The digitalization of the global economy has necessitated a revision of VAT systems. Recognizing the challenges of cross-border e-commerce and the digital economy, the European Union has initiated a comprehensive reform of its VAT rules. The ECOFIN agreement on 5 November marks a milestone in this effort, introducing a series of measures aimed at simplifying VAT compliance, ensuring fair taxation and combating VAT fraud. However, key pillars are facing delays.
Key updates and delays to the VAT reforms:
Platform economy reforms brought forward to 2030: The deemed supplier rules, originally scheduled for 2027(Pillar 2), will now be introduced in January 2030, with an optional voluntary phase starting in July 2028. This measure will designate short-term accommodation and ride-sharing platforms as VAT taxable persons, ensuring tax parity with traditional businesses. Concerns from member states prompted the delay, and optional ten-year exemptions for suppliers with a VAT ID or small businesses under a new SME VAT scheme.
Single VAT Registration (SVR) delayed to 2028: Originally scheduled for earlier implementation, Single VAT Registration (Pillar 3) will now start in July 2028. This reform will allow e-commerce businesses to reduce the burden of VAT registration in multiple Member States, benefiting SMEs by centralizing VAT registration.
E-invoicing and digital reporting: A key focus until 2030
July 2030 deadline for digital reporting and e-invoicing (Pillar 1): From July 2030, mandatory Digital Reporting Requirements (DRR) will apply to intra-community transactions, including B2B services and energy supplies. With this requirement, structured e-invoices based on the EU’s EN16931 standard will replace paper invoices for DRR transactions. The EU expects this to strengthen compliance and reduce the annual €61 billion VAT gap. Member States will retain the flexibility to design the technical aspects of reporting.
E-invoicing Harmonization Postponed to 2035: The deadline for aligning domestic e-invoicing systems with ViDA standards has been extended from 2027 to January 2035. This delay takes into account the investments that countries such as Italy and France have made in existing e-invoicing systems, allowing them to adapt over a longer period.
Domestic transaction reporting schemes will continue to be an option for EU member states, allowing systems like SAF-T for internal reporting to remain in use. A new central database, Central VIES, will be managed by the European Commission to track DDR transactions, taxpayer identification, and VAT numbers. This system will increase transparency, allowing customers to see intra-EU transactions related to their VAT numbers, which helps prevent unintended involvement in VAT fraud. The functioning of the DRR system and e-invoicing will be reviewed by 2033.
Mandatory structured e-invoicing will apply to all DRR transactions, following Directive 2014/55/EU, though paper and hybrid formats may still be used for domestic transactions. The EN16931 e-invoice standard will be updated by July 2025, and e-invoices must undergo basic validation and meet technical requirements through accreditation schemes. These e-invoices must be issued within specific time frames (such as 10 days after the chargeable event or within 5 days for self-billing). Holding an e-invoice will be a prerequisite for VAT deductions, and summary invoices will still be allowed under certain conditions. Taxpayers will also be able to use third-party e-invoicing providers.
These reforms will return to the European Parliament for formal approval, followed by adoption by the Council in early 2025. With gradual timelines and compromises on implementation dates, the ViDA package marks a transformative shift in the EU’s approach to VAT, adapting to digital advances while simplifying compliance for businesses.
