EU – Council Adopts Reconciled Version of the VAT in the Digital Age 

March 12, 2025, will be remembered as a game-changing day for the EU VAT framework. After more than two years of negotiations, the EU Council has given a long-awaited green light to adopt the VAT in the Digital Age (ViDA) package. 

VAT in the Digital Age package represents one of the most notable reforms of the EU VAT system. The digitalization of the economy and technological advancements have shown the necessity of updating tax provisions that are not in alignment with new business models that emerged in the last few years. 

The ViDA package has three separate pillars. The first pillar is devoted to reforming intra-EU VAT reporting, the second regulates the Platform Economy, and the third introduces significant changes in the OSS simplified registration and reporting system. 

The Commission presented the VAT in the Digital Age package in December 2022. The package includes three proposals to amend two regulations and the EU VAT directive. These amendments aim to align these three main pieces of VAT legislation with the digital transformation of the EU economy. 

Background

The above mentioned proposals were designed to amend the following legislation: 

• Proposal for a Council directive amending Directive 2006/112/EC as regards VAT rules for the digital age;
• Proposal for a Council regulation amending regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age;
• Proposal for a Council implementing regulation amending implementing regulation (EU) No 282/2011 regarding information requirements for specific VAT schemes.

Adopted ViDA package 

Impact

The adopted directive, regulation and implementing regulation shall all enter into force on the twentieth day following their publication in the Official Journal of the EU. The foundational EU rules state that regulations directly apply to all 27 Member States, while the directive must be transposed into national law. 

Timeline of ViDA package 

Directly effective changes on entry into force of ViDA reform

• Possibility of Member States to introduce a country-wide  digital reporting mechanism based on e-invoicing (under specific rules) without obligation to obtain a derogation from the EU Commission. 
• Updates to the IOSS scheme to improve the control system.

New provisions with effect from January 1, 2027 

• Legislative updates for users of the OSS and IOSS schemes. 

New provisions with effect from July 1, 2028

• Introduction of the deemed supplier concept for digital platform operators facilitating the short-term rent accommodation services, and for the passenger transport services (Member States have an option to start with this mandate from January 1, 2030). 
• Single VAT registration updates – Extension of the OSS scheme to reduce the number of mandatory VAT registrations for intra-EU transactions; usage of the mandatory reverse charge mechanism in cases where supplier’s TAX ID cannot be validated.

New provisions with effect from July 1, 2030 

• Introduction of Digital Reporting Requirements (DRR) based on e-invoicing for intra-Community B2B transactions. 

New provisions with effect from July 1, 2035 

• Member States that implemented a domestic digital real-time transaction-based reporting obligation before January 1, 2024, need to readjust their reporting requirements to comply fully with the EU-wide DRR mechanism. 

The adoption of the VAT in the Digital Age (ViDA) package will unquestionably reshape the EU VAT framework and the national VAT regimes of the Member States. This reform will impact most taxable persons who make supplies or purchases in the EU to some extent. 

Different stakeholders need to address the adoption of the ViDA package because it will impact all categories of taxable persons, from MNEs to SMEs, sole traders, and tax authorities. The service providers of VAT compliance solutions and software companies will play an important role in adequately adopting the ViDA. 

Using new technologies will enhance the quality of transaction control and related VAT reporting.