The following partner insight was authored by Filippa Jornstedt, VP, Regulatory Analysis & Design at Sovos.
The European Union (EU) is about to upend how businesses handle its value-added tax (VAT) system, and the changes will impact many companies headquartered far beyond the EU’s borders. Member states currently lose €50 billion yearly to VAT fraud, losses that ultimately lead to higher compliance burdens and stricter scrutiny for all businesses. VAT in the Digital Age (ViDA) will accelerate the introduction of mandatory e-invoicing even before the regulations come into effect.
To address this, ViDA brings a few major changes to VAT in Europe:
- A strict real time reporting rule for each intra-EU cross-border transaction is replacing monthly and quarterly recapitulative statements. Tax authorities can now spot problems in real time; businesses that miss this window risk substantial penalties and increased regulatory oversight.
- The EU is also fixing the registration headache. Rather than forcing companies to register for VAT separately in each country, they’re expanding the existing single registration point, the One-Stop Shop (OSS), to include a new range of scenarios. The OSS lets businesses file a single VAT return for all their EU activities.
- Digital marketplaces face their own disruption. These platforms will be required to track and report VAT for all their sellers rather than leaving sellers to handle tax matters themselves, unless they declare that they will do so. Under ViDA, platforms like Airbnb and Uber will be tasked with collecting and remitting VAT for specific transactions, ensuring consistent tax treatment across the EU.
While the EU-wide rules on digital reporting don’t fully kick in until 2030, waiting until then is ill-advised. It is expected that EU Member States will be free to introduce e-invoicing mandates as early as 2025, under ViDA. Several countries are already on the move, with Germany implementing changes in January 2025, Belgium in January 2026 and France following suit in September 2026. This staggered rollout means businesses need to stay alert to varying deadlines across different countries.
Updating SAP for ViDA isn’t simple. These systems were built when tax reporting happened monthly or quarterly — not in real-time.
Yet across Europe, developers at tax software companies like Sovos are finding ways to extend SAP’s capabilities to meet new demands for global enterprises. Companies using these new tools report faster payment cycles and clearer cash flow visibility once systems are installed.
As for PEPPOL, think of it as the email protocol of invoicing. Just like email lets Gmail users write to Yahoo users without thinking about it, PEPPOL lets different invoicing systems communicate with each other. This interoperable approach is becoming the default way to handle e-invoices in Europe, as well as Australia and Japan.
The technical challenges of ViDA are significant, but they’re manageable with proper planning. Preparing for ViDA demands a cross-functional effort. While IT departments tackle SAP upgrades, finance teams must rethink their processes as organizations adjust to a much faster pace. Success requires unprecedented coordination between tax, finance, IT, and operations teams, as these changes touch every aspect of the business cycle.
Many businesses are already working with providers like Sovos to prepare their SAP systems. These partnerships prove beneficial, considering getting ViDA right means understanding both the nuts and bolts of the software and the complex rules behind it.
While ViDA’s requirements might feel like a burden, they’re pushing companies to fix tax systems that should have been updated long ago. Motivated companies will use this deadline to build something better than the bare minimum needed for compliance.
Filippa Jornstedt is VP, Regulatory Analysis & Design at Sovos.