“VAT in the Digital Age” or ViDA is an initiative promoted by the European Union to modernize and adapt VAT rules to the digital economy. The main components and objectives of this initiative include:
- Simplified Rules for E-Commerce: introduce rules to simplify the collection of VAT in cross-border e-commerce, facilitating compliance for both companies and tax authorities.
- Digital Platforms and Markets: establish clear responsibilities for online platforms in terms of VAT collection and remission. This includes making platforms responsible for VAT on sales made by third-party sellers through their sites.
- Digital Services: apply VAT to a wider range of digital services, such as streaming services, cloud software and digital downloads, regardless of where the service provider is located.
- Unified Registration and Reporting System: create a unified VAT registration and reporting system to simplify the tax obligations of companies operating in multiple EU countries. Examples of this include the extension of the Mini Single Window (MOSS) system to a larger Single Window.
- Combating Evasion and Fraud: implement advanced technologies and share data between countries to combat VAT evasion and fraud in digital transactions.
How can companies adapt to the changes imposed on them by this new regulation?
With the new rules and the added complexity in collecting and reporting VAT, companies will be more inclined to use invoice automation platforms to ensure compliance and reduce errors.
When choosing which tool to use, it is important to keep in mind that the tool in question must be able to adapt quickly in order to integrate the new digital VAT rules into its systems, to ensure smooth regulatory compliance.
Concerns about “ViDA”
However, this initiative is not going ahead as several countries have expressed reservations or have opposed certain parts of the “VAT in the Digital Age” initiative. These include Ireland, Luxembourg, Germany and Estonia.
The reasons vary, but, among others, there are two main concerns:
- How the new rules could impact small and medium-sized enterprises (SMEs) and increase the administrative burden.
- Concern given that it may discourage foreign direct investment.
In addition, if this law were to go ahead in the coming years, it would affect some of the points that the Creates and Grows Act, as well as in each country, its local regulations regarding Electronic Invoicing, but there are still no concrete details about this overlap. At Brait, we create solutions that cover national and international regulations so that your electronic invoicing solution is always up to date with legislative changes, so you don't have to worry.
Conclusion
Ongoing collaboration and commitment will be essential to advance VAT reform in the digital age. Do not hesitate to put yourself in contact with our team of specialists to answer any questions about this or any other regulation that may affect your company's billing.
We will be happy to help you choose the tool that best suits your needs, and you can have peace of mind knowing that we have partners who have the necessary agility to comply with regulatory changes that may take place, both nationally and internationally.
