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VAT in the Digital Age: How Could it Affect Your Business?

European ViDA or VAT in the Digital Age reforms present many changes and opportunities for business. In the article below, we look at the most frequently discussed aspects of the policy. Hopefully, it will help your business prepare, adapt, and benefit from the new taxation direction.

Timeline of implementation

As the European Commission published VAT in the Digital Age direction includes several areas related to VAT, the changes will take place from 2024 to 2028. Some of the changes will likely happen earlier — already this year.

It is expected that full enrolment of electronic invoicing will span until 2028, while domestic CTC schemes can be implemented in 2023 already.

Adaptation period

As all changes have been adopted in discussion with the public, businesses can expect a grace period to implement needed updates in software or processes. However, some businesses tend to underestimate how much effort they will need to comply with the new requirements. Therefore, we recommend preparing in advance and leaving time for any mistakes to be fixed so that your business stays compliant and avoids any obstacles.

Technology requirements

ViDA will impact all invoicing processes. Therefore, accounts payable, receivable, and all systems that power these and related processes need to follow the e-invoicing and digitalization requirements.

When it comes to reporting and CTC mandates, the software and processes have to adhere to standards drawn by the regulators. If a business is using several ERP, billing, and accounting systems that process PDF invoices, it might be worthwhile to look into a unified technology solution in advance, as integrations can be difficult or impossible. With the requirement to issue e-invoices and report in real time, businesses will have to use centralized solutions or find tools that are in sync with the government‘s platforms. It is possible that the ViDA systems will ask for more information on the invoices — which can impact business processes.

At the same time, companies participating in business-to-government transactions will have to prepare for stringent invoicing and reporting requirements — in some countries, the changes have already been implemented.

Of course, if a business is already working with trustworthy partners and software providers who are willing to upgrade the solutions as required, companies can continue using the tools in place. Nevertheless, it is crucial to ensure that the service providers are fully compliant and can make updates if the regulator requires them.

Cross-border transactions

Cross-border transactions in the EU will also be subject to the real-time reporting requirement. The data will be first sent to each member state involved and streamed to the central database of the European Commission. Some relief will be provided to business moving their own stock in the EU — thanks to digital solutions. In addition to that, the Import One-Stop-Shop scheme for low-value goods will become obligatory and will impact foreign online sellers.

Finding your answers

If you want to be ready for the future, experienced partners can help you prepare. 1stopVAT’s team has the know-how needed to adjust your operations to all changes in the VAT regime. So reach out to us, and let’s start working together.

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