Challenges of ViDA – Exploring the Future of Tax Compliance

As businesses navigate a rapidly digitalising economy, tax compliance systems must evolve to match. The European Union’s VAT in the Digital Age (ViDA) initiative aims to modernise VAT reporting, streamline processes, and combat fraud across Member States. But with the sweeping reforms come growing pains. In this blog, we examine the key challenges of ViDA, with insights from our expert panel at our recent ELEVATE event.  

The panel, moderated by Lisa Dowling (Chief Tax & Compliance Officer at Taxback International), featured insights from: 

• Raúl Corral – Indirect Tax Senior Manager, TE Connectivity 

• Inka Rainemaa – Tax Manager, Head of GBS Tax, Customs & Trade, SSAB 

• Veronika Slapakova – Manager, Indirect Tax, Edwards Lifesciences 

Understanding ViDA

ViDA is a set of EU-wide reforms designed to digitalise tax compliance. The initiative was recently approved by the European Parliament and was fully ratified in March 2025. While its main goal is to reduce VAT fraud, it also seeks to simplify tax reporting for businesses operating across multiple EU countries. 

ViDA is structured around three key pillars: 

• Digital Reporting Requirements (DRR) and eInvoicing
• VAT Treatment of the Platform Economy 
• Single VAT Registration Across the EU 

Pillar 1: Digital Reporting & eInvoicing  

A major component of ViDA is the move to eInvoicing and digital reporting. This will standardise VAT reporting across the EU, making real-time data submission the norm. 

Key implementation milestones include:

• January 2027 – Modifications impacting those using the One-Stop Shop (OSS) schemes. 27 member states to revise and agree. 

• July 2028 – Deemed supplier measures for short-term accommodation rental and passenger transport platforms (Member States can delay implementation until 1 January). 

• July 2030 – eInvoicing becomes mandatory for cross border B2B transactions in the EU. 

• March 2033 – Review of the current VAT process. 

• July 2035 – Full standardisation of DRR

Key Business Challenges

While the initiative aims to simplify tax reporting, there are several challenges businesses face as they prepare for ViDA. 

• Uncertainty around IT & technology implementation: Many businesses are unclear on how to adapt their systems for ViDA. 

• Costs of compliance: Initial investment in eInvoicing software and infrastructure can be significant. 

• Different rules across EU countries: Not all Member States may adopt the same reporting obligations, leading to inconsistencies. 

• Practical Issues with eInvoicing: Businesses will have to issue and report invoices under strict time constraints: 
  • Sellers: Maximum of 10 days to issue the eInvoice 
  • Buyers: 5 days to report the invoice 

These deadlines add pressure on procurement and accounting teams with lengthy approval processes.  

“The 5-day deadline is very problematic, in large companies it’s very common that the process takes longer than 5 days due to review and approval. If after the 5 days it turns out the purchase invoice is not to be approved, that means manual corrections and that means money” – Inka Rainemaa. 

Additionally, some EU countries are hesitant to implement this strict deadline, which could lead to uneven adoption and new fraud risks. 

Fraud Prevention and Data Concerns

While ViDA aims to prevent VAT fraud through real-time data, our experts flagged concerns. 

• Detection vs. prevention: Digital reporting may identify fraud but doesn’t necessarily stop it.
• Lack of clarity: Businesses struggle to assess the full impact of ViDA without detailed implementation guidance.

“It is extremely difficult for businesses to make assessments on the impact that ViDA will have. It is a step in the right direction but there’s still a lot of open questions to be answered” – Veronika Slapakova. 

Pillar 2: VAT Treatment of the Platform Economy 

With the rise of digital platforms, ViDA aims to clarify VAT obligations for businesses operating in the platform economy. This includes e-commerce platforms, short-term accommodation rentals and ride-sharing services. Examples are Uber, Airbnb and delivery apps. However, many companies are still waiting for clear implementation guidance. 

New Obligations Include:

• Platforms must charge, collect, and remit VAT on behalf of suppliers if the supplier is not VAT-registered or does not provide a VAT number.
• Platforms must also collect and keep records, even if they are not responsible for VAT. This is intended to make tax rules clearer, reduce confusion and level the playing field between small suppliers and large corporations. 

Key Business Concerns:

Many businesses within the platform economy oppose these changes, as they: 

• Shift administrative burdens to platforms 
• Increase compliance costs for companies 
• Lead to higher costs for end consumers as VAT is applied to more transactions 

By placing the compliance responsibility on digital platforms, tax authorities can collect more VAT revenue without having to deal directly with small, unregistered suppliers. However, this creates significant challenges for platform-based businesses.  

“We have to move from detective mode to preventive mode…it’s not only changing the mindset of the teams but it’s changing the systems” -Raúl Corral. 

Pillar 3: Single VAT Registration – A Step Toward Simplification 

Pillar 3 of ViDA aims to simplify VAT compliance for businesses operating in multiple EU countries as it reduces the need to register for VAT in all these countries.  

Key changes: 

• Expands the One-Stop-Shop (OSS) system: This allows businesses to file VAT returns in one country for multiple transactions across the EU. 
• Covers more transactions: Now includes B2C transactions, electricity, natural gas, and domestic supply of goods and services. 
• Eliminates the EU Sales List (ESL): By July 2030, businesses will no longer have to submit intra-community sales reports. 

Challenges:

While single VAT registration is meant to simplify compliance and administrative tasks, businesses still face uncertainty: 

• Can businesses fully rely on the OSS system? 
• Will administrative costs and burdens actually decrease? 
• How will refunds for import VAT work? 

“The main disadvantage is through the One-Stop-Shop regime you still cannot deduct input VAT that you incur in the other member states. That means you would have to file a VAT refund which might lead to additional administrative costs and time.” – Veronika Slapakova. 

Companies must closely review their VAT processes to determine how these changes will impact their operations. 

ViDA: An Evolution or a Revolution? 

The panel concluded that ViDA is an important step forward for the EU, but it is not yet the VAT revolution that businesses had hoped for. 

What Would a True Revolution Look Like? 

• A faster, harmonised approach across all EU Member States. 

• More automation in tax compliance processes. 

• Clearer and more standardised guidance from tax authorities. 

“Right now, ViDA is more about decluttering VAT compliance than revolutionising it. The real change will come when we find a way to use all this new tax data efficiently.” – Lisa Dowling. 

How should businesses prepare for ViDA? 

To mitigate the challenges of ViDA, business should: 

• Assess your company’s readiness for eInvoicing: Can your systems support new digital reporting requirements? 
• Understand the cost impact: Budget for investments in technology and process adjustments. 
• Monitor guidance updates: The rules are constantly evolving so businesses need to stay agile and stay up to date with the latest changes. 
• Engage with tax authorities & industry experts: Proactively discuss potential compliance challenges.
• Ensure master data accuracy across entities and systems

Final Thoughts 

ViDA is a bold step towards modernising VAT compliance in Europe, but the road to implementation is far from smooth. As Lisa Dowling and the other tax experts highlighted during the panel, businesses must start thinking ahead as they prepare for ViDA, rather than waiting for final guidance. Businesses must address the challenges of ViDA proactively today to ease the transition to a fully digital VAT system tomorrow. 

Want deeper insights? Watch the full ELEVATE panel discussion below.