The European Union’s VAT in the Digital Age initiative marks one of the most significant modernisations of VAT rules in recent years. It goes beyond a technical update and represents a fundamental rethink of how VAT should operate within a digital, integrated single market. For many businesses, current VAT systems remain fragmented and heavily dependent on manual processes that create inefficiencies and compliance challenges. ViDA seeks to address these issues by introducing a harmonised, digitally driven framework that aims to enhance transparency, consistency, and efficiency across Member States.

The reform is built around three core pillars that will reshape the way companies manage their VAT obligations.

Pillar One: Digital reporting and e-invoicing

From January 2028, businesses will be required to submit transaction-level data electronically for intra-community transactions, replacing existing recapitulative statements. E-invoicing will become the default model for intra-community supplies, with paper invoices and summary invoices being phased out. All e-invoices will need to comply with the European Standard EN 16931, ensuring uniformity and reducing the risk of manual data entry errors. These measures promise faster reconciliation and fewer administrative burdens, although they will require SMEs in particular to invest in more resilient digital systems.

Pillar Two: Platform economy rules

From January 2025, digital platforms that facilitate short-term accommodation or passenger transport will be deemed suppliers for VAT purposes when the underlying provider is not registered. This model also extends to certain goods transactions, with platforms making use of the Import One-Stop Shop for imports. The aim is to create a level playing field between traditional businesses and digital operators while easing compliance obligations for individuals and small sellers who rely on platform-based models.

Pillar Three: Cross-border simplification

ViDA expands the One-Stop Shop to enable a single VAT registration for all EU transactions. This extension covers additional B2C supplies such as goods with installation, onboard supplies, energy services and domestic supplies of goods. The mandatory reverse charge for B2B supplies further reduces the need for non-established suppliers to maintain multiple VAT registrations across the EU. These measures are intended to reduce administrative costs and remove barriers to cross-border activity, particularly for SMEs looking to expand into new markets.

ViDA represents a major step towards a faster, clearer, and more harmonised approach to VAT compliance. It promises greater accuracy, improved transparency and a more predictable operating environment for businesses working across borders.

From an RSM Malta perspective, ViDA offers a long-overdue modernisation that strengthens the integrity of the VAT system while supporting the digital transformation of business processes. Yet its effectiveness will depend on how well companies, especially SMEs, are supported as they adapt to real-time reporting and the transition to mandatory e-invoicing. These changes require investment in technology and training, and without accessible guidance, there is a risk that smaller businesses may find themselves at a disadvantage.

The potential of ViDA is considerable. With the right preparation and the right support, it can help businesses operate more efficiently, expand with confidence, and benefit from a more coherent EU-wide VAT framework. RSM Malta remains committed to guiding clients through this transition, helping them understand the reforms, update their systems, and ensure a smooth and compliant shift to the new model.

Article written by Michela Scicluna, Manager – Indirect Tax Advisory & Compliance