Anyone in Europe that’s involved in invoicing and VAT will have heard of the EU’s VAT in the Digital Age (ViDA) proposal that’s been eluding agreement among member states for two years. Designed to streamline VAT across the European Union, member states
have once again failed to reach agreement on ViDA during the latest vote in June 2024.
A lot of confusion and uncertainty remains around understanding the legislation. Additionally, different member states take different approaches in preparation for the deadlines – adding an additional layer of complexity to an already complex situation.
Yet, becoming ViDA compliant – if tackled holistically – offers a lot more benefits and added value than just ticking a mandatory checkbox. Let’s take a deep dive into ViDA to clarify what change is coming to the EU, what is mandated for businesses, and what
businesses of all sizes need to do to comply.
What is ViDA and why is it facing so many delays?
Originally submitted by the European Commission on 8 December, 2022, the ViDA package was proposed in order to modernise the EU’s VAT system and enhance its resiliency to fraud. In order to achieve this, ViDA focuses on
three pillars:
- E-invoicing requirements: Digital reporting requirements designed to standardise the information submitted.
- Platform economy: The rules and regulation for the VAT treatment of the platform economy to ensure a fair and level playing field in regards to traditional sectors.
- Single EU VAT registration: Reducing the burden on companies of having to register in multiple member states by assigning a unique VAT number.
While pillars 1 and 3 have been previously agreed upon by member states, it’s pillar 2 (the platform economy) that continues to elude political agreement. At the latest vote in June, Estonia continued to veto the proposal, due to concerns that the current
definition could undermine neutrality and adversely affect smaller traders that were below the VAT registration threshold.
Adding to the stalemate, the rotating presidency of the Council of the EU was transferred from Belgium to Hungary in July, which means there will be no chance to continue talks in the EU Finance Ministers forum (ECOFIN) until autumn this year.
Final timelines for ViDA will only be available once the agreed proposal has been approved by the EU Parliament, yet it’s clear that pillars 2 and 3 will come into effect earliest in July 2027, while pillar 1 (digital reporting requirements) will apply earliest
in July 2030.
Though while member states wait on official EU agreement, national mandates are already starting to kick in over the next couple of years in several jurisdictions: Belgium’s e-invoicing mandate applies from
January 2026; Germany will start gradually rolling out e-invoicing obligations, starting with the compulsory acceptance of e-invoices and interoperable formats, from
January 2025; and many other member states are following suit.
Considering these timelines, companies need to start thinking about e-invoicing sooner rather than later. If approached from a holistic angle, transformation can become a value-driver rather than just ticking a regulatory checkbox.
Benefits and challenges of becoming ViDA compliant
ViDA is all about bringing VAT into the 21st century – increased automation, less errors, more resiliency towards fraud. The positive impact on companies is much broader than just compliancy; it’s about smoothing the processing of documents, decreasing the
number of documents lost, and the ability to pay and get invoices paid faster.
The good news is that – unless a company still relies on Excel sheets or Word documents to create invoices – the large chunk of the work does not actually lie with the company itself: it’s about choosing the right invoicing software.
It’s the software providers that need to ensure their services are up to par with the new (domestic and EU-wide) regulations that are coming in – and most importantly ensure interoperability between various jurisdictions. While local providers will most
likely be dealing with only one tax authority, providers that services companies that operate in multiple jurisdictions will have to deal with reporting to multiple tax authorities.
Of course, organisations will not be able to comply if they don’t manage to choose the right partner. The bigger issue is that too many companies still rely on spreadsheets for invoicing. Research shows that not only do almost
90% of spreadsheets have errors, but spreadsheet-invoicing additionally makes it virtually impossible to comply with incoming mandates. ViDA is about digitising VAT, so it’s time organisations evaluate their invoicing.
Market implications: Addressing ViDA through software
The crux of ViDA is software. There are several factors that companies need to consider when choosing a software that fits their needs – and the biggest is generally the organisational size. While smaller and midsized companies usually have less requirements
and can work with out-of-the-box software, large companies have more configuration needs and are looking for customised functionalities, as well as related services, which is why they often opt for custom made software solutions in combination with a document
service provider for the multichannel delivery of their invoices.
An organisation’s sector additionally plays a large role in choosing the right invoicing software. Verticals such as construction, manufacturing or retail each have specialised software providers that can address specific invoicing needs unique to their
industry.
Another requirement that especially SMBs cannot neglect is accountancy. If a company is working closely with an accountant, their sales invoices and their purchase invoices need to be compatible with the accounting software of the accountant – which means
that integration is key.
Related, whether an organisation is B2B or B2C (or both) plays another part in choosing the right provider. Before choosing a provider, businesses need to put their needs on paper, do their research, and chose the right solution according to size and needs.
How can software providers prepare for ViDA?
While organisations can choose an appropriate software provider in order to streamline their e-invoicing and become ViDA compliant, software and service providers will have more work on their plate in order to address the upcoming regulatory updates. So
how can they tackle ViDA?
In the first instance, it depends on whether they provide software only or additional services as well.
Service providers serving larger companies deliver more than just the connectivity to the Peppol network – they also provide other networks or delivery methods, enable compliancy, and offer other additional services like the conversion of formats, archiving
and reporting.
Software providers offering out-of-the-box software to smaller and midsized companies need to find an appropriate Peppol access point partner to meet their clients’ need with the upcoming mandates in mind, so their users are able to send and receive real e-invoices
from within the software.
But while service providers may have additional responsibilities to their clients, the essence of ensuring that software is ViDA compliant – for both out-of-the-box providers as well as service providers – is Peppol.
In today’s inter-connected world, partnerships are often the key to success, and ViDA will be no exception to this rule. The best way to fast-track ViDA compliance for software companies of any size will be to choose the right partner. There are several
Peppol access-point-as-a-service APIs, like Flowin, available on the market, which are specifically designed to help software houses in this connectivity matter.
Future-proofing VAT
While we don’t know when we’ll finally reach agreement on ViDA, we do know one thing: it is coming in one form or another. And like with many other things in life, the early bird catches the worm.
Companies that start their invoicing transformations now will be ahead of the curve, not just for when the regulation does come in, but because they will streamline their operations, increase automation, and decrease losses, errors and fraud.
Fitting to the digital age we’re living in, the key to successful transformation lies in partnerships. Finding the right software provider will help organisations increase efficiency, interoperability, and on top of that, ensure compliance.