Understanding the EU ViDA - Digital Reporting Requirements and e-invoicing in Europe

One of the most notable aspects of the EU ViDA reforms is the introduction of Digital Reporting Requirements (DRRs), which will take effect on 1 July 2030. These will require e-invoicing between businesses, as well as digital reporting to tax authorities for B2B intra-community supplies.

This article explains the main elements of the reforms with a focus on the DRRs and its implications for businesses.

Overview of the digital reporting requirements

The Digital Reporting Requirements (DRRs) will establish a near real-time reporting system for intra-community transactions. This includes the reporting on:

• Intra-community supplies and acquisitions
• B2B services
• Reverse charges where the supplier is not established
• Supplies of energy to taxable dealers
• Triangulation transactions

The EU VAT Expert Group, the Fiscalis Project Group, will develop explanatory notes on the most common questions surrounding e-invoicing and digital reporting. These notes will help businesses and tax authorities interpret the VAT directive. These issues include, for example:

• Definition of e-invoices: What constitutes an e-invoice? What specifications apply to attachments? How do these invoices integrate with existing standards?
• Interpreting legal provisions: How to transition from paper invoices to e-invoices in accordance with new articles 218 and 232 of the VAT Directive?
• Jurisdictional issues: Which country’s laws apply to e-invoices: the supplier’s or the buyer’s?
• Transaction scope: Which types of transactions are included, such as services, multiple transactions, exempt supplies and reverse charges?
• Digital reporting to tax authorities: What are the digital reporting obligations and the country-specific requirements?

Transitioning to digital reporting and e-invoicing in Europe

Countries that had domestic transaction-based reporting systems in place before 1 January 2024 can continue to use them until 2035. However, any new systems introduced after this date must comply with the ViDA requirements by July 2030.

Member states will have the flexibility to develop their own reporting protocols and technical specifications to suit their local businesses. This is particularly important for businesses operating across multiple jurisdictions, as it enables them to navigate different schemas and connectivity protocols.

Implementation timeline and milestones

July 2030 – digital reporting requirements and e-invoicing

• Mandatory e-invoicing for business transactions and intra-community supplies will come into force.
• Invoices must be issued to business customers for intra-community supplies within ten days of the chargeable event. (Currently, companies are required to issue paper invoices by the 15th of the month following the chargeable event).
• Member states will have to harmonise their domestic e-invoicing systems with the new digital transaction reporting requirements.
• Companies will have to report the headline data of the transactions and bank details to enable tax authorities to track payments, and the summary of total sales by customers will not be sufficient.

July 2032 - central VIES database

• The current VIES search engine will be discontinued in July 2032 and replaced with the new Central VIES central database.

January 2035 – harmonisation of domestic and intra-community transaction reporting

• Existing domestic e-invoice reporting regimes must align with the ViDA e-invoicing standard to ensure a consistent approach across all EU countries.

The impact of the digital reporting requirements on businesses

The ViDA reforms require businesses to adapt to a more structured electronic invoicing framework. Key implications are:

Mandatory structured e-invoicing:

• Businesses will be required to issue structured e-invoices for all DRR transactions, as specified by Directive 2014/55/EU
  

Streamlined data requirements:

• Enhanced reporting standards will require businesses to include additional data, such as bank details, to facilitate tracking by tax authorities
  

Real-time compliance:

• With the focus on near-real-time digital reporting, companies must be prepared to implement technologies that support immediate data transmission and compliance.

Transition costs:

• While these reforms ultimately aim to simplify processes, the transition may initially incur costs for businesses that need to upgrade their invoicing and reporting systems.

How should companies prepare for the digital reporting requirements?

As businesses prepare for these changes caused by the EU ViDA reforms, it will be crucial to understand the detailed requirements and timelines in order to implement them successfully. By adapting to these evolving standards, businesses will not only ensure legal compliance, but also gain a competitive edge in the digital economy.

Businesses should consider taking the following steps to prepare for the upcoming changes:

1. Assess current reporting systems. Evaluate existing transaction-based reporting systems to ensure compliance by the July 2030 deadline.
2. Track national developments. Keep up to date with changes to domestic reporting protocols, specifications and deadlines.
3. Invest in e-invoicing solutions. Deploy e-invoicing solutions that are compatible with ViDA directives to simplify VAT processes.
4. Formulate cross-border strategies. Plan for the effective handling of international reporting across EU states.