ViDA Update: Estonia lifts its blocking veto and agrees to move forward with VAT in the Digital Age

Another step forward towards digitalization and standardization of domestic and cross-border document transaction in the European Union

By Ioana Ploesteanu, product marketing manager, Tradeshift

What’s the latest position from Estonia in relation to VIDA?

On November 5th, 2024, Estonia agreed to lift its blocking veto for the ViDA initiative at the ECOFIN meeting.

They used the veto in the May and June meetings this year to express concern for the second pillar, Platform Economy Rules. 

Prior to this, on October 30th, the Council of the European Union published an update on ViDA (VAT in the Digital Age), the initiative to modernise the VAT system within the EU zone to suit the digital economy.

Besides the ViDA 3 pillars: Digital Reporting Requirements, Platform Economy Rules and Single EU VAT Registration, the update includes mentions about exemptions, e-invoicing standards and the fact that EU countries can implement e-invoicing mandates without asking the EU for approvals. 

The ViDA proposals will now return to the EU Parliament for a final approval vote. This is necessary due to the significant changes made by ECOFIN compared to the initial Commission proposal.

Given the extended timeline, this step is expected to be a formality. Once approved by the Parliament, the proposals will move to the Council for final adoption.

What are the key takeaways from the update and the meeting on November 5th?

The updates published on October 30th and discussed during the latest Economic and Financial Affairs Council on November 5th are intended to streamline VAT collection, reduce administrative burdens, and prevent tax evasion in the digital economy while creating a level playing field across Member States: 

1. Digital Reporting Requirements: The update introduces Union-wide digital reporting standards for cross-border transactions. These requirements aim to reduce VAT fraud and the “VAT Gap” by mandating electronic invoicing and automated reporting, enhancing transparency and enforcement capabilities for tax administrations.
2. Platform Economy and Deemed Supplier Rule: The proposal addresses VAT issues in the platform economy, particularly in sectors like short-term rentals and ride-sharing. Platforms will be deemed suppliers, meaning they must collect and remit VAT on behalf of non-registered or exempt suppliers. This reduces unfair competition with traditional businesses.
3. Single VAT Registration: The update seeks to minimize the need for multiple VAT registrations across the EU by extending the One Stop Shop (OSS) system, allowing businesses to fulfill VAT obligations through a single registration. This includes the Import OSS (IOSS) for imported goods and special schemes for intra-community transactions.
4. Harmonized E-invoicing Standards: Electronic invoicing will become the default method for VAT reporting. Member States can adopt additional measures to ensure compliance, but all e-invoices must meet a European standard to facilitate cross-border interoperability.
5. Special Provisions and Exemptions: Specific rules are set for sectors like short-term accommodations and transport, with flexibility for Member States to adapt criteria for VAT application in these sectors. The deemed supplier model exempts certain platforms from VAT under specific conditions, such as when suppliers provide their VAT identification.
6. Evaluation and Adjustments: The European Commission will assess the effectiveness of these changes, particularly the impact on VAT collection efficiency, by 2033. The Commission may extend deadlines or recommend further amendments based on its findings.

Original Timetable vs. Current Status of ViDA Implementation

Original Timetable (Now Delayed):

• Single VAT Registration & Platform Economy Pillars – Originally 2025
• Digital Reporting Requirements Pillar – Originally 2028 

Current Status:

• Single VAT Registration Pillar – July 2028  
• Platform Economy Pillar – voluntary July 2028, mandatory January 2030
• Digital Reporting & e-Invoicing Pillar – harmonisation January 2035, mandatory July 2030 

Our take: Digitalisation is the way forward but with the right tools

A decade ago, when Italy introduced its Sistema di Interscambio (SDI) system, the idea of transitioning from paper to digital invoices was still emerging.

Today, digitalization has become the global standard for B2B invoicing.

The European Union, in particular, has been at the forefront of this shift, with initiatives like ViDA (VAT in the Digital Age) driving the adoption of standardized electronic invoicing across member states.

This digital transformation aims to streamline cross-border transactions, reduce administrative burdens, and enhance tax compliance.

Several European countries, including France, Belgium, Germany, Romania, Poland, Hungary, and Spain, have already implemented or are in the process of rolling out e-invoicing or tax clearance mandates.

These mandates require businesses to issue and receive electronic invoices in specific formats, often involving real-time transmission of invoice data to tax authorities.

By embracing digitalization and investing in a flexible, interoperable e-invoicing solution such as Tradeshift, businesses can navigate evolving regulations and thrive in this increasingly digital landscape.

Tradeshift’s commitment to compliance and supporting digital transformation

Tradeshift has a proven process for delivering compliance-as-a-service, and provides customers such as AirFrance, Disneyland Paris, Le Bon Marché, Schaeffler, DHL with innovative solutions that support their digital transformation journey and ensure they comply with e-invoicing and tax clearance mandates.

To ensure compliance excellence, we continually evaluate emerging global and regional regulations, such as ViDA, and prioritise the inclusion of additional countries or requirements in our roadmap.

We currently offer compliance-as-a-service for 70 countries, including a streamlined process for complying with tax clearance mandates in 12 countries and e-Invoicing mandates.

Examples of countries with tax clearance or B2B e-invoicing mandates that we support are France, Romania, Malaysia, and Germany with other European and APAC countries on our roadmap. 

We’re also the only company offering cross-zone fapiao e-invoicing capabilities in China and among the first to become a registered PDP (PDP immatriculée) in France.

Ready to streamline tax compliance domestically and for cross-border document transactions? One platform is all you need.

Start sending and clearing your invoices with Tradeshift today.