What is ViDA? VAT in the Digital Age initiative Q&A

What is ViDA?

Why is the VAT in the Digital Age EU initiative necessary?

Who does the ViDA initiative apply to?

What changes will VAT in the Digital Age bring to invoices?

Does ViDA only affect cross-border transactions?

Will the ViDA proposal change current CTC models in the countries that implemented the e-invoicing mandate?

VAT in the Digital Age timeline

What are the key benefits of the ViDA proposals?

How to select a service provider with ViDA requirements in mind?

How can Pagero Help?

VAT in the digital age (ViDA) is a set of regulations introduced by the EU Commission to update the current VAT system to adapt it for the digital age. It aims to ensure that VAT is collected fairly and efficiently for businesses that sell goods or services online to customers in the EU, regardless of whether they are based within or outside the EU.

The current VAT system was designed for traditional businesses and does not adequately address the challenges of the digital economy. Moreover, VAT return reports are currently prone to criminal VAT fraud, as the data for the intra-EU trade transactions is inspected months after their occurrence, which makes it too slow for Member States to keep up with tax evasion. ViDA seeks to ensure fair and efficient VAT collection within the EU.

ViDA applies to businesses that sell goods or services to customers in the European Union, regardless of whether they are based within or outside the EU. This includes online marketplaces, platforms, and intermediaries that facilitate sales between sellers and buyers.

Under ViDA, businesses will need to include additional information on their invoices to comply with the new regulations. This includes the VAT identification number of the supplier and the customer, the place of supply, and the VAT rate applied. In addition, businesses that use online marketplaces or platforms to sell their products or services will need to ensure that the correct VAT is charged and collected by the platform.

In addition to a landmark reform of e-invoicing, the Commission also proposes a unified Digital Reporting Requirements (DRR) schema, which will become mandatory for intra-Community and optional for domestic transactions as of 2028. 

No, ViDA applies to all sales of goods or services to customers in the EU, whether they are crossborder or not. This means that businesses that are based in the EU and sell to customers in their own country will also be affected by the new regulations.

Member States will be given the option to introduce DRR for transactions not covered by the intra-Community DRR (i.e., domestic supplies of goods and services). Domestic DRR systems’ features should be aligned with this for intra-Community DRR. As each Member State will have to implement a DRR system for intra-Community transactions, we anticipate that many, if not all, will want to leverage this investment and extend its applicability to domestic transactions, too.

The short answer is yes, but it will depend on the current status and implementation of e-invoicing/DRR. Each Member State must ensure that the implementation aligns with the ViDA proposal.

In our whitepaper, we present a high-level overview of the EU Member States with e-invoicing and DRR-like requirements, and provide a prediction as to how these countries may be affected by VAT in the Digital Age initiative.

Here are some key milestones and important dates related to the ViDA initiative:

By the year 2025, predictions indicate that nearly 80% of organizations across the globe will need to switch to electronic invoicing, either due to legislative mandates or as necessitated by their business partners. With the forthcoming mandates in countries like France, Poland, and Spain, this trend is evident.

But where does ViDA fit into this evolving landscape, and what implications does it have for businesses both in the immediate and distant future?
A closer look at the ViDA specifications reveals three primary advantages for businesses:

It's crucial for businesses to weave the ViDA proposal into their digital evolution plans. Otherwise, they might find themselves lagging and facing challenges in staying competitive when the proposal takes effect.

As the ViDA-driven changes loom on the horizon, businesses can adopt multiple strategies. Yet, the most significant benefits likely come from collaborating with a service provider proficient in supporting their clients in all impacted regions using adaptable technology. This not only ensures operational consistency but also leverages expertise in global regulatory compliance.

Thus, key financial decision-makers, be it CFOs, Heads of Finance, or Tax Managers, should ponder: is there a single service provider adept at navigating the intricate requirements of ViDA and other global mandates?

Through Pagero’s open network, we’ve helped businesses streamline their order-to-cash, purchase-to-pay and transport management processes while ensuring we meet global requirements when it comes to compliant transactions of documents, unlocking the full potential of accurate and reliable business data. This is achieved regardless of location, industry, size or ERP landscape through a single, scalable connection.

For businesses keen on understanding how to align with ViDA requirements and ensuring preparedness against a surge in global e-invoicing mandates, we invite you to connect with us. If you're in the midst of strategizing a transformational project, our team of in-house experts is here to guide.

More detailed information regarding important dates can be found in the whitepaper.

In conclusion, the ViDA initiative is a crucial step towards adapting the current VAT system for the digital age. By ensuring that VAT is collected fairly and efficiently, the initiative helps to level the playing field for businesses and prevent revenue loss for governments. It is important for businesses that sell goods or services online to customers in the EU to understand the implications of VAT in the Digital Age and ensure compliance to avoid potential penalties.

 

This text was originally published 11 April 2023 and last updated 15 November2023.

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