Today marks the one-year anniversary of the European Commission’s VAT in the Digital Age (ViDA).

Set to be enforced between 2024 and 2028, these reforms respond to reports indicating a €93 billion loss in VAT revenues for European member states in 2020 and aim to enhance efficiency and combat fraud.

The proposed measures include a shift to real-time digital reporting through e-invoicing for businesses operating cross-border within the EU, updated VAT regulations tailored for passenger transport and short-term accommodation platforms, and the introduction of a single VAT registration across the EU. 

Mariana Príncipe, Senior Director of VAT Compliance at Ryan, shares her thoughts on the progress made, the challenges and opportunities for businesses, and what to expect in 2024.

The Progress So Far

“Over the past year, businesses assessed their readiness for these imminent changes. Navigating varied adjustments across countries has emerged as the key challenge for many businesses. Despite extensive communication from tax authorities, a lack of clear explanation and multiple delays have also fuelled uncertainty.

“For instance, French tax authorities initially set e-invoicing obligations for July 2024, later proposing a potential delay to September 2026 in July 2023. The demand for comprehensive guidelines and harmonisation has heightened amid the complexities of VAT system reform. Going forward, it is clear that alignment between countries is crucial for facilitating implementation for taxpayers operating across the EU.”

Consequences of the One-Year Delay

“On 23 October, the European Parliament voted for a one-year delay for ViDA reform implementation. This delay is anticipated to positively impact the implementation of VAT reform, provided a clearer outcome is achieved. Businesses now have an extended timeframe to prepare for digital transformations and address the implementation costs. Similarly, tax service providers can leverage the additional time and increased clarity to enhance their service lines, aiding clients in navigating the complexities of the new digital tax era. The expectation is for further clarifications on processes in individual countries and a more harmonised strategy for implementation across EU nations.”

Opportunities and Challenges for Businesses

“Key challenges include adapting to new obligations. E-invoicing and digital reporting pose a hurdle, especially for small and medium enterprises (SMEs). The digitalisation journey requires businesses to navigate varying impacts on B2G, B2C, and B2B transactions across different countries, determining when changes will occur and how they affect specific businesses. The potential patchwork of partners per country poses difficulties and additional costs.

“Despite challenges, significant opportunities arise, promising increased efficiency in handling VAT obligations, time and resource savings, cost reductions, and modernisation of VAT reporting. Furthermore, the introduction of the Single VAT Registration (SVR) aims to minimise the obligation for multiple VAT registrations across EU member states, thus streamlining the compliance process.”

Looking Ahead

“In 2024, we will see a significant shift toward the digital era of the VAT system. For tax advisors, the focus will be addressing client inquiries about the implementation details of e-invoicing and digital reports. Further clarifications and instructions from the European Commission and various tax authorities are likely in the year ahead. The expectation is for the provision of guidelines and increased harmonisation to propel the ongoing VAT system reform, marking 2024 as a critical year in reshaping VAT compliance practices.”