ViDA : key changes to VAT and their impact on EU business
The European Union reached a major milestone in tax policy when the ECOFIN Council approved a package of measures aimed at modernising VAT rules, known as the VAT in the Digital Age (ViDA) Directive in early November 2024. This comes after almost two years of intense negotiations and despite obstructions from several member states. The package represents an important step forward towards digitisation, the fight against tax fraud, and the simplification of administrative obligations for taxpayers.
Digital reporting and e-invoicing
One of the key elements of the new package is the introduction of a digital VAT reporting system in (near-) real time through electronic invoicing. This system is to be fully implemented by 2030 for intra-community (EU) transactions, replacing EC sales lists. By 2035 at the latest, the changes will also affect the reporting of domestic transactions, replacing VAT ledger statements. This will allow for the faster and more accurate tracking of the flow of goods and services as well as of the payments for these transactions. Businesses will be required to automatically report transaction data to their tax authorities, which will improve the quality of data available to the tax authorities and thus help in the fight against VAT fraud.
Following the agreement of the ECOFIN Council, the Standard EN 16931 common template will be used for e-invoicing. The deadline for uploading an e-invoice into the system has been extended from the original proposal to 10 days after the transaction takes place or payment is received (whichever is earlier). The possibility to issue summary tax documents monthly will remain, under certain conditions. Summary tax documents will have to be uploaded into the system within 10 days after the end of the calendar month.
Digital (online) platforms
Another important change is the introduction of the deemed supplier concept for online platforms. This is intended to ensure that platforms do not only charge VAT on the service they provide (the service of linking supply and demand - i.e. the online platform service) but also on supplies “purchased” from individual providers of the services offered, even from VAT non-payers. The scheme is intended to apply to the provision of short-term accommodation rentals and passenger transport services to ensure a fairer competitive environment between traditional and digital services and to increase VAT collection in the digital economy sector.
Extension of the One-Stop-Shop for VAT purposes
The new rules also extend the One-Stop-Shop scheme for VAT purposes (e.g. to include transfers of own goods between EU member states). This will make it easier for businesses to register (only one registration will be necessary instead of having to register for VAT in each member state) and will simplify the payment of VAT under this scheme for selected transactions (goods and services) across EU member states. This will reduce the costs incurred by taxable persons to register for VAT in different countries.
Further context and implementation in the Czech Republic
The position of the Ministry of Finance of the Czech Republic has been rather passive. According to information from tax administration representatives, the Czech Republic will implement the ViDA only when mandatory; voluntary implementation before the deadline is not expected. The whole package of measures will now be discussed by the European Parliament. Once formally adopted and published in the Official Journal of the EU, the new rules will enter into force.
These measures are expected to significantly simplify VAT administration and boost the competitiveness of EU businesses in the digital age. However, the phase of setting-up e-invoicing will be financially and technically challenging for taxable entities and for tax administrations. We should see single EU registrations from 2027, new rules for the platform economy from July 2028, and digital reporting from 2030.