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Taxation and Customs Union

VAT in the Digital Age (ViDA)

A proposal to modernise and improve the EU’s VAT system 

VAT in the Digital Age

Proposal

On 8 December 2022, the European Commission proposed measures to modernise the EU’s Value-Added Tax (VAT) system, make it work better for businesses and more resilient to fraud, and address challenges in VAT raised by the development of the platform economy.  

Latest news

The Commission welcomes on 5 November 2024 general approach announced by the Council on the Commission's proposals on VAT in the Digital Age. By embracing and promoting digitalisation, this package makes the EU's VAT system more business-friendly and more resilient to fraud.

Background 

According to the 2023 VAT Gap Report, EU countries lost €99 billion in VAT revenues in 2020. Conservative estimates suggest that one-quarter of the missing revenues can be attributed directly to VAT fraud linked to intra-EU trade. In addition, VAT arrangements in the EU can still be burdensome for businesses, especially SMEs, scale-ups and companies operating cross-border. 

Key actions proposed under ViDA will help EU countries collect up to €18 billion more in VAT revenues annually (€11 billion as a result of anti-fraud measures) while helping businesses, including SMEs, to grow. 

Infographic that shows the three changes we need to make vat fit for the digital age: A new real time digital reporting system based on e-invoicing,  Updated vat rules for the platform economy, A single vat registration for businesses selling to consumers across the eu

Real-time digital reporting 

The new system introduces real-time digital reporting for cross-border trade, based on e-invoicing. It will give Member States the valuable information they need to step up the fight against VAT fraud, especially carousel fraud. 

The move to e-invoicing will help reduce VAT fraud by up to €11 billion a year and bring down administrative and compliance costs for EU traders by over €4.1 billion per year over the next ten years. It ensures that, in time, existing national systems converge across the EU and paves the way for EU countries that wish to introduce national digital reporting systems for domestic trade. 

Updated rules for the platform economy 

Under the new rules, platforms facilitating supplies in the passenger transport and short-term accommodation sectors will become responsible for collecting and remitting VAT to tax authorities when their users do not, for example because they are a small business or individual providers. 

Together with other clarifications, this will ensure a uniform approach across all EU countries and contribute to a more level playing field between online and traditional short-term accommodation and transport services. It will also simplify life for SMEs who currently need to understand and comply with the VAT rules, often in different EU countries. 

Single VAT registration 

Building on the already existing ‘VAT One Stop Shop’ (OSS) model for e-commerce, the proposals would allow more businesses selling to consumers in another EU country to fulfil their VAT obligations via an online portal in one EU country. Further measures to improve the collection of VAT include making the ‘Import One Stop Shop’ (IOSS) mandatory for certain platforms facilitating sales by persons established outside the EU to consumers in the EU. 

Legal Texts

Summary of impact assessment8 December 2022
Impact Assessment – Executive Summary - VAT in the Digital Age
Impact assessment8 December 2022
Impact Assessment - VAT in the Digital Age

Final Report

Factsheet

Factsheet5 December 2022
VAT in the digital age - Factsheet

Related links

VAT Gap Report

Press release on the VAT in the Digital Age proposals

Q&A MEMO on the VAT in the Digital Age proposals