By Alex Baulf
The way in which digital businesses operate has changed for good. Today’s era of digital innovation will be defined by the radical changes we’ve witnessed in transaction systems and the adoption of emerging tax technologies.
Enter the VAT in the Digital Age (ViDA) legislation. This reform, initially proposed by the European Commission in 2022, finally received full political agreement and formal adoption in March 2025, marking a pivotal step in the modernisation of the EU’s outdated VAT system which was plagued with inefficiencies and had failed to keep pace with changes in technology and business models. The legislation signals a widespread desire for change and a clear roadmap for implementing it.
Though there were hesitations at first, it’s important to note that ViDA is not just focused around tightening rules and regulations on digital platforms like Airbnb or Uber. It is a way to revolutionise how businesses and tax authorities interact with one another and make the entire VAT compliance process more efficient and transparent. A big player in this is e-invoicing, which is already establishing itself as a growing topic of conversation in the finance, tax and accounting world. This technology is set to provide unprecedented benefits for both businesses and tax authorities, including improved process efficiency and reduced fraud, as well as helping to combat human errors.
However, businesses looking to embark on this journey must treat it as an investment and make the necessary long-term investments, not only in technology but in relation to underlying quality of data, reviewing and updating processes, and changes to existing systems. ViDA comes with amazing potential but also significant strategic and technological demands. Businesses can unlock a new digital age if they embrace it and manage to get this right. But what does this look like?
E-invoicing is changing the way businesses operate
Mandates that force businesses to issue e-invoices to their customers and share tax and transactional data in real-time to tax authorities have been in place across the Latin America region for years and in some cases, decades. Within Europe, with the exception of some outliers, generally e-invoicing was only mandated for public procurement (business to government transactions). However, the recent rise of mandates across Europe and beyond has set the scene for e-invoicing to become the norm globally by 2030. In 2026 alone, Belgium, Poland, France and the United Arab Emirates will all mandate e-invoicing for business-to-business transactions. E-invoices which, unlike their traditional paper or PDF counterparts, are issued, transmitted, received, and processed in a structured machine-readable format, allowing them to be automatically processed by the recipient’s systems without manual input. This allows businesses to automate both their Accounts Receivable and Accounts Payable processes altogether. What is left is a system that reduces errors, saves time, and promotes interoperability across businesses and systems nationally, and even cross-border through open networks like Peppol and the DBNAlliance.
In short, this approach means businesses can no longer rely on outdated systems or non-compliant processes to meet these new digital compliance requirements.
As a technology, e-invoicing provides tax authorities with access to real-time financial information. This represents a shift in the way auditing is achieved, providing full visibility into transactions, the goods and services sold and acquired by trading partners. Italy’s e-invoicing model is an example of centralised distribution, where the invoice is actually made available to the customer by the tax authority.
An adoption en masse
E-invoicing has also served to reduce fraud and close the VAT gap, which had long been a concern for governments. In the EU alone, this gap sits at a staggering €89.4 billion per year. Through live reporting underpinned by e-invoicing, governments and tax authorities have access to live information and genuine insights on transactions. This transparency helps identify fraud and errors too.
ViDA shows that Europe is finally getting on board the e-invoicing train. Though it was Italy that was first to take on this task in 2019, rolling out a broad e-invoicing mandate. Germany, the largest economy in the EU is taking a phased approach where it has removed the barriers for businesses to adopt e-invoicing. As of 1st January, all German taxpayers must be equipped to receive e-invoices that meet the European standard, effectively paving the way to making e-invoicing the norm.
On the horizon…
ViDA is just the start and e-invoicing is set to be a transformative shift for businesses. On the horizon lies stricter legislation. And for businesses that remain unprepared, the clock has begun to tick. There are many benefits of e-invoicing, and for businesses, it can be daunting to make this transition, particularly in light of the potential to miss out on this unknown tech.
What businesses need to know is that implementation requires strategic planning and technological investment. Scaling up may incur initial costs and changes to existing systems. However, this will invariably lead to long-term benefits and better operational operations.
The earlier the preparation, the better. Businesses that choose to invest in next generation technology will gain a competitive advantage. They will not only enjoy its benefits but ensure they are ready for the impending regulations that seem to be inevitable. Businesses that lag behind may be left behind, unable to cope with the impending mandates and changing legislation.
A VAT system to reflects the current digital economy
ViDA is a step towards fully digitalised economies and supply chains within the EU. It is in line with modern trends and introduces standardised e-invoicing and digital reporting requirements. A future of streamlined VAT registration and reporting requirements allows for better compliance and transparency for tax authorities.
Beyond compliance, this transformative reform offers the tools to conduct core operations and business processes in a more efficient manner. It is a challenging step forward, signaling an international commitment to a better and in-sync technologically advanced tax system. It is up to businesses whether they want to place themselves in a position where they are not only ready for this change but also embrace it.
