European parliament digitizes VAT collection and approves ViDA law

Why is ViDA needed? The VAT gap in Europe.

With 589 votes in favor, 42 against and 10 abstentions, the ViDA directive was approved by the European Parliament. The directive is an important means of reducing the VAT gap in Europe. This VAT gap is the difference between the VAT effectively collected and the VAT to be collected.

Figures from the European Commission show that in 2022 this gap reached €89 billion, representing an average 7% loss of VAT revenue in the EU. Belgium was no exception: of the €36.03 billion in expected VAT revenue, the Belgian government lost an estimated €4.47 billion due to non-compliance and fraud.

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The domains of ViDA

The ViDA law introduces several reforms to modernize VAT rules within the EU and combat fraud.

• Mandatory e-invoicing and real-time reporting
  Businesses must use structured e-invoices, making VAT returns faster and more accurate. Authorities can detect suspicious transactions more easily with real-time data.
• VAT obligation for online platforms
  Services such as Airbnb and Uber will now have to pay VAT on certain transactions, regulating the platform economy more fairly.
• Expansion of the one-stop shop system (OSS & IOSS)
  Companies operating in multiple EU countries will be able to file VAT returns through one central point, without having to register separately in each country. This makes cross-border trade easier.
• Tighter approach to VAT fraud
  Tax authorities will cooperate more closely and receive new digital tools to detect and combat VAT carousel fraud more quickly.

These measures will create a more efficient and transparent VAT system, with e-invoicing playing an important role.

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E-invoicing and e-reporting: the future of VAT declaration

At the heart of ViDA lies e-invoicing and e-reporting, two digital processes that are dramatically changing VAT collection:

• What is an e-invoice?
  An e-invoice is an invoice that is created, sent and processed entirely digitally in a structured format (such as XML), allowing for automatic processing. This makes invoicing more efficient and reduces the risk of errors. This system has been used for many years by companies with high invoice volume to process invoices faster and more accurately. More and more countries in Europe and worldwide are now making its use mandatory.
• What is e-reporting?
  With e-reporting, invoice data is transmitted to tax authorities in (near) real-time. Thanks to data mining and analysis, governments can detect fraud faster and improve VAT compliance. This is possible because invoices are sent in a structured format, such as XML files.

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Conclusion

With the introduction of ViDA, Europe is taking a big step toward a digital and transparent VAT system. E-invoicing and e-reporting will become the new standard and will not only ensure more efficient VAT collection, but also reduce fraud and administrative burdens for businesses.

Want to know how your company can prepare for mandatory e-invoicing?

Stay tuned and find out how Unifiedpost's solutions can help you make a smooth transition. Contact us for more info.