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Great news for businesses across the EU! After two years of hard negotiations, the EU has finally reached an agreement on the “VAT in the Digital Age” (ViDA) package. The agreement was finalized at the ECOFIN Council meeting at the end of 2024, and it’s set to transform how Value Added Tax (VAT) works in the EU—especially for digital businesses and cross-border transactions.
So, what exactly does this agreement mean, and why should businesses care? Let’s break it down in simple terms.
Digital Reporting: Making Taxing Easier (and Faster!)
One of the main changes is the way businesses report VAT on their transactions. Starting from 2030, all EU countries will have to adopt a new digital reporting system. This system will require businesses to send their VAT data in real time—so no more waiting months to file taxes!
What’s more, businesses will need to use e-invoicing for cross-border B2B transactions (that’s business-to-business transactions across different countries). If you’ve been using paper invoices, it’s time to go digital! And, instead of sending in a yearly recap of your transactions (like some businesses currently do), you’ll send the info right away through the new system. By 2035, the EU expects all national VAT systems to work together smoothly, meaning no matter where you are in Europe, everything will be connected.
Platform Economy: New Rules for Online Marketplaces
Next up: platforms like Airbnb, Uber, and Bolt. These online platforms, which connect consumers with services like accommodation and transport, will be taking on new responsibilities. Starting in July 2028, these platforms will be considered “deemed suppliers” of services. This means they’ll be responsible for collecting and paying VAT on behalf of their users (the people providing the services).
For example, if you book a stay through Airbnb or a ride through Uber, the platform itself will handle the VAT instead of the individual service providers. This will make things much easier for consumers, and it also ensures that VAT is collected correctly. However, countries will have the option to opt-out of this rule if they prefer, which helped make the agreement possible.
One-Stop Shop for VAT Registration: Simplifying Cross-Border Sales
For businesses selling directly to consumers (B2C) across different EU countries, there’s more good news: the existing One-Stop-Shop (OSS) system is getting a major upgrade. The OSS already lets businesses handle all their VAT obligations in one place for sales to consumers in other EU countries. With the new changes, businesses will be able to use this system for even more types of cross-border sales. No more dealing with complicated VAT registrations in every country you sell to—it’ll all be handled through a single online portal.
Why Does This Matter?
These changes are a big win for businesses operating in the digital economy, especially those involved in cross-border trade. They’ll make VAT collection more efficient and reduce the administrative burden on businesses.
For consumers, it means fairer and more transparent pricing when using services through platforms. And for tax authorities, it will be easier to track and collect VAT, ensuring that the system works smoothly across the EU.
The Road Ahead
While the changes are exciting, businesses will need some time to adapt. The new rules will be rolled out gradually, with the full digital system in place by 2030. However, getting ready now can help businesses stay ahead of the curve and make the most of these changes when they come.
The VAT in the Digital Age package is a huge step forward in making VAT simpler, faster, and more transparent for everyone in the EU. Whether you’re a small business owner or a digital platform, these changes will help streamline processes and reduce hassle in the years to come.
How 1st Step Team Can Help
Understanding and implementing the new VAT rules can be a complex process for many companies. Our team is ready to help you navigate these changes and prepare for their implementation. We provide consultations on transitioning to electronic invoicing, adopting the digital reporting system, and registering in the One-Stop-Shop portal for VAT.
We can also assist with analyzing how these changes will impact your business and offer solutions to optimize processes and reduce administrative burden. Whether you are a small business owner or manage a large digital platform, our team will provide the support you need to adapt to the new requirements with minimal effort.
Contact us now for more information and support.
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