VAT in the Digital Age: Is now the time to put those plans into action?

Around six years ago, the EU Commission started consulting with businesses and Member States on the future of the EU VAT system and modernising VAT reporting. In 2022, the results of the consultation were published and since then the EU’s Member States have discussed, agreed and adopted the VAT in the Digital Age (ViDA) package of measures. 

The three adopted ViDA pillars are:

1. Digital Reporting Requirements (DRR) and e-invoicing: DRR will affect cross-border B2B transactions from 1 July 2030, but many EU Member States (and non-EU members) have already introduced mandatory domestic e-invoicing as a prerequisite for digital reporting. (The UK has also announced its own mandate for e-invoicing, for B2B transactions effective from April 2029).
2. The platform economy: The introduction of the deemed-supplier rules for platforms facilitating supplies of short-term accommodation rental and passenger transport, from 1 July 2028.
3. Single VAT registration: These changes build on the VAT One Stop Shop (OSS) model for trading in the EU and facilitate business operations in the EU that would have otherwise required multiple reporting and filing mechanisms. Practical changes from 1 January 2027 include expanding the OSS for certain B2C supplies (gas, electricity, heating and cooling), with changes from 1 July 2028 expanding OSS and a scheme to manage reporting for transfers of own goods within the EU. 

While ViDA may look like a revolutionary change in the way that taxpayers comply with the VAT regulations across the EU, the technological foundations can be traced back more than 60 years. There have been decades of advances in structured business messaging, standardised data formats, ERP systems, internet-enabled document exchange systems and most recently the e-invoicing frameworks of PEPPOL and EN 16931. All these developments have now converged and helped to make the ViDA package technically and economically feasible. 

So, while it looks like a significant change, there are some familiar steps to take to make sure that your business is as prepared as possible. 

Why now, and what resources?

For many owner-managed and small and medium-sized businesses (OMBs, SMEs), VAT is often managed by a lean finance team, a financial controller with multiple responsibilities, or even outsourced to a third-party adviser. Unlike large multinational groups, few have dedicated indirect tax teams, resources to manage ERP transformation or internal e-invoicing experts.

While the headline implementation dates may appear some way off, businesses will benefit most by planning early. ViDA represents one of the most significant changes to EU VAT compliance in decades, introducing new DRR, mandatory e-invoicing for certain transactions, and changes designed to simplify VAT registrations across the EU.

For UK businesses selling goods into the EU and maintaining EU VAT registrations, the challenge is to understand how ViDA affects existing supply chains, systems, invoicing processes and compliance obligations across multiple countries, suppliers and customers.

Many of the businesses we work with have grown internationally over time. They may hold stock in an EU warehouse, sell under DDP terms, make intra-EU movements of goods, or maintain several EU VAT registrations that were established years ago. The result is often a VAT footprint that has evolved organically rather than strategically. ViDA means that businesses must readily understand exactly how their transactions flow through the EU and whether existing systems can support increasingly digital VAT reporting requirements.

What information should businesses gather now?

Before considering systems changes, management teams should establish a clear picture of their current position:

• Which EU countries are we VAT registered in and why?
• Where do we hold stock or inventory within the EU?
• Do we operate DDP, consignment stock or call-off stock arrangements?
• Which systems generate VAT invoices?
• Can those systems support structured electronic invoicing?
• Is customer and supplier VAT data complete and accurate?
• How many manual adjustments are currently made to VAT returns?
• Which compliance activities are managed internally, and which are outsourced?

It would also be beneficial to consider any planned supply chains to establish how ViDA will impact them and whether there are changes which can be made to minimise burdens, taking into account the new rules.  In addition, has the VAT complexity meant that the business has decided not to undertake certain transactions in the past – the ViDA changes may reduce the complexity, allowing them to take place in the future.

How businesses are approaching preparedness

ViDA seems complex, and in parts it will be, but we think there are three key stages for businesses to work through as they prepare for the changes:

• Stage 1 – Understand the current position: Businesses are mapping their supply chains, reviewing EU VAT registrations, documenting transaction flows and identifying areas where manual processes exist.
• Stage 2 – Assess systems and data: Management teams are evaluating whether current accounting systems, ERP platforms and invoicing processes can support future digital reporting requirements. Particular attention is being given to:
  • VAT master data quality.
  • Customer VAT number validation.
  • Invoice data completeness (often a challenge).
  • Audit trail requirements.
  • Integration between finance, logistics and tax processes.
• Stage 3 – Build a longer-term roadmap: Rather than waiting for mandatory deadlines, many businesses are incorporating ViDA readiness into wider finance transformation initiatives, ERP upgrades and process improvement programmes. If none of these initiatives are in plan – the roadmap to ViDA should work backwards from 1 January 2027.

How Crowe UK can help

There is already a significant amount of technical commentary available for those businesses affected by the changes, but the challenge is translating that complex technical commentary into practical actions that are proportionate to the size and complexity of the business.

This is where Crowe UK can add significant value: 

1. VAT impact assessments: We can help businesses understand which aspects of ViDA are relevant to their specific trading model and identify where future compliance obligations may arise.
2. EU VAT footprint reviews: Our specialists can review existing EU VAT registrations, supply chains and reporting obligations to identify opportunities for simplification and areas of potential risk.
3. Readiness and gap assessments: We work with finance teams to assess whether current systems, processes and data are capable of supporting future digital reporting requirements.
4. International coordination: One of the most significant challenges facing SMEs is managing differing approaches across EU Member States. Through the Crowe Global network, we can coordinate advice across jurisdictions, providing local country insight while maintaining a consistent overall strategy. This allows clients to obtain practical guidance on:
   • Local e-invoicing developments.
   • Member State implementation requirements.
   • VAT registration obligations.
   • Digital reporting expectations.
   • Country-specific compliance risks.
5. Ongoing compliance support: Many SMEs will continue to rely on external advisers to supplement limited in-house VAT resources. Crowe UK can support clients with:
   • EU VAT registrations.
   • VAT return compliance.
   • Indirect tax advisory services.
   • Supply chain reviews.
   • Process and control enhancements.
   • Cross-border transaction planning.

Final thoughts

For many owner-managed and SME manufacturers, ViDA is unlikely to create an immediate compliance burden. However, it will require businesses to become more digitally prepared, more data-driven and more confident in the quality of their VAT processes.

The businesses that start planning now will be best placed to manage the transition efficiently and avoid costly remediation projects later.

Crowe UK VAT specialists, supported by colleagues across the Crowe Global network, are already helping clients assess their readiness, understand the practical implications of the changes and develop proportionate implementation roadmaps. For SMEs with limited internal VAT resources, obtaining that support early can make the difference between a managed transition and a last-minute compliance challenge.

For further information on the above, please get in touch with your usual Crowe UK contact.