On 5 of November 2024 the European Council has adopted the VAT in the Digital Age (‘VIDA’) package. This means that significant changes will be made to the EU VAT system starting from 2027.

In short, VIDA applies to all businesses that sell goods and/ or services in the EU, irrespective of whether they are established in an EU Member State or not. The three main pillars of VIDA are:

1. Introduction of Digital Reporting Requirements – modernize the process of invoicing and move to mandatory e-invoicing on intra-EU business to business transactions

1. Electronic invoicing will become the default system for issuing invoices and eventually holding a valid e-invoice will become a material VAT recovery requirement. However, Member States will be allowed to authorise other invoices for domestic supplies.
2. Invoices that have been issued, transmitted and received in electronic format that allow for automatic electronic processing will be considered to be electronic invoices and they should in principle comply with the European Standard (EN16931) and its list of syntaxes (other formats are allowed as long as these data formats ensure interoperability with the European Standard). Member States will not be allowed to request any additional data, to avoid unnecessary administrative burden. Summary invoices will be allowed (however, Member States may exclude this possibility in certain fraud sensitive sectors).
3. The electronic invoices for cross-border transactions must be issued no later than 10 days following the chargeable event.
4. The current recapitulative statements (EC sales listings) will be replaced with DRR for cross-border supplies of goods and services. The reporting of the invoice data by the supplier needs to happen in real time (i.e. at the time the invoice is issued or should have been issued). However, in situations of self-billing or reporting by the buyer, the buyer needs to transmit the information no later than five days after the invoice is issued or should have been issued.
5. Although real-time reporting of domestic transactions is not required under the EU VAT Directive, should a Member State opt to implement such a system, it will need to align with the digital reporting requirements for cross-border supplies. Member States can decide that holding an electronic invoice issued in compliance with the required standard becomes a substantive condition to be entitled to deduct or reclaim the VAT due or paid.
6. Member States will not be allowed to impose any additional general transaction-based reporting requirements, but may keep national measures to prepare/submit VAT returns for audit purposes, e.g., SAF-T requirements and reporting obligations which are not general such as cash registers.

The requirements above will apply as from 1 July 2030 with specific rules for Member States with domestic digital real time transaction-based reporting obligations already in place or announced on 1 January 2024 (who will have to converge their national systems into the ‘EU model’ by 1 January 2035).

2. Introduce a deemed supplier rule for platforms that facilitate short-term accommodation rentals and passenger transport services by road

3. Reduce the need for multiple VAT registrations through expansion of the One-Stop Shop, the introduction of a specific scheme for the transfer of own goods and a mandatory application of the reverse charge mechanism.

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