On March 11, 2025, the Council of the European Union formally adopted the VAT in the Digital Age (ViDA) proposal, setting the stage for significant transformations in the European Union’s VAT system over the coming years. This milestone was reached after nearly three years of negotiations following the initial proposal on December 8, 2022. ViDA represents a major step toward modernizing VAT compliance, particularly for businesses engaged in cross-border transactions within the EU.
The reform package revolves around three main pillars: the implementation of digital real-time reporting and e-invoicing, the revision of VAT rules for the platform economy, and the single VAT registration system to ease compliance for businesses operating in multiple EU member states. While extensive analyses of ViDA’s broad implications exist, this article focuses on imminent changes expected before 2028 and the persistent VAT challenges businesses will continue to face even after full ViDA implementation.
Immediate VAT changes: what’s coming before 2028?
Key ViDA provisions will take effect in stages, with the platform economy and single VAT registration reforms set to apply from July 1, 2028, and the e-invoicing and digital reporting measures following on July 1, 2030. However, some changes will come much sooner, in 2025 and 2027.
E-Invoicing: no more waiting for approval
One of the first ViDA provisions to take effect will be about e-invoicing. Just 20 days after ViDA is published in the Official Journal of the European Union, member states will be empowered to mandate e-invoicing for domestic transactions without seeking prior approval from the European Commission. This means that individual countries can require businesses to issue, receive, and process electronic invoices as soon as they are ready to implement national regulations.
Will this trigger a rapid wave of e-invoicing mandates across the EU? Not necessarily. While the legal foundation for mandatory e-invoicing will be in place, practical implementation is another story. Member states that have already attempted large-scale e-invoicing rollouts—such as France and Spain—have encountered significant delays. The complexity of adapting business and governmental IT systems, training staff, and ensuring smooth interoperability between different invoicing solutions means that widespread adoption is unlikely to happen overnight. Businesses should stay alert but can reasonably expect a gradual transition rather than an immediate upheaval.
More clarity for low-revenue e-commerce sellers
A minor but notable change will come into effect in 2027, targeting small businesses engaged in cross-border e-commerce. Currently, the EU allows businesses with occasional cross-border sales of goods and digital services to private consumers to apply a simplification rule. Instead of charging VAT based on the customer’s country, businesses with total cross-border sales below €10,000 per year can continue applying the VAT rate of their home country.
However, the current law is ambiguous about whether this simplification and threshold apply when goods are shipped from a location outside the seller’s country of establishment. For example, if a business is based in Germany but fulfills orders from a warehouse in Poland, it’s uncertain if the simplification still applies. ViDA clarifies this issue by stating that the simplification will only be available when both the seller and the goods originate from the same member state. If the goods are dispatched from a warehouse in another country, the seller will need to charge VAT based on the customer’s location.
E-Mobility and simplified VAT reporting
Another important change set for 2027 will be the extension of the One-Stop Shop (OSS) scheme to cover intra-EU B2C (business-to-consumer) supplies of electricity, gas, heat or cooling energy. This development is particularly relevant for businesses operating electric vehicle (EV) charging networks across Europe.
Under current VAT rules, electricity is taxed where it is consumed, meaning that EV charging service providers must register for VAT in every EU country where they operate charging stations. Unlike e-commerce businesses that can use the OSS system to streamline VAT compliance, EV charging companies do not have such simplification available to them now.
With ViDA, EV charging businesses will be able to use the OSS system to declare and pay VAT for all their EU charging stations through a single registration. This eliminates the need for multiple VAT registrations, reducing compliance costs and administrative burdens. For businesses expanding their charging networks across multiple EU countries, this reform is a game-changer, making cross-border operations much more efficient.
VAT after ViDA: compliance challenges that remain
A patchwork of VAT compliance rules
The ViDA proposal is designed to harmonize e-invoicing and digital reporting rules across the EU, with the goal of simplifying VAT compliance for businesses operating in multiple member states. In theory, this sounds like a dream come true for businesses bogged down by varying national VAT rules. However, while the European Commission is striving for uniformity in cross-border VAT reporting, the fate of existing domestic compliance obligations—such as SAF-T (Standard Audit File for Tax) and real-time reporting—remains unclear.
ViDA will prevent member states from introducing additional transaction-based reporting requirements for cross-border sales covered by the new Digital Reporting Requirements (DRR). However, member states may still impose national-level reporting obligations for VAT return preparation, submission, or audits. In practical terms, this means that while ViDA introduces standardization for international transactions, each country will still have its own domestic VAT reporting requirements. Businesses will need to navigate a complex mix of both EU-wide and country-specific rules.
Another challenge is that ViDA does not address transmission protocols or technical specifications for submitting DRR data to tax authorities. Each member state will develop its own technology for real-time reporting of cross-border transactions. This could result in businesses facing increased compliance costs, as they will need to integrate with multiple reporting systems, each with its own set of requirements. It’s a bit like switching from a universal phone charger back to a world where every country has its own unique plug—technically standardized, yet frustratingly incompatible.
VAT refunds: the unresolved bottleneck
While ViDA expands the OSS system to simplify VAT reporting, it does not solve a long-standing problem: the cumbersome VAT refund process. The OSS allows businesses to report VAT for multiple EU countries through a single return, but it does not provide a way to deduct input VAT on business expenses incurred in other member states. This means businesses must still go through separate, often slow and bureaucratic, refund procedures to reclaim VAT paid abroad.
The problem is that VAT refunds require businesses to pre-finance their tax obligations while they wait—sometimes for months—for tax authorities to process their claims. The absence of an input VAT deduction mechanism within OSS may push businesses to maintain multiple local VAT registrations in order to claim deductions directly. Introducing an input VAT deduction mechanism into OSS could streamline the process, but it would also require one country to approve tax refunds that would be paid from another country’s budget—an idea that raises political and fiscal challenges.
Three OSS schemes and the need for further simplification
Currently, the EU operates three separate OSS schemes for VAT reporting on B2C sales: the Union OSS for intra-EU sales of goods and services, the non-Union OSS for services sold by non-EU businesses, and the Import One-Stop Shop (IOSS) for low-value goods imported into the EU. Non-EU businesses can use all three schemes, whereas EU-based businesses can only access Union OSS and IOSS. Managing multiple OSS registrations can be complex, and some businesses may find themselves caught in a bureaucratic tangle when trying to determine which scheme applies to which transactions.
ViDA expands the Union OSS to cover more B2C transactions, including domestic sales within a member state. For example, a UK business selling goods from a German warehouse to a German private individual will be able to declare VAT through the Union OSS rather than obtaining a German VAT registration. However, OSS does not extend to B2B (business-to-business) transactions, meaning that many businesses involved in both B2B and B2C trade will still need multiple VAT registrations. For instance, a UK company storing goods in a German warehouse and selling to both German and French businesses will still need a German VAT registration.
VAT number verification: a critical weakness
Under ViDA, distinguishing between businesses and consumers will become even more critical due to the expanded scope of OSS. Businesses must be able to verify whether their customer is a business or a private individual, as different VAT rules apply. Typically, this is done by checking the customer’s VAT identification number (VAT-ID). However, this process is not as simple as it sounds.
Currently, VAT number validation relies on the VAT Information Exchange System (VIES), an online database that allows businesses to verify VAT-IDs. Unfortunately, VIES has been reported to experience reliability issues, including periods of downtime, particularly during peak times such as VAT filing periods and year-end closures. This creates unnecessary risks for businesses, as an inability to verify VAT-IDs promptly may lead to incorrect tax reporting and potential penalties.
For ViDA to function effectively, enhancements to VIES would be beneficial. Improvements such as supporting bulk validation via APIs, ensuring real-time updates, and increasing overall system reliability could streamline VAT-ID verification processes. However, there are currently no concrete plans to improve the system, leaving businesses to work with a tool that is not always fit for purpose. It’s like having a car with a faulty fuel gauge—you can drive, but you’re never quite sure when you’ll run out of gas.
The ViDA transition: time to get ready
ViDA has been hailed as the most significant VAT reform in decades, and while it promises many simplifications, it also comes with major implementation challenges. According to European Commission estimates, businesses will need to invest approximately €11.3 billion to comply with the new DRR rules, while tax authorities will face additional costs of around €2.2 billion. These figures may not capture the full extent of financial and operational adjustments businesses will need to make.
Benjamin Franklin wisely noted, “By failing to prepare, you are preparing to fail.” While the core ViDA measures won’t take effect until July 2028 and July 2030, businesses should start assessing the impact now. Three to five years might seem like ample time, but for companies needing to adapt major business processes or implement new technology solutions, the clock is already ticking.
However, in reality, many businesses are still bogged down with today’s VAT compliance challenges, such as navigating new e-invoicing and digital reporting mandates. With so many immediate hurdles to clear, preparing for reforms set years into the future may not seem like a pressing priority but like a problem for “later.” But as any tax professional will tell you, “later” has a habit of arriving much sooner than expected. The clock is ticking, and businesses that start preparing now will be in a much stronger position when ViDA finally takes full effect.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of any organizations with which the author is affiliated.