What is ViDA? How to future-proof your VAT set-up

VAT in the Digital Age (ViDA) is effectively a modernisation of the EU’s VAT system that every business owner needs to be aware of.

Running a small business is enough of a challenge without the complexities of managing your VAT obligations. Whether it’s understanding VAT thresholds, registering for VAT, getting the invoicing right, filing returns, or just general compliance, there’s a lot to get to grips with.

Over the past few years, however, there has been a huge effort towards taking advantage of developments in digital technology to modernise VAT systems and processes, particularly to align ongoing compliance obligations more closely with normal business processes.

There are important EU-wide changes to VAT coming down the line over the next few years in an attempt to modernise and standardise systems and processes, so now could be a good time to future-proof your VAT set-up.

What is ViDA?

VAT in the Digital Age (ViDA) is the name given to a set of measures aimed at significantly modernising the EU’s VAT system. First proposed in 2022, it was formally adopted by the EU Council in early 2025 with only a few minor changes.

There are three broad pillars to the package:

1. E-invoicing and digital reporting
2. Platform economy
3. Single VAT registration

1. E-invoicing and digital reporting

Electronic invoicing will become the default method for issuing invoices, following a structured format that enables automatic processing. They must be issued 10 days after the transaction, and the data digitally reported to Revenue straight after the invoice has been issued.

Those EU countries who have already implemented some form of e-reporting will be given more time put in place e-invoicing and digital reporting for domestic transactions that conform to the new EU standards, but all countries must have e-invoicing and digital reporting in place for cross-border transactions by July 2030.

In Ireland, the Revenue Commissioners have said they will introduce mandatory e-invoicing and digital reporting for domestic transactions, according to KPMG, but have not yet given a specific timeline.

2. Online platform economy

This pillar of ViDA affects online platforms and marketplaces. In a nutshell, platforms that provide short-term accommodation rentals and passenger transport by road will be deemed the suppliers of the underlying service – and therefore liable to charge the VAT – unless the underlying service provider gives their VAT number and declares to the platform operator that they will charge the VAT. The deadline for this change will be July 2030.

3. Single VAT registration

This pillar is intended to reduce the requirements for businesses supplying to different EU states to register for VAT there, mainly by expanding the EU’s One Stop Shop (OSS) system, which simplifies the process of VAT registration for businesses selling to multiple EU markets. By July 2028, the OSS will be extended to all B2C services.

Along with this, a special scheme for transfers of own goods will be introduced that will apply a mandatory reverse charge mechanism. This will be used when suppliers are not established for VAT purposes in the relevant member state, but their business-to-business (B2B) customer is.

What do these measures mean for my business?

The impact of the first pillar – e-invoice and digital reporting – will have the most widespread impact in that all businesses will need to review and update their current invoicing and VAT reporting procedures. The final deadline of July 2030 might seem a long way off, but if you sell to other EU countries, there is a good chance that those countries could implement e-invoicing and digital reporting rules well before then.

The second pillar specifically affects businesses operating platforms, but also the various small supplier businesses who don’t currently charge VAT, particularly in the passenger transport and accommodation sectors.

The third pillar is good news for exporters supplying to multiple EU countries who are not formally established and registered for VAT in those countries. It won’t completely eliminate the need to be registered, but it will give many businesses the opportunity to decide to maintain any current foreign VAT registrations or to maximise the use of the simplifications provided by this pillar, says KPMG.

Recommended steps for business

To aid the transition to digital reporting and electronic invoicing, PwC recommends that businesses should:

• Assess processes: Look at your current VAT and invoicing set-ups to understand what the transition to digital reporting and electronic invoicing means, and identify any gaps in systems, processes, data and employee skills.
• Start now: Get ready for adoption sooner rather than wait for the January 2030 deadline, as many EU and non-EU countries are already implementing digital reporting and e-invoicing measures.
• Understand Revenue’s requirements: Look at how the Revenue’s VAT modernisation, based on digital reporting, will affect domestic VAT rules and processes. Revenue published a report last year on a two-year consultation process on VAT modernisation.
• Align changes to business operations: Ensure new e-invoicing obligations are integrated with your existing commercial processes, such as credit notes, intercompany transactions, cash flow management and procurement. Update tax governance policies to reflect these changes and ensure all stakeholders are aware of the new processes and obligations.
• Explore new technologies: Invest in advanced technology and data strategies to streamline tax processes, improve data quality and ensure compliance. AI tools can automate tasks, reduce errors and provide valuable insights, leading to more efficient and accurate tax management.
• In terms of the changes that will simplify single VAT registrations, businesses should:
• Weigh up the benefits and costs: Evaluate the benefits of the simpler VAT registration regime and potential compliance cost savings, from which you can decide whether maintaining foreign VAT registration is necessary for local VAT recovery.
• Understand new obligations: Assess the impact of the new reverse charge obligations. The VAT simplification measures aim to reduce compliance burdens and deliver benefits, but VAT registration may still be necessary in some cases.

You can find more information on ViDA and its implications for businesses on the websites of Grant Thornton, PwC and KPMG.

Photo by Jakub Żerdzicki on Unsplash

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