ViDA adopted: Everything you need to know about the new e-invoicing and reporting obligations

Everything revolves around ViDA!

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ViDA, short for "VAT in the Digital Age", is a key EU initiative for the fundamental modernization of VAT law in the digital age. The initiative, which is particularly important for small and medium-sized enterprises (SMEs), aims to simplify VAT, especially in cross-border trade and e-commerce, and adapt it to current challenges.

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The latest agreements set out concrete timetables for implementation, which will bring far-reaching changes for companies in the EU. These agreements have clearly specified the direction and timetables for ViDA.

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But what exactly does this mean for companies? In this article, we take a closer look at the key aspects of ViDA - and what SMEs in particular should do to prepare for the upcoming changes in good time.

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ViDA: Why modernization is necessary

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The current VAT system is facing major challenges in the digital age. Cross-border transactions, e-commerce and new business models make the correct collection and administration of VAT more difficult. The resulting VAT gap - also known as the VAT Gap - has a significant impact on EU economies and leads to a loss of revenue for public services.

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To meet these challenges, ViDA wants to adapt the VAT system to the realities of the digital economy. The main objectives of ViDA are:

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• Adapting to the digital economy: VAT laws should keep pace with the business models and transactions of the digital age.
• Reducing the VAT gap: The annual gap of 89 billion euros(as of 2022) is to be reduced by combating VAT fraud and evasion.
• Easing the burden on SMEs: Complex regulations are to be simplified in order to facilitate compliance and reduce the administrative burden.
• Combat VAT fraud more effectively: VAT fraud, including carousel fraud and tax evasion, is to be detected and prevented more effectively through improved digital reporting and controls.

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Core components of ViDA and updated schedules

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Now that we have looked at the objectives of ViDA, let's take a look at the specific main components and the updated timetables:

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Autonomy of the Member States with regard to electronic domestic invoicing:

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• Member States will be given more autonomy in introducing national e-invoicing systems.
• A prior exemption from the European Commission is no longer required.
• Companies must be ready to process e-invoices as soon as a Member State introduces such a system.
• This comes into force 20 days after the formal adoption of ViDA.

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Mandatory electronic invoicing for intra-Community deliveries:

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• E-invoicing in accordance with the EN 16931 standard will be mandatory for intra-Community transactions from July 1, 2030.
• Member States have the option of using alternative standards for national transactions.
• The deadline for issuing invoices is extended to 10 days after the taxable event.

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Digital Reporting Requirement (DRR) for intra-Community B2B transactions:

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• From July 1, 2030, companies must report intra-Community B2B transactions digitally. This digital reporting obligation (often referred to as e-reporting) will be introduced as a harmonized European-wide requirement.
• Binding instruments are prescribed for the transmission of invoice data.
• Countries with existing systems must adapt by January 1, 2035. 

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Improvements to the One-Stop-Shop (OSS):

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• The One-Stop-Shop system (OSS), which enables companies to submit their VAT returns for several European countries from a single location, will be expanded and strengthened.
• Specifically, this means updating the thresholds for distance selling and extending the scope of application of the OSS in 2027 and 2028.

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Platform economy:

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• New VAT obligations are being introduced for digital platforms. The platform economy refers to business models in which digital platforms act as intermediaries between providers and customers, such as Airbnb for accommodation or Uber for transportation services.
• A voluntary phase will begin in July 2028, with mandatory application from January 2030.

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ViDA: Impact on companies and SMEs

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The introduction of ViDA will significantly change business practices in the EU, in particular the processes of invoicing, transaction reporting and VAT payment. Small and medium-sized enterprises (SMEs) in particular, which often struggle with limited resources and complex regulations, will have to adapt to significant changes. Early preparation is therefore crucial.

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In concrete terms, ViDA means for companies:

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• More efficient tax processing: Clear and harmonized VAT rules reduce the administrative burden.
• Facilitated cross-border trade: Harmonized regulations improve market access and reduce bureaucratic hurdles in EU-wide trade.
• Fairer competitive conditions: Modernized and fair taxation creates a level playing field for all companies and strengthens the competitiveness of SMEs.
• More efficient processes through e-invoicing and e-reportingE-invoicing and digital reporting increase efficiency and accuracy and make it easier to comply with regulations. By automating processes, SMEs can save time and resources.

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It is advisable to deal with the new requirements at an early stage and implement the necessary systems and processes in order to benefit from the advantages of ViDA.

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ViDA: E-invoicing and e-reporting against fraud

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ViDA not only revolutionizes VAT rules, but also plays a decisive role in combating VAT fraud. The introduction of electronic invoicing and the digital reporting obligation are key elements of this strategy.

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E-invoices go far beyond the mere digitization of paper invoices. They consist of structured data that enables faster data exchange and more efficient verification. This not only speeds up processing, but also makes it easier to detect irregularities and attempted fraud. The digital reporting obligation also enables the transmission of transaction data in near real time, allowing tax authorities to respond more quickly to suspicious activity.

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In addition, strengthening the one-stop store system helps to combat fraud by simplifying compliance and minimizing sources of error and fraud. The new obligations for the platform economy also close loopholes that were previously used to circumvent VAT.

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For companies, this means that they have to adapt their systems and processes to the new requirements. The switch to e-invoicing and digital transaction messages is not only a question of compliance, but also offers the opportunity to benefit from the numerous advantages of digital administration, such as optimizing internal processes, reducing costs and increasing efficiency. It is therefore advisable to deal with the technical and organizational aspects of these changes at an early stage.

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Practical steps for companies

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To optimally prepare for the introduction of ViDA and take advantage of the associated benefits, you should consider the following practical steps:

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• Stay informed: The developments surrounding ViDA are dynamic. It is therefore essential to keep up to date with the latest changes, directives and deadlines. Subscribe to newsletters from relevant institutions, follow industry experts and regularly consult official EU sources to ensure you don't miss any important information.
  
  
• Evaluate current systems: Analyze your current invoicing and reporting systems thoroughly. Check whether they meet the future requirements of ViDA or whether adjustments or upgrades are necessary. Consider both technical and procedural aspects.
  
  
• Integration planning: Create a detailed plan for the integration of the e-invoicing and e-reporting solutions. Define clear goals, responsibilities and timelines. Work closely with your IT and finance departments to ensure a smooth implementation.
  
  
• Training courses: Train your employees on the new processes and requirements in good time. Make sure that everyone involved understands the changes and knows how to apply the new systems and rules. Provide regular training and updates to keep knowledge up to date.
  
  
• Seek expert advice: Consult tax advisors and technology providers who are familiar with ViDA. These experts can help you understand the complex requirements, select the right solutions and optimize your implementation.

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The course is set

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As we have seen, ViDA is modernizing the VAT system for the digital age and introducing mandatory e-invoicing and DRR for intra-Community transactions. The introduction for national transactions is left to the individual member states. All these innovations within the framework of ViDA mean considerable changes for companies. Early preparation is therefore essential to ensure a smooth transition and compliance with the new regulations.

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Switching to ViDA can be challenging, but with the right tools, companies can reap the benefits early on. With Banqup, you can convert your national and cross-border invoices to e-invoicing in no time at all. This also includes B2G e-invoicing in Germany. Thanks to our integrated Peppol connection, you are ideally equipped. Sign up for your free 30-day trial today and get started right away!