Written in cooperation with the VAT department of Grant Thornton Netherlands
The European Union’s VAT in the Digital Age (ViDA) package is often described as an e-Invoicing and digital reporting reform. That is true, but it understates the changes it creates for businesses.
The more significant shift is where VAT compliance happens.
As structured e-Invoicing and digital reporting become more embedded in the transaction lifecycle, VAT compliance is moving closer to the point at which a transaction is created. Tax decisions, customer and product data, ERP processes, invoice generation, validation, transmission, reporting and audit evidence are becoming increasingly interconnected.
ViDA was adopted in March 2025 and will be rolled out progressively through January 2035. From 1 July 2030, the Digital Reporting Requirements will apply to intra-EU cross-border B2B transactions, with e-Invoicing becoming the basis for reporting. Member States also have options around domestic e-Invoicing and digital reporting regimes.
The UK is following a separate but related digitalisation journey. The government has confirmed that VAT e-Invoicing will become mandatory from April 2029, with further implementation details and technical specifications to follow. Peppol has also been announced as the core interoperability network for the UK’s e-Invoicing regime.
For organisations operating across both markets, the strategic question is therefore no longer simply:
“Are we ready for e-Invoicing?”
It is:
“Can we connect the right tax decision to the right transaction data, execute it consistently, report it correctly and retain evidence of what happened?”
That is why ViDA readiness requires both VAT expertise and technology automation, working together across a single compliance lifecycle.
What ViDA Means for UK and EU Businesses
ViDA does not create a single, identical e-Invoicing regime across every EU country. It is a broader package covering Digital Reporting Requirements, the platform economy and Single VAT Registration, with different implementation milestones and options for Member States.
For businesses, however, one shift stands out: VAT information will become increasingly structured and connected to the underlying transaction.
Historically, many VAT controls have operated downstream. A transaction is completed, an invoice is issued, accounting information is consolidated and tax teams subsequently review the information during VAT return preparation or reconciliation.
Digital reporting increases the importance of what happens upstream.
If transaction information is expected to support digital reporting, weaknesses in master data, tax codes, classifications or ERP configurations can surface much earlier in the compliance lifecycle.
This makes ViDA a control-point shift, not simply a document-format change.
The business outcome is significant: organisations that improve the quality of transaction data and controls at the source can identify errors earlier, reduce downstream corrections and create stronger traceability between the transaction and the eventual VAT position.
Why UK Businesses Also Need to Prepare
UK businesses are not subject to ViDA simply because they operate from the UK. However, UK groups with EU subsidiaries, VAT registrations or cross-border operations may need to manage ViDA alongside the UK’s own e-Invoicing requirements.
For multinational organisations, this creates an opportunity to think beyond country-by-country compliance.
Instead of creating isolated processes for each of the upcoming e-Invoicing mandates, businesses can establish common capabilities around data, integration, validation, connectivity, reporting and controls, while allowing local rules to be configured where required.
The outcome is not only compliance with individual mandates, but a more scalable architecture for managing regulatory change across markets.
For many businesses, the first step is not to select an e-Invoicing tool, but to understand where ViDA and related domestic requirements actually touch the organisation. As Grant Thornton Netherlands’ ViDA specialists Aiki Kuldkepp and Ygrain Post highlight, this starts with understanding the regulatory impact across the business before moving into technology decisions. That requires a structured review of legal entities, VAT registrations, transaction flows, customer and supplier relationships, ERP landscapes and cross-border activities.
UK and EU businesses should assess whether they have EU subsidiaries, local VAT registrations, intra-EU B2B flows, domestic transactions in Member States with existing or upcoming digital reporting rules, or platform economy activities that may be affected by future changes. The impact may differ by country, entity and transaction type.
This assessment also helps identify where VAT risk sits in the current process. For example, inconsistent tax codes, unclear place of supply logic, manual invoice adjustments or incomplete master data can all become more visible once reporting moves closer to the transaction.
A regulatory impact assessment should therefore come before technology selection. It gives the business a clear view of what is in scope, which risks need to be controlled and what the future solution actually needs to support. Grant Thornton’s ViDA experts can help businesses perform this assessment and develop a practical roadmap for implementation.
Why ViDA Is More Than a Technology Project
Once an organisation understands how it is affected, the next question is:
What should actually be automated?
The answer cannot begin with an invoice format or connectivity requirement.
It begins with the tax position.
Technology can execute a defined VAT treatment at scale. It cannot replace the need to determine whether that treatment is correct.
Before automation, businesses need clarity on issues such as place of supply, customer and supplier status, product or service treatment, exemptions, reverse charge and cross-border transaction rules.
These decisions become the foundation for the processes, data and system rules that follow.
Correct VAT Rules Must Come First
A technology programme can generate thousands of structured invoices efficiently. However, if the underlying tax logic is incorrect, automation simply scales the error.
A stronger approach connects the tax decision to the technology requirement:
VAT treatment → business rule → data requirement → ERP configuration → invoice field → validation → reporting
This creates an important business outcome: tax policy becomes operational rather than remaining confined to documentation or manual controls owned solely by the tax function.
The organisation can move from asking whether employees know the correct VAT treatment to asking whether the correct treatment is consistently embedded in the transaction process.
What needs to be decided before automation
Before a business can automate its VAT compliance process, it needs to decide what the correct VAT outcome should be for transactions. Automation is only effective where the underlying tax logic is clear, documented and capable of being translated into business rules.
This means reviewing the VAT determination logic for relevant transaction flows, including place of supply, customer status, supplier status, exemptions, reverse charge rules, special schemes, VAT rates and country-specific requirements. It also means mapping how those decisions are currently made in practice and whether they are supported by reliable master data, tax codes and ERP settings.
From a VAT risk perspective, this is where advisory input is critical. If the tax treatment is unclear, inconsistent or dependent on manual judgment, automation may simply repeat the same weakness at scale. The objective is to define the required VAT treatment, identify control gaps and convert the tax position into practical requirements for systems, data, validation and reporting.
In that way, VAT advisory becomes the bridge between regulation and execution.
A Valid Digital Invoice Can Still Have Tax Errors
One of the less obvious challenges in digital VAT compliance is that technical validity does not guarantee tax correctness.
An electronic invoice can contain all the required fields, comply with the relevant structure and pass technical validation while still reflecting an incorrect VAT treatment.
For example, the underlying transaction could have the wrong tax code, VAT rate, exemption reason or classification.
This creates two different control questions:
Technical validation: Is the invoice structurally correct and ready for exchange?
Tax validation: Does the invoice accurately represent the underlying transaction and VAT treatment?
A mature compliance environment needs to address both.
This is also why master data is becoming a strategic compliance issue.
Customer and supplier classifications, product information, VAT codes, rates and transaction attributes influence what eventually appears on the invoice and what subsequently feeds into reporting.
The more automated the process becomes, the more important those inputs become.
Automation does not remove the need for control. It moves control closer to the transaction.
The business outcome is earlier error detection. Instead of discovering a VAT issue during a later reconciliation or audit exercise, businesses can identify and address the issue before the transaction progresses further through the compliance lifecycle.
Where VAT Advisory Adds Value
The role of VAT advisory is not simply to interpret the regulation.
It is to help translate regulation into a business-specific compliance model.
Understanding Which Businesses and Transactions Are Affected
The impact of digital VAT requirements depends on the organisation’s legal structure, VAT registrations, countries of operation, transaction types, supply chains and systems.
A meaningful readiness assessment therefore needs to ask more than whether the organisation “needs e-Invoicing”.
It needs to establish:
- Which entities are affected?
- Which transaction flows are in scope?
- Which VAT treatments need review?
- Where are manual controls being used?
- Which country-specific requirements apply?
- Where are the highest compliance risks?
The outcome is a prioritised roadmap rather than a generic compliance programme.
Managing VAT Risk, Controls and Country Rules
Digital reporting also increases the importance of governance.
Tax, finance, IT and operational teams need clear ownership of VAT rules, data, system configuration, exceptions and regulatory change.
For multinational organisations, the challenge is balancing common controls with local requirements.
The objective is not to eliminate every country-specific difference. It is to create a framework in which those differences can be understood, controlled and maintained without fragmenting the wider compliance environment.
From regulatory requirements to operating model
As the team Grant Thorton – Netherlands suggests, ViDA readiness is not only about meeting technical reporting obligations. It also requires businesses to define how VAT decisions will be governed, maintained and monitored once digital processes are in place.
A strong operating model should clarify ownership across tax, finance, IT and operational teams. Tax teams need to own the interpretation of VAT rules and risk decisions. Finance and operational teams need to understand how those rules affect transaction processing. IT teams need to translate approved requirements into system configuration, data flows, validations and reporting outputs.
This governance becomes particularly important for multinational businesses, where requirements may differ between countries. The aim is not to create a separate process for every jurisdiction, but to build a controlled framework that allows local differences to be identified, approved, implemented and monitored.
Internal controls should also remain visible after implementation. Businesses need a process for managing regulatory change, reviewing exceptions, updating VAT logic and confirming that changes have been correctly reflected in systems. This helps ensure that VAT risk remains controlled as both the business and the regulatory environment evolve.
Where Automation Makes Compliance Work
Once the tax position and operating model are defined, technology becomes the execution layer. This is where Cygnet.One brings the technology perspective, helping businesses translate defined VAT requirements into connected, automated and scalable compliance processes.
As Niraj Hutheesing, Managing Director at Cygnet.One, highlights, the objective is not simply to digitise the invoice, but to connect the complete transaction-to-compliance lifecycle.
A ViDA-ready solution should connect the transaction, invoice, exchange, reporting, reconciliation and evidence lifecycle.
Connecting ERP Systems and Creating Digital Invoices
ERP and finance systems remain the source of much of the commercial and accounting information required for invoicing.
ERP integration for VAT compliance therefore needs to extract relevant data, transform it into the required structure, apply validation and return status information to the relevant business systems.
A typical invoice-to-VAT journey may look as follows:
ERP / Finance System
↓
Data extraction and mapping
↓
Tax and data validation
↓
Structured e-Invoice generation
↓
Technical validation
↓
Peppol / permitted exchange mechanism
↓
Customer / network response
↓
Digital reporting
↓
VAT reconciliation
↓
Audit trail and monitoring
This changes the role of the invoice.
It is no longer simply a document sent to a customer. It becomes a structured data object moving through a chain of compliance controls.
The business outcome is greater process continuity: information created at the transaction stage can flow through invoicing and reporting without repeatedly being recreated or manually reconciled.
Managing Peppol, Validation, Reporting and Record Keeping
Connectivity is only one part of the process.
A solution also needs to manage validation, transmission status, responses, reporting and exceptions.
Consider a rejected invoice.
In a manual environment, identifying the failure, determining its cause, correcting the data, resubmitting the invoice and checking the downstream reporting impact can require several teams.
In a connected architecture, the exception can become part of a defined workflow:
Detect → identify cause → route → correct → resubmit → confirm → update records
The outcome is not simply faster processing.
It is controlled exception management, with greater visibility into where transactions are failing and whether they have been resolved.
The same principle applies to VAT reporting.
Where digital reporting requirements rely on transaction data, the business benefits from being able to trace reporting information back to the originating transaction and invoice.
This creates a stronger chain of evidence:
Transaction → Invoice → Exchange → Report → VAT records → Audit evidence
Security, Hosting, GDPR and Data Governance
A connected VAT architecture also needs to protect the information moving through it.
E-Invoicing environments can connect ERP systems, customers, suppliers, service providers, exchange networks and tax authorities. Depending on the transaction, personal data may also be included in the information being processed.
Security and privacy should therefore be considered as part of solution design, alongside functional compliance.
Areas such as encryption, access controls, secure transmission, audit logging, retention, hosting arrangements, data governance and third-party controls should be assessed as part of the overall architecture. Where GDPR applies, organisations also need to consider the appropriate processing, protection and retention of personal data.
The outcome is broader than cybersecurity.
A well-governed compliance architecture gives businesses greater confidence that sensitive transaction information is protected, traceable and controlled throughout its lifecycle.
Why Advisory and Automation Must Work Together
The strongest ViDA operating model does not treat advisory and technology as two sequential projects.
It connects them across the lifecycle.
Consider a change in VAT treatment.
Advisory determines how the regulation affects the business. That decision then needs to become an operational requirement.
Technology then translates that decision into:
Tax interpretation → business rule → system configuration → transaction data → invoice → validation → reporting → evidence
If the chain stops with advisory, the business may understand what should happen but struggle to execute it consistently.
If technology is implemented without the right tax interpretation, the organisation can automate an incorrect outcome.
The real business value comes from integrating the two.
Advisory Explains What Must Change
Advisory provides the regulatory interpretation, tax assessment, risk perspective and governance framework.
Automation Makes the Change Repeatable
Technology translates those decisions into system rules, data requirements, validation controls, workflows, connectivity and reporting.
This also changes how businesses should think about future regulatory change.
A new mandate, tax treatment or reporting requirement should ideally become a managed configuration and change process, rather than trigger a new technology implementation.
That requires architecture that can accommodate changes to rules, mappings, invoice structures, validations, reporting requirements and connectivity.
The outcome is adaptability.
Instead of repeatedly rebuilding compliance processes as regulations evolve, businesses can change the relevant components while retaining the underlying architecture.
A successful ViDA readiness programme depends on bringing tax interpretation and technology execution together from the start. From a Grant Thornton Netherlands perspective, the first priority is to understand the regulatory impact on the business: which entities and transactions are in scope, what VAT treatments are required, which risks need to be controlled and what governance model is needed to maintain compliance over time.
Those decisions then need to become operational. From a technology perspective, the agreed VAT treatment must be translated into data requirements, system rules, invoice fields, validation logic, workflows, reporting outputs and audit evidence. This is where automation turns a tax decision into a repeatable process.
The connection between advisory and technology is critical because every regulatory decision drives a technology requirement, and every technology configuration carries a tax consequence. If these workstreams are separated, the business may either understand the rule but fail to execute it consistently, or automate a process that does not reflect the correct VAT position.
The strongest approach is therefore integrated: define the tax outcome, build the system logic around it, monitor the process and adapt it as requirements change.
A Practical ViDA Readiness Plan
Readiness does not need to begin with a technology implementation.
It should begin by understanding the current state and identifying where tax, data, process and technology dependencies exist.
1. Map the Business and Transaction Landscape
Identify relevant legal entities, VAT registrations, jurisdictions, ERP systems, transaction types and cross-border flows.
Outcome: A clear view of where requirements apply and which transaction flows need attention.
2. Assess Tax, Data and Control Gaps
Review VAT treatments, master data, tax codes, invoice fields, existing controls and reporting processes.
Ask:
- Is the VAT treatment clearly defined?
- Is the required transaction data available?
- Is master data reliable?
- Can the ERP provide the required information?
- Where are manual controls currently used?
- Which exceptions require human intervention?
Outcome: A prioritised view of the gaps that could prevent reliable transaction-level compliance.
From a Grant Thornton – Netherlands perspective, ViDA readiness should start with a regulatory and VAT risk assessment rather than an implementation project. Businesses first need to understand which legal entities, VAT registrations, countries, transaction flows and business processes are affected. This provides the basis for identifying where the current compliance model may need to change.
The next step is to assess gaps in VAT treatment, master data, ERP configuration, invoice content, controls and reporting processes. This should include areas where manual review is currently relied upon, where tax codes are inconsistently applied or where ownership between tax, finance and IT is unclear.
The outcome should be a practical roadmap that connects regulatory requirements to the business operating model. That roadmap should define the target VAT control framework, clarify ownership, prioritise risk areas and set out what the technology solution needs to support.
This approach helps ensure that readiness is not limited to producing digital invoices, but supports a controlled, scalable and adaptable VAT compliance model.
3. Build the Technology Architecture
The technology assessment should determine how ERP systems, data, e-Invoicing, validation, exchange, reporting, VAT reconciliation and audit records will connect.
The objective should be a scalable architecture that supports multiple jurisdictions without creating unnecessary country-by-country integrations.
Outcome: A reusable compliance foundation that can support current requirements while accommodating future regulatory change.
4. Test the Full Invoice-to-VAT Journey
Testing should not stop when an invoice is successfully generated.
It should cover:
Transaction creation → VAT determination → invoice generation → validation → transmission → response → reporting → reconciliation → exception handling → audit evidence
Testing should include standard transactions as well as rejected invoices, missing data, incorrect tax treatments, connectivity failures and correction scenarios.
Outcome: Confidence that the compliance process works end-to-end, not just at the point of invoice creation.
5. Launch, Monitor and Adapt
Compliance should continue to be monitored after go-live.
Businesses need visibility into transaction status, exceptions, reporting and regulatory changes.
A mature solution should help answer:
What failed? Why did it fail? Who needs to act? Has it been corrected? Has the correction flowed through to reporting and records?
Outcome: Compliance becomes an ongoing operational capability rather than a one-time implementation.
Conclusion: Build ViDA Readiness on Adaptability, Not Just Compliance
ViDA is often discussed through its deadlines, e-Invoicing requirements and Digital Reporting Requirements.
For business leaders, the more important change is structural.
VAT compliance is moving closer to the transaction.
That means the quality of a VAT outcome increasingly depends on the connection between tax policy, transaction data, business processes, ERP systems, electronic invoicing, reporting and controls.
Advisory expertise helps determine the right tax treatment, assess risk and establish governance.
Technology makes those decisions repeatable across transactions, entities and jurisdictions.
The opportunity is therefore broader than preparing for another compliance deadline.
Businesses can use ViDA and the wider move towards digital VAT to build a connected, controlled and adaptable VAT operating model.
The organisations that approach readiness this way will not simply be prepared when a mandate takes effect.
They will be better equipped to detect errors earlier, reduce manual intervention, strengthen auditability, manage regulatory change and scale compliance across markets.
ViDA readiness is ultimately not about digitising invoices. It is about creating a connected, controlled and adaptable VAT compliance lifecycle.
Author
Niraj Hutheesing
Founder & MD, Cygnet.One
Niraj Hutheesing is the Founder and Managing Director of Cygnet.One, leading the company’s global vision across tax technology, compliance transformation, and AI-enabled enterprise solutions.
With extensive experience in building and scaling technology businesses, he has steered Cygnet.One through multiple phases of digital evolution, from enterprise technology services to advanced platforms for e-Invoicing, VAT compliance, finance automation, and regulatory reporting.
Niraj believes compliance is evolving from a statutory requirement into a strategic enabler of business transformation. His focus is on helping enterprises build more connected, accurate, and intelligent finance and tax operations through scalable technology, deep domain expertise, and responsible AI.
As digital tax and e-Invoicing transformation accelerates across Europe, particularly in markets such as France, Germany, Belgium, and Poland, Niraj continues to champion secure, auditable, and future-ready solutions that help organisations navigate evolving regulatory requirements, simplify compliance, and build a stronger foundation for sustainable growth.
Co-Authors
Aiki Kuldkepp
Senior manager Tax
Aiki is a Senior Manager at Grant Thornton Netherlands with over 20 years of international tax experience, specialising in indirect tax, VAT, customs, and tax technology. She has advised businesses across multiple jurisdictions and contributed to VAT automation and tax technology solutions. Aiki holds a doctoral degree in taxation and is an accomplished author of books and publications on European VAT and international taxation.
Ygrain Post
Manager Indirect Tax Technology
Ygrain is a tax and technology professional focused on developing innovative computational tax solutions. With experience at a Big Four firm and an international law firm in Amsterdam and New York, he/she brings a multidisciplinary perspective to VAT and tax technology. Ygrain holds a Master’s degree in Tax Law from Erasmus University and has also completed a Tax & Technology course at Tilburg University.