, Poland) must in principle converge with EU standards by January 1, 2035. As such, it is expected that until such time, there may not be a full harmonization across the EU with varying local e-invoice and reporting obligations.

Pillar two: Updated VAT rules for the platform economy

Currently, ‘deemed supplier’ rules apply under conditions to electronic interfaces (e.g. an online platform) where goods or electronically supplied services (e-services) are supplied. From July 1, 2028 (or later, see below), a deemed supplier rule is introduced for electronic interfaces through which the supply of short-term accommodation rental (up to 30 consecutive nights) and/or passenger transport by road is facilitated.

Currently, the supply of the accommodation c.q. transport services would be treated as a supply by the ‘actual supplier’ (e.g. the driver or hotel operator) directly to the consumer. With the application of the deemed supplier rule, the service is deemed to have been received and supplied via the electronic interface. Taking a booking of short-term hotel accommodation via a platform as an example, the deemed supplier rule entails that the hotel operator is deemed to supply its service to the platform and the platform has subsequently supplied the service to the consumer.

However, the deemed supplier rule may not apply if the supplier of the accommodation or transport service provides to the electronic interface its VAT number (from the EU MS where VAT is due) and declares it will charge VAT due on the supply.

EU MS may opt to exclude from the deemed supplier rule suppliers of the accommodation or transport services which make use of the small business exemption. In addition, EU MS can opt to postpone the introduction of this deemed supplier rule until January 1, 2030. We understand so far only Spain has announced its intention to request such postponement; other EU MS may follow suit.

Pillar three: Single VAT registration

With pillar three, the EU aims to reduce the compliance burden for companies conducting business in different EU MS. To facilitate such reduction, the following changes will be made:

• The so-called One Stop Shop (OSS) currently allows for the reporting and remittance of certain B2C supplies across the EU via an OSS registration in a single EU MS. From July 1, 2026, the OSS will be extended to include additional B2C supplies including domestic supplies and installation c.q. assembly supplies. From January 1, 2027, the supply of electricity, natural gas and other energy-related supplies will qualify as a distance sale, thereby allowing the use of the OSS.

• Currently, the movement of own goods between EU MS can qualify as a deemed intra-Community supply which triggers VAT registration and reporting requirements. One of the exceptions where a movement of goods between EU MS would not qualify as a deemed intra-Community supply is in case of the call-off stock (COS) scheme. From July 1, 2028, the OSS will be extended to allow for the reporting of this movement of goods between EU MS. As this will mean that the COS scheme will become redundant, it will be phased out starting January 1, 2027 until July 1, 2029.

• A reverse charge mechanism (RCM) results in suppliers shifting the burden of VAT to their customer. At present, some EU MS have been using the option to allow for a RCM for certain domestic supplies. From July 1, 2028, the domestic RCM will become mandatory for all B2B supplies of goods and services by suppliers who are not established or registered in the EU MS where the VAT is due if the customer is VAT registered. EU MS may opt to apply the RCM also in such situations where the customer is not VAT registered. The RCM would not apply if the margin scheme is used (e.g. margin scheme for second hand goods) or the supplies concern a work of art.

Key takeaways

While some of the VIDA changes are still years away, businesses can and should already start preparing for the various new compliance-related rules of the first pillar (e-invoicing and digital reporting). While VIDA is tax-related, other stakeholders would very likely need to be involved with such preparation; this includes the accounting and IT functions ensuring all systems and processes are fully compliant in time with the various e-invoicing and automated reporting obligations (pillar one). Furthermore, until there is full harmonization, businesses should be aware and keep track of the varying local e-invoicing and e-reporting rules.

The introduction of the deemed supplier rule for accommodation rental and transport services (pillar two) would be relevant mostly for businesses operating in this sector. For electronic interfaces facilitating such services it is crucially important to ensure that the rule is correctly applied as it otherwise could result in VAT liabilities and obligations for the platform (e.g. applying the correct VAT treatment and collecting sufficient information on the customer).

Lastly, while the pillar three (single VAT registration and reverse charge) could reduce the VAT compliance costs (e.g. by VAT deregistration in some EU Member States), businesses may still prefer to retain local VAT registrations for various reasons. A case-by-case analysis is thus recommended to ascertain whether proceeding with a VAT deregistration is the preferred approach.