Preparing for the Future of VAT in Europe: The ViDA Initiative and Open Peppol’s Role in EU’s New E-Invoicing Landscape

The European Union is on the verge of a significant overhaul of its VAT (Value Added Tax) system through the VAT in the Digital Age (ViDA) initiative. Designed to modernize the taxation system and reduce the EU's VAT gap—estimated at €99 billion in 2020—ViDA introduces reforms that will impact businesses across the EU.

So, what does ViDA involve? The initiative has three key components:

1. Digital reporting: Real-time digital reporting for cross-border trade, based on e-invoicing.
2. Platform economy: Platforms facilitating services in sectors like passenger transport and short-term accommodation will be responsible for collecting and remitting VAT when users do not.
3. Single VAT registration: Building on the VAT One Stop Shop (OSS) model, businesses selling to consumers in another EU country will be able to meet VAT obligations through a single online portal.

These reforms aim to streamline VAT processes while enhancing transparency and compliance, making it crucial for companies to stay ahead of developments.

ViDA Timeline: Key Dates

ViDA is expected to be approved in December 2024:

• Pillar one of the digital reporting requirements (DRR) means that EU countries will no longer need to ask for derogation to introduce mandatory e-invoicing, leading to the possibility of optional domestic e-invoicing starting from January 2025
• By 2030, mandatory intra-community e-invoicing & DRR will enter into force. Optional domestic DRR and transaction reporting will also start.
• By 2035, a member state harmonization for existing CTC (Continuous Transaction Controls) framework is expected, covering both e-invoicing and reporting.

Staying prepared for these changes will help businesses ensure compliance and avoid disruptions.

Introducing the Open Peppol ViDA Pilot: Preparing for E-Invoicing Compliance

In response to these upcoming regulations, Open Peppol has launched a ViDA pilot to demonstrate how its e-invoice specifications and network can support the Digital Reporting Requirements (DRR) of the ViDA initiative. This pilot aims to highlight that the Open Peppol framework can meet the demands of the new e-invoicing mandates across Europe.

The pilot project is open for participation by tax administrations, public authorities, service providers, business users, and international organizations. Its goal is to position Open Peppol as a compliant and effective solution for ViDA's e-invoicing and reporting requirements.

Scope of the Open Peppol ViDA pilot

The pilot focuses on B2B (business-to-business) and B2G (business-to-government) e-invoicing and DRR for intra-community transactions. Depending on the interest of participating EU member states, it could extend to domestic transactions as well. Key activities include:

• Exchange of e-invoices and e-reports based on real and artificial invoice data, including complex cases with multiple tax rates and currencies.
• Use of UNSPSC codes to standardize the classification of goods and services.
• Handling of special cases like summary invoices, self-billed invoices, and corrections of erroneous invoices.

By addressing such varied scenarios, the pilot ensures that the Open Peppol system is ready to support businesses in complying with ViDA requirements.

Deliverables of the Open Peppol ViDA Pilot

The pilot will deliver:

• Development of use cases: Documenting real-world e-invoicing scenarios to ensure the Open Peppol system can handle diverse business needs.
• Peppol specifications: Detailed specifications for sales and purchase invoice reports under DRR, ensuring that Open Peppol is fully aligned with ViDA’s digital reporting expectations.

Open Peppol ViDA Pilot Timeline

The pilot will follow this timeline:

• Preparation phase (Q3-Q4 2024): Setting up the project, finalizing participants, and laying the foundation.
• Design phase (Q1-Q3 2025): Developing the technical framework for e-invoicing and digital reporting.
• Implementation phase (Q4 2025 onwards): Testing and rolling out the system for real-world use.

This structured approach gives businesses and service providers ample time to adapt and integrate new systems before the ViDA requirements take full effect.

The Business Case: Why you Should Act Now

For businesses in the EU, adopting Peppol e-invoicing today is a strategic step to future-proofing your operations. With the impending ViDA requirements, compliance with e-invoicing and digital reporting standards will be critical.

Partnering with a trusted service provider like Basware, a pioneer and leader in Peppol services, can help businesses navigate these changes smoothly. Whether managing domestic or cross-border transactions, adopting Peppol ensures your business is well-prepared for the future of VAT reporting.

Don't wait—Get Ahead of Regulations

The ViDA initiative marks a new chapter in VAT management across the EU, and the Open Peppol ViDA pilot is at the forefront of these changes. By adopting Peppol e-invoicing today, businesses can ensure compliance with the upcoming digital reporting requirements and streamline their operations.

Contact us today to learn how we can support your transition to a future-proof VAT solution.