EU Parliament Approves ViDA: VAT Reforms & Digital Tax Compliance

From the moment the members of the ECOFIN reached an agreement on the VAT in Digital Age (ViDA) proposal, all that was left was to conduct a series of formal procedural steps to complete the adoption of the legislative package.

Due to the fact that the European Parliament provided its opinion on the text of the ViDA in 2023, and that the final text was adopted on November 5, 2024, the Council decided to consult once again with the European Parliament, and ask for its official approval of the proposed text. With 589 for, 49 against and 10 abstentions, the European Parliament approved the final version of the text.

Impact on Tax Compliance and Implementation Deadline

As underlined by the European Parliament the ViDA reformatory package represents an action plan to develop a fair and simple taxation system that would fight against tax fraud more effectively and efficiently. To achieve this the ViDA introduces three changes to make the EU VAT system more suitable for the digital age. 

These three changes mean implementing a EU e-invoicing real-time digital reporting system, redefining specific VAT rules for digital platforms, and broadening a single VAT registration (OSS) for businesses engaged in cross-border transactions.

Under the adopted timeline of implementation the ratification of the ViDA package by the EU Council is expected in March 2025. The expansion of the OSS is set for July 2028, rules for platforms facilitating accommodation and transport services will be introduced first on a voluntary basis as from July 1, 2028, and then mandatory as from January 1, 2030, and digital reporting requirements and e-invoicing is expected to be fully implemented by July 2030.

Finally, the harmonization of national e-invoicing systems that were implemented before the EU standard that was introduced in 2024 and the intra-EU e-invocing system, must be completed by January 1, 2035.

Conclusion

The implementation of the ViDA package will bring more control for the EU and its Member States, while for businesses operating in platform economy, e-commerce, and cross-border supply mean shifting to a digital based tax compliance, which should ultimately lead to reduced administrative burdens and more simplified tax compliance.

Since the shift towards digital compliance is inevitable, and due to the fact that there is a sufficient amount of time before these rules become mandatory, businesses should take a proactive approach to prepare for new ways of fulfilling VAT requirements.

Source: European Parliament, VATabout