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OUR GOAL
To provide an A-to-Z e-commerce logistics solution that would complete Amazon fulfillment network in the European Union.
If you’re a non-EU e-commerce seller planning to enter the European market, or if you already entered the market a few months or years ago, you will probably agree with us when we say that planning how to ship your products to the EU or preparing custom documentation isn't the hardest part when expanding your business to Europe.
No, the hardest and most confusing part is understanding how value-added taxes (VAT) work in practice. Since the European Union is made of several independent countries, each country has its own VAT rates, uses different reporting formats, and also has its own administrative nuances. That means that if you want to expand to 3 or 5 countries, you need to learn how to navigate five different sets of VAT regulations and cover all administrative quirks in each country. But for the EU itself the fragmented system turned out to be a significant problem as well, as inconsistent digital reporting requirements and different national systems made monitoring and auditing cross-border transactions so much harder.
That’s one of the reasons the European Commission introduced VAT in the Digital Age (VIDA) - a directive that changes how VAT information is reported and shared between businesses and tax authorities. The goal is to make cross-border VAT reporting more transparent and consistent across all member states. Non-European e-commerce sellers planning to enter European markets should be especially interested in this directive, as it's going to make understanding the VAT system and selling into multiple EU countries much more straightforward.
But first, you need to learn what is changing, what the changes mean for your business if you’re selling into the EU, and how you can prepare for meeting ViDA requirements - and this is exactly what we'll cover in this article.
What is VAT in the Digital Age (VIDA)?
VAT in the Digital Age (or simply VIDA) is the European Union’s plan to modernize how VAT is reported and managed across member states. The reform package was introduced by the European Commission as a response to one simple reality: the way businesses operate today has outpaced the way VAT systems were designed to function. The EU VAT framework itself has existed for decades and already provides a high level of harmonization. But the infrastructure around VAT (meaning reporting systems, invoicing standards, data exchange between countries, etc.) was left to each individual country, which means that each country calculates and reports their VAT differently.
For non-European sellers, this fragmentation was especially problematic, as they had to follow different sets of VAT reporting rules for each country, which might, for example, involve using different platforms or creating reports in different formats.
VIDA is meant to address that fragmentation.
Instead of redesigning VAT rates or introducing an entirely new tax structure (which could only bring more chaos), EU authorities decided to focus on how VAT information moves—how transactions are reported, how data is shared, and how cross-border sales are monitored across European countries.
Why now?
With the rapidly growing number of cross-border orders entering the EU, upgrading the VAT system became a pressing matter. Goods move between warehouses, across borders, and to customers within days—sometimes even within 24–48 hours inside the EU. At the same time, VAT reporting in many cases still relies on periodic returns submitted weeks or months after transactions take place.
This discrepancy between transaction and reporting times created two major issues.
First, for businesses operating in multiple EU countries, reporting obligations can quickly multiply. Take digital reporting as an example. Italy introduced its own mandatory e-invoicing system (SdI), which requires invoices to be issued and transmitted through a government platform in a specific XML format. Poland has been rolling out its KSeF e-invoicing system, also based on structured digital invoices. Meanwhile, Spain implemented SII, a near real-time VAT reporting system that requires transaction data to be submitted within a few days of issuance. For a company storing goods in more than one EU country, this can mean adapting invoicing workflows depending on where the transaction is deemed to take place - and having three times more work filling those VAT reports.
Second, delayed and fragmented reporting makes cross-border VAT monitoring more difficult because authorities in different Member States do not receive transaction data at the same time—or in the same format.
Consider a simplified cross-border B2B transaction within the EU. A supplier in one member state applies the 0% VAT rate under the intra-EU supply rules and reports the transaction in its VAT return and recapitulative statement. The customer in another member state is expected to declare the corresponding intra-EU acquisition and account for VAT locally.
In theory, these two declarations should mirror each other. But in practice, there are plenty of places where inconsistencies might appear.
For example:
The supplier reports an intra-EU supply, but the customer does not declare the corresponding acquisition.
The values reported by each party differ.
The transaction is declared in different reporting periods.
One party submits corrections much later, while the other does not.
When reporting is periodic and processed separately in each member state, identifying these discrepancies may take weeks or months. During that time, fraudulent schemes (such as missing trader or carousel fraud) can exploit the timing gap. Goods may move through several countries, VAT may be reclaimed at one stage, and the entity responsible for paying it may disappear before inconsistencies are detected. VIDA’s digital reporting framework aims to shorten that gap by moving toward more standardized, transaction-level data exchange between countries.
The three pillars of VIDA
So what does VIDA actually change?
Instead of introducing one dramatic reform, the EU divided the modernization effort into three connected areas, where each pillar tackles a different weak point in the current VAT system and introduces changes and adjustments to handling cross-border VAT.
Let’s unpack them one by one.
1. Digital reporting requirements (DRR)
Today, if you make an intra-EU B2B sale (for example, shipping goods from your warehouse in Germany to a VAT-registered buyer in France), you issue an invoice with 0% VAT under the intra-EU supply rules. Later, you report that transaction in your VAT return and include it in your recapitulative statement (VIES). On the other side, your customer declares the corresponding intra-EU acquisition in their country. The system is based on summary reporting, and so the tax authorities do not see the transaction when it happens. They see it only through periodic declarations submitted separately in each member state.
VIDA changes that reporting logic.
Under the Digital Reporting Requirements, certain intra-EU B2B transactions will require a structured electronic invoice that follows a standardized EU format. The key data from that invoice will need to be transmitted digitally within a much shorter timeframe than under the current VAT return model. Instead of reporting aggregated totals weeks or months after the fact, businesses will submit transaction-level data much closer to the moment the invoice is issued.
In practical terms, this means that if your company:
stores goods in one EU country and sells B2B to another,
transfers its own stock between warehouses in different Member States,
or carries out intra-EU supplies between related entities,
your invoicing and accounting systems will need to adapt, as the system generating that invoice must be capable of producing it in the required structured format, include specific mandatory fields, and be aligned with the digital reporting framework so that what is transmitted electronically matches what is later declared in VAT returns.
2. VAT Rules for the Platform Economy
The second pillar of VIDA focuses on online marketplaces and digital platforms, because that’s where a significant share of cross-border e-commerce now happens. In recent years, the EU already introduced the “deemed supplier” mechanism for certain cross-border B2C transactions, meaning when a non-EU seller uses an online marketplace to sell goods to EU consumers, the platform may be treated as if it purchased and resold the goods itself for VAT purposes. In those scenarios, the platform becomes responsible for collecting and remitting VAT.
VIDA expands and refines this framework.
One key area of change concerns situations where platforms facilitate short-term accommodation services or passenger transport, but for e-commerce sellers, the more relevant development is the broader alignment of VAT treatment when goods are sold through digital intermediaries. The intention is to reduce situations where VAT responsibility falls into grey areas between the platform and the underlying seller. Under the updated rules, in certain cross-border scenarios, platforms may be required to account for VAT even if the underlying supplier would otherwise have been responsible.
What does this mean in practice?
If you sell through marketplaces, the allocation of VAT responsibility becomes more standardized across member states. The platform may take on VAT collection obligations in more clearly defined scenarios, reducing inconsistencies between countries. However, this does not automatically remove all VAT obligations from the seller.
Your responsibilities may still include:
Properly classifying your goods,
Providing accurate transaction data to the platform,
Maintaining VAT registrations where required,
Ensuring that inventory movements within the EU are reported correctly.
In other words, even if the platform collects VAT from the final customer, your upstream supply chain and stock movements may still trigger VAT reporting obligations under EU rules.
3. Single VAT Registration
If you’ve ever structured warehousing in more than one EU country, you already know this part can get complicated. Today, the One Stop Shop (OSS) system allows you to report certain cross-border B2C sales through a single VAT registration - but the moment you start storing goods in multiple countries, you are expected to have a local VAT registration in all countries you have a warehouse in.
For example, if you hold inventory in Poland and Germany, local VAT registration is generally required in both countries—even if most of your sales are cross-border B2C. The same applies if you move your own stock from one country to another, as those stock transfers are treated as taxable transactions for VAT purposes and must be reported locally.
VIDA aims to allow certain cross-border movements of own goods to be declared through OSS instead of requiring a separate domestic VAT registration in the Member State of arrival and also expand OSS to cover a broader range of cross-border B2C supplies that currently fall outside its scope and still require local registration.
This could be particularly relevant for:
Sellers using multiple EU fulfillment centers for inventory distribution.
Businesses redistributing stock between Member States based on demand.
Companies operating centralized EU warehousing with regional stock allocation.
However, keep in mind that there will still be cases where a local VAT registration will be necessary, for example, if you sell products domestically within a European country (for example, selling goods located and delivered entirely within France to French consumers).
What this means for non-EU D2C sellers
All this legal talk and VAT regulation updates might sound a bit overwhelming, we know. But most of those changes will actually be very beneficial for non-European companies selling to the EU, such as yourself.
The thing you should be looking forward to the most is much simpler and more consistent regulations related to VAT registration and reporting, especially if you plan to sell or store your products in multiple countries.
Currently, if you'd like to, for example, rent a warehouse in France in addition to the German and Italian ones to shorten delivery times to French customers, you'll have to take care of a new VAT registration for France, prepare a new reporting workflow that meets the French law requirements, and also learn how exactly you should send the reports to the authorities. Just because you wanted to store products in France, now you have to manage three different VAT systems!
With the expansion of OSS under VIDA, you'll be able to register the warehouse operations under OSS rather than needing a full domestic registration in every country involved. What's more, since the VAT reporting formats, filling timeline, and methods of delivering the VAT reports will be (mostly) unified across several countries, you won't have to spend several hours (or maybe even days) filling three types of VAT reports using three different local platforms. Since we don't know the details of how exactly the standardization will look like, there might be some minor differences in reports between countries, - but you will no longer have to fill three or five separate VAT reports just because you have a warehouse in those countries.
Fulfilling the Digital Reporting Requirements (DRR) will require some upfront preparation, but as a benefit, you'll have much better visibility into tax reports, which will help you notice and correct any discrepancies early—not during yearly VAT audits or cross-border data checks, when the last thing you want to hear is that tax authorities want you to explain and correct issues in your reports. Your reports will be, as a result, much cleaner as well.
Long-term, all those changes will also make it easier to expand your e-commerce brand to other countries within European Union.
How to prepare for implementing ViDA?
VIDA simplifies the reporting structure—but only if your data is already structured correctly. Because reporting will become more digital and closer to the time of the transaction, errors won’t sit unnoticed until the end of the quarter. So what does “preparation” actually mean?
Before VIDA becomes fully operational in your setup, you should review three specific areas.
1. How your system records intra-EU stock transfers
If you move inventory between EU warehouses, those transfers must be recorded in your system as intra-EU movements of own goods. They should not appear as regular sales, and they should not be treated as neutral internal stock relocations without VAT implications.
In accounting terms, that means your system must automatically:
Recognize the movement as a deemed intra-EU supply in the country of departure,
Record the corresponding intra-EU acquisition in the country of arrival,
Apply the correct VAT codes to both sides of the transaction,
and ensure that these entries feed into the correct VAT reporting fields.
If stock transfers are currently handled through manual journal entries, spreadsheet adjustments, or end-of-period corrections, the risk of inconsistencies increases. Under digital reporting requirements, transaction data is transmitted closer to the time of movement. That leaves less room for retroactive corrections and reconciliation fixes at the end of the month or quarter.
2. Whether your invoicing system can generate structured electronic data
VIDA introduces structured e-invoicing for certain intra-EU transactions, and if your invoices are currently generated only as PDF documents, your system may not yet meet the new technical requirements. Under structured e-invoicing, an invoice must contain standardized data fields in a machine-readable format, such as supplier and customer VAT numbers, transaction values, VAT treatment, supply classification, and date, all organized according to a predefined structure.
This means your ERP or accounting software must be able to:
generate invoices in the required electronic format, and
ensure that the VAT data in those invoices matches what is reported digitally to tax authorities.
If your current setup relies on manually created invoices or basic PDF exports, adjustments may be necessary to comply with the structured reporting framework.
3. How marketplace and direct sales are separated in your VAT reporting
If you sell partly through marketplaces and partly through your own website, VAT responsibility may differ depending on the sales channel. Your reporting setup must clearly distinguish between:
Transactions where the platform accounts for VAT as a deemed supplier, and
Transactions where you remain responsible for collecting and reporting VAT.
If those flows are merged under one VAT logic, reconciliation becomes difficult — especially under more detailed digital reporting.
ViDA directive will make many things easier, but you need to prepare your business for it
If you’re entering the EU market as a non-EU e-commerce brand, you’re already dealing with a lot: VAT registrations, warehouse planning, shipping structures, and marketplace rules. ViDA isn't here to give you even more rules and requirements to follow - in fact, it's going to make one of the most tedious parts of running a business much more straightforward for you.
But this will only work in your favor if you do your due diligence and adjust your current setup to ViDA requirements earlier, such as checking if your invoicing system can support structured electronic reporting and if it includes all necessary data fields. Do it while you still have ample time for adjustments, as finding the right invoice and reporting provider after ViDA launches might be far easier to do - and definitely much more stressful.
