VAT in the Digital Age (ViDA): EU reform guide

On 8 December 2022, the European Commission published a set of reform proposals under the “VAT in the Digital Age” (ViDA) initiative, marking a major step in modernizing the EU’s VAT system.

These changes are driven by several transformative trends: the rapid digitalization of the economy, the rise of platform-based business models, persistent VAT compliance burdens for companies, and ongoing challenges in preventing cross-border VAT fraud.

The key points are the following:

Pillar 1 – DRR & eInvoicing

Pillar 2 – Platform economy

Pillar 3 – Single VAT registration / OSS & IOSS

Elizabeth Barendregt

Partner, Indirect Tax & ESG

KPMG Switzerland

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Mathias Bopp

Partner, Head of Indirect Tax

KPMG Switzerland

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Why the reform was needed

The current VAT framework, designed for a more traditional, physical marketplace, has become increasingly outdated in the face of global e-commerce, gig economy services, and real-time digital transactions.

The ViDA proposals aim to address these gaps by leveraging technology to simplify compliance, improve fraud detection, and ensure fair taxation in the digital single market.

A 2020 OECD study highlighted the growing importance of VAT globally, with around 170 countries now using it. VAT accounts for about 20% of total tax revenue in OECD nations. As international trade and digital commerce expanded, VAT became a central element of tax policy, but also a source of significant compliance challenges. In the EU alone, VAT revenue losses (the VAT gap) were estimated at EUR 134 billion in 2019 and EUR 93 billion in 2020 and EUR 128 billion in 2023.

Pillar 1 – DRR & eInvoicing

Policy effective date: Apply from 1 July 2030.

The current VAT Directive dates to the 1970s and was not developed with digital reporting in mind. Over time, there has been a global shift from traditional VAT compliance methods toward real-time data sharing between businesses and tax administrations, often facilitated through eInvoicing systems.

This trend is increasingly evident within the EU, where many Member States have already introduced or are planning to introduce their own digital reporting frameworks. However, these national approaches have developed independently, resulting in a fragmented system that creates unnecessary complexity and compliance costs for businesses operating across multiple EU countries.

This fragmentation poses challenges to the integrity of the single market and undermines efforts to combat VAT fraud effectively, which is why a more coordinated and standardized EU-wide system is now being proposed.

The new rules are the following:

Digital reporting for intra-EU B2B transactions
- Replaces the current European Sales Listing.
- Requires transaction-by-transaction reporting within 5 days of invoice issuance.
- Member States may extend DRRs to domestic transactions using the EU-standard format.
Mandatory eInvoicing as default

Structured electronic invoices will become the default, no longer needing buyer consent.
Invoice issuance deadline

Invoices for cross-border and reverse-charge supplies must be issued within 10 days, down from the current max of 45 days.
Summary invoices under special conditions

Summary invoices to be allowed for supplies occurring in the same calendar month under certain conditions.
Expanded invoice content
eInvoices will include additional required data such as:
- Bank account identifiers
- Payment details
- References to corrected invoices
Final harmonization

By 1 January 2035, Member States with a domestic digital real-time transaction reporting obligation must align their systems with the EU standards, marking the final phase of this comprehensive ViDA package.

Pillar 2 – Platform economy

Policy effective date: Apply from 1 July 2028 (1 January 2030)

The business world is changing rapidly, and online sales models are the new normal even in traditional business sectors like passenger transportation and accommodation rental.

According to the “VAT in the Digital Age” study, up to 70% of the suppliers using an online platform are not registered for VAT.

Since traditional hotels and taxi operators have been obliged to charge VAT on their supplies, there is a clear and increasing VAT inequality.

To close this gap, the EU has proposed new rules to clarify responsibilities and enhance VAT collection through digital platforms.

Introduction of the Deemed Supplier Regime

Platforms to become deemed supplier (i.e. liable to account for VAT) when facilitating supplies of passenger transport by road and short-term accommodation, where underlying supplier is not required to account for VAT.

Deemed supply rules for short-term accommodation rental or passenger transport

The deemed supply between a seller and a customer is split into two transactions for VAT purposes:

The underlying seller is deemed to have sold the short-term accommodation rental or passenger transport to the platform. This supply is exempt from VAT without deduction right.

The platform is deemed to have sold the short-term accommodation rental or passenger transport to the customer.

This supply is regarded as intermediary service allowing for the uniform application of the place of supply rules. I.e. the platform will be responsible for collecting the VAT due on the sale from the customer and remitting the VAT to the tax authorities, as appropriate. Note, this supply should not impact the VAT deduction right of the platform.

This will ensure a level playing field between platforms offering services and other traditional suppliers qualifying as taxable person, while not imposing a burden on the underlying sellers operating through the platform.

Pillar 3 – Single VAT registration / OSS & IOSS

Policy effective date: Apply from (1 January 2027) 1 July 2028

Businesses operating across multiple EU Member States have long faced complex and costly VAT compliance obligations, creating barriers within the EU single market.

The VAT e-commerce package, effective from 1 July 2021, introduced new rules that significantly reduced these burdens. Instead of requiring VAT registration in every Member State where sales occur, the package introduced centralized VAT reporting through:

The One-Stop Shop (OSS) for intra-EU B2C supplies

The Import One-Stop Shop (IOSS) for imports of goods valued up to EUR 150

While OSS and IOSS have proven successful, their limited scope still leaves many businesses subject to burdensome VAT obligations across multiple countries.

The aim of the proposal is to reduce the number of situations in which businesses are obliged to register in an EU Member State where they are not established.

Key measures include:

Expansion of the (I)OSS schemes
The Union OSS will cover:
- Supplies of goods with installation or assembly
- Onboard sales on ships, aircraft, or trains
- Supplies of gas, electricity, heating, and cooling
- Domestic B2C supplies of goods
- Margin scheme goods in specific cases
The non-Union OSS extention

The non-Union OSS will be extended to cover all services provided by non-EU businesses to non-taxable EU customers. Businesses will now be able to amend (I)OSS returns via corrective filings in the same period, as long as it’s before the submission deadline.

Note: Input VAT recovery will still require use of the VAT refund procedure, as OSS does not allow VAT deduction.
New OSS scheme for intra-EU transfers of own goods

A new OSS scheme will allow centralized monthly reporting for businesses transferring their own goods between EU Member States. These transactions will be VAT-exempt in the country of arrival, removing the need for separate VAT registrations. This scheme also covers call-off stocks, replacing the simplification introduced under the 2020 “Quick Fixes.”
Mandatory reverse charge mechanism

Currently optional for Member States, the reverse charge mechanism will become mandatory. It will apply to all supplies of goods or services by non-established suppliers to VAT-registered businesses in a Member State, eliminating the need for supplier VAT registration.
Expanded deemed supplier rule for platform operators

The scope of the deemed supplier rule will extend to all goods supplied via electronic platforms, regardless of the supplier’s or buyer’s location or VAT status. It will also apply to certain own goods transfers facilitated through electronic interfaces, further simplifying VAT obligations for platform-based sellers.

Compliance & Risk management

Process readiness assessment

Evaluate existing invoice processes and their readiness for the mandatory eInvoicing and real-time reporting requirements.
Master data governance

Secure master data accuracy in ERP systems by following the “first time right” approach across all business units.
Training & regulatory monitoring

Train staff and stay updated on Member States’ specific guidelines.
Solution selection & decision

Select and decide about the eInvoicing software solution.
Roadmap & operating model

Establish an implementation roadmap and define the framework (RACI) for the upcoming system updates and solution implementation.

Implementation timeline & deadlines

Date	Milestone
1 April 2025	Domestic eInvoicing mandates permitted without pre-approval from the European Commission
1 January 2027	Extension of the OSS scheme (gas, electricity, heating and cooling)
1 July 2028	Platform deemed supplier rules, further extension of Single VAT registration rollout
1 July 2030	Cross-border eInvoicing & DRR mandatory
1 January 2035	EU-wide eInvoicing harmonisation complete

Practical impact & next steps

With ViDA comes a range of important modifications to data collection, validation, processing, and reporting processes throughout organisations (e.g. accounting, finance, tax, and commercial functions).

Businesses active in the EU should act without delay to achieve compliance readiness.

Establish a central, cross-functional eInvoicing & DRR strategy and strength collaboration between tax, finance and ERP/IT functions.

Assess the impact of the OSS/IOSS simplifications and decide about VAT registration and VAT compliance strategy.

Analyze the impact of the Platform Economy pillar and plan in time the invoicing process adjustments in your underlying billing/ERP systems.

Key takeaways

ViDA reforms are phasing in through 2035 across three pillars.

eInvoicing & DRR will streamline reporting, simplify compliance, but require solid and stable digital infrastructure.

The new platform economy VAT rules will ensure a level playing field between platforms offering services and other traditional suppliers qualifying as taxable persons Extension of OSS/IOSS will offer room to reduce VAT registration burdens.

Under the new Single VAT Registration rules we recommend business to consider whether it is preferable to maintain existing foreign VAT registrations (where possible) or maximize the use of the simplifications. Not registering for VAT in the other Member State may also have negative cash flow implications as the supplier may then have to reclaim input VAT incurred in that Member State through the non-resident refund claim mechanism rather than through a local VAT return.

How can KPMG help?

Our VAT experts help you confidently navigate the EU’s “VAT in the Digital Age” reforms – from eInvoicing and Digital Reporting Requirements to platform economy rules and expanded OSS/IOSS – ensuring compliant, efficient, and future-ready operations across all Member States.

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