On 11 March 2025, the European Union officially adopted the ViDA (VAT in the Digital Age) package, aiming to digitise the EU VAT system. The EU’s VAT reform will enter into force on Monday 14 April, the 20th day after its publication on 25 March, but the changes will be phased in gradually between 2025 and 2035. The ViDA package aims to increase transparency in digital trade and cross-border transactions, reduce tax evasion and cut administrative burdens, while also presenting significant challenges and opportunities for businesses.
The EU’s VAT reform is built on three key pillars.
Pillar 1: E-invoicing and digital reporting
- From 2025: Member States may mandate e-invoicing for domestic transactions.
- From 1 July 2030: E-invoicing will be mandatory for all cross-border B2B (business-to-business) and B2G (business-to-government) transactions, in a standard EU format. Digital reporting will also be mandatory.
- From 2035: Full EU-wide harmonization is expected.
Impact on businesses
Companies must prepare for substantial IT and administrative adjustments, including overhauling their invoicing systems.
Pillar 2: Platform economy
From 1 July 2028: As Pillar 2 of the EU’s VAT reform, platforms offering passenger transport and accommodation services (e.g. Uber, Airbnb) may be considered deemed VAT payers in certain situations.
However, these platforms do not have to pay VAT if the actual service provider provides a valid VAT number and declares that it will account for the VAT itself. The rules primarily target cases where the original provider would not otherwise be subject to VAT.
Member States may postpone the introduction of the rule until 1 January 2030. SMEs can be an exception to this rule.
Other obligations:
- The place of supply of B2C (business-to-consumer) facilitation services from platforms will be where the basic supply takes place.
- Customers who do not provide VAT identification will automatically be treated as non-taxable persons.
- Platforms that facilitate the sale of goods and store goods owned by a third party (e.g. in a warehouse) will be obliged to notify the owner if the goods are transferred to another country.
Impact on businesses
Pillar 2 of the EU’s VAT reform is sector-specific. In particular, it represents a major change for platforms that provide passenger transport and accommodation services. Service providers who offer these services through platforms but are currently not obliged to charge VAT will also be affected. In the future, the obligation to pay VAT may be shifted to the platforms, which could have an impact on prices and revenues.
The “deemed supplier” rule may be applied differently by Member States, which may complicate compliance, in particular when checking the VAT status of suppliers. The definition of short-stay accommodation may also vary from one Member State to another.
Pillar 3: Single VAT registration
- Extension of OSS (from 1 July 2028): Simplified VAT return (OSS) for intra-EU B2C supplies will be extended to new services (e.g., electricity, natural gas, installation contracts, domestic supplies).
- Energy supply (from 1 January 2027): OSS will be extended to energy supplies (e.g., EV charging in another Member State).
- Movement of own goods (from 1 July 2028): There will be a new OSS module for intra-EU movement of own goods – avoiding VAT registration in the country of destination if the goods qualify for full deduction. The new rule will replace the simplification rule for call-off stock which will be abolished at the same time.
- Reverse charge mechanism (B2B): Member States will be obliged to apply reverse charge mechanism where the seller is not but the buyer is VAT registered in the destination country – this will reduce the registration obligation for foreign companies.
- Live streaming and virtual events: As of 1 January 2025, new rules on the place of supply for B2C will apply, following the rules for electronic services.
The original EU’s VAT reform proposal included a country of destination taxation for margin supplies (e.g. works of art), but this has been removed from the final text.
Impact on businesses
Although the new rules in Pillar 3 of the EU’s VAT reform reduce the need for foreign VAT administrations, they do not eliminate them completely. A non-established vendor, for example, will still have to register in the Member State from which they carry out an intra-Community supply.
The failing to register can lead to cash flow disadvantages, as input VAT can only be reclaimed through a foreign VAT refund procedure. Companies should consider whether to maintain their existing registrations or take advantage of the new simplifications.
Why is it important to plan now?
Although many regulatory changes will not come into force for years, the developments required by the EU’s VAT reform – such as e-invoicing and real-time reporting – will require major financial and technological overhauls. This affects not only accounting, but also legal, tax and IT.
Key actions for businesses to take now include:
- Designing e-invoicing and digital reporting systems
- Reviewing the contractual protection of platforms to transfer VAT risks
- Thorough checks on the status and location of customers
- Conduct liability and risk analysis to avoid penalties
Not all Member States waiting for ViDA deadlines
Several Member States – such as Hungary, Germany, Belgium, Poland, Spain or France – are not waiting for the EU’s VAT reform to come into force as planned, but are already introducing or planning to introduce mandatory e-invoicing and reporting in certain areas. It is therefore advisable to monitor national regulatory changes in the short term to allow businesses to react in time.
What to expect in the coming years?
The EU’s VAT reform is reshaping EU VAT legislation to meet the expectations of the digital age. The new rules will affect not only e-commerce but almost all businesses.
Preparation cannot be delayed: it is worth starting now to review business processes, improve IT systems and assess the legal environment so that businesses do not risk future fines, delays or disruption to their operations.
The VAT experts at WTS Klient Hungary drawing on decades of professional experience can effectively support their clients not only with Hungarian but also international VAT regulation. Do not hesitate to contact us if your company is engaged in international or intra-EU transactions, and you have questions about what changes you need to prepare for under the EU’s VAT reform.
