The ViDA proposal aims to modernize the indirect tax system across the European Union. It is intended to digitize reporting, increase EU tax revenues, provide more effective protection against tax fraud and a shift towards a final VAT system, where cross-border transactions are treated in the same way as domestic transactions.
The first major change that the ViDA directive will bring about is the introduction of the possibility for EU Member States to implement compulsory electronic invoicing for intra-Community transactions. Electronic and traditional physical documents will be placed on the same level. The directive will also introduce a single VAT registration across the European Union and will enable businesses that trade across the European Union to fulfil their VAT obligations in one country, i.e. in one language and through a single online portal. Over ten years, this change should reduce costs by 8.7 billion euros.
The transition to electronic invoicing will help to reduce VAT by up to 11 billion euros a year and, in the next ten years, it will reduce administrative costs and compliance costs for EU traders by more than 4.1 billion euros a year. It will also connect existing national systems across the EU and make it easy for Member States that wish to establish national digital reporting systems for domestic trade.
Also, a central VIES registry should be set up, which will process, evaluate and cross-check the reported data. This process will be a control mechanism that will verify in real time all the details and the format of the digital tax document. The whole system should work on the basis of automatic clearing; however, this process would be very costly and so it is uncertain whether or not it will be introduced.
Only a machine-readable document in the proposed XML or UBL format will be considered an electronic document. At the same time, the proposal anticipates a greater number of compulsory elements in electronic documents, such as the counterparty’s bank account, to which the amount is to be paid. For now, electronic invoicing should be introduced at this intra-Community level. This, however, is currently prevented by Article 232 of the Directive on the Common System of VAT, which requires the counterparty’s consent to exchange electronic documents. This article will be removed from the VAT Directive and consent will no longer be required.
The Directive has encountered certain legislative delays and it is highly unlikely that it will be implemented into Czech legislation at the beginning of 2024, as originally planned. It is expected that after the meeting of ECOFIN finance ministers, which will take place in early October in Dublin, the date when this Directive could be implemented will be closer.