In December 2022, the European Commission presented the VIDA Directive (Directive on VAT in the Digital Age), a project that has since been approved by member states. Its aim is to impose electronic invoicing for all intra-Community trade within the European Union. This reform of the VAT system, which will come into force in January 2025, will bring about significant changes in the way e-commerce operates.
Objective of the European VIDA directive
VAT reform at European level aims to combat tax fraud using new technologies, while simplifying companies' tax obligations. The old method, dating back to 1993, no longer met current needs, and modernization was necessary.
This reform aims to make online transactions more traceable and transparent, which is essential to win the trust of online buyers and suppliers.
Impact on e-commerce platforms
The European VIDA directive will have a significant impact on e-commerce. E-commerce platforms, particularly important in the e-commerce and dropshipping sectors, will now be considered as buyers and resellers of goods and certain services. Their role in VAT matters will thus be strengthened.
Marketplaces will have to adopt the IOSS one-stop-shop to simplify procedures for e-tailers and ensure tax compliance. In addition, the directive abolishes the system of stocks under contract of deposit to combat abuse of VAT identification numbers.
Information exchange between member states
It is essential that information flows efficiently between the Member States involved in transactions, to ensure the security and transparency of e-commerce. The VIDA directive also covers distance sales of second-hand goods, which will now be subject to VAT in the state of destination.
From January 1, 2025, e-commerce companies will no longer need to register in every country in which they operate, as a single VAT registration system will be introduced.
Simplified billing processes
From January 1, 2024, e-invoicing and e-reporting obligations will be reviewed to simplify processes, offering greater fluidity in the issue and transmission of electronic invoices.
A second measure, scheduled for 2028, will impose e-reporting for intra-Community and domestic flows, combined with the obligation of e-invoicing, with the addition of a few extra details on invoices (supplier's IBAN, payment due date, initial invoice number in the case of credit notes).
Faced with this forthcoming reform, e-commerce players have every interest in anticipating their future invoicing obligations.