We keep hearing about ViDA or ‘VAT in the Digital Age’ in the context of e-invoicing. But what exactly does it involve, why is it so important and what does it mean for businesses in practical terms? Find out more in this blog.
4 min reading time
The European Commission introduced the term ViDA in December 2022. It stands for ‘VAT in the Digital Age’.
ViDA is a package of reform measures to modernise VAT administration in the EU by digitizing and simplifying it. The objective is to increase transparency, combat fraud and reduce the administrative burden on businesses. Furthermore, ViDA should provide a solution for the VAT challenges caused by the platform economy (the supply of goods and services via digital platforms).
Currently, there is a huge gap between the VAT that EU countries should collect and the VAT they actually do collect. According to a European report, in 2023, the VAT gap for all EU countries together amounted to no less than 61 billion euros in lost VAT revenues. In 2020, that figure was even higher at 99 billion euros. Conservative estimates suggest that about a quarter of the missing revenues can be attributed directly to VAT fraud.
The introduction of ViDA should enable EU countries to collect up to 18 billion euros more in VAT revenue annually, including 11 billion euros thanks to anti-fraud measures. In addition, the measures should make it easier for businesses, particularly SMEs, to grow.
ViDA is based on three main pillars:
Businesses will only have to register in one EU member state for cross-border trade. This will simplify VAT obligations and reduce the number of duplicate registrations.
Thanks to automated VAT returns, European businesses will experience fewer administrative burdens. They will also receive VAT refunds sooner.
These benefits do come with an adjustment for businesses because to enable VAT returns to be filed in real time, e-invoicing (the digital exchange of invoices as structured files) will be mandatory for businesses.
The European Council gave the final green light to the ViDA package of measures on 11 March 2025. These measures will be implemented in phases from 2028 to 2035. EU member states will still need to implement the directives in their national legislation.
ViDA, or VAT in the Digital Age, is a far-reaching reform to modernise the VAT rules within the EU. While this offers major benefits for both authorities and businesses, it also introduces new obligations.
It means that European businesses will need to prepare for these changes in good time to benefit fully from a more efficient and transparent VAT system in the future.
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