Complex VAT compliance across the EU is costing businesses, technology that simplifies it presents a solution for the now.
The EU’s Single Market was built on a simple premise: businesses should be able to trade across borders with fewer barriers, lower costs and greater competitiveness in the global market. Tax, however, remained largely in the hands of individual member states.
In practice, the administration behind cross-border trade is anything but simple. VAT compliance still operates across 27 national systems, each with its own rules, processes and technical requirements, with limited common ground between them.
Johannes Ferner, founder and CEO of fiskaly, argues that the direction of travel is no longer in doubt. The real question is how businesses navigate the waters until unifying regulation takes effect.
Where fragmentation actually bites businesses
At the start of 2026, the European Parliament described the current tax situation as undermining the single market, with “legal uncertainty, administrative complexity and divergent national practices as persistent obstacles to cross-border activity.”
Germany for example is already some way into its phased B2B e-invoicing mandate (Wachstumschancengesetz), and the UK, now outside the single market but still a trading partner for most of it, is rethinking its approach to invoicing with the yet-to-be-defined e-invoicing framework.
While these nations continue with their own regulation changes, the big policy revolution at the EU level is also ongoing, with ViDA (VAT in the Digital Age) adopted in March 2025. ViDA makes digital reporting mandatory for cross-border B2B transactions from July 2030.
It is a step in the right direction, but it is also five years away, and narrower in scope than it might sound.
Extending the same requirements to domestic transactions remains a decision for individual member states, while fiscalisation – the process of recording sales at the point of sale – sits outside ViDA altogether. Each country continues to set its own requirements, technical standards and implementation timelines. A business selling into five European markets can therefore still face five separate fiscalisation regimes.
The distinction matters: digitising tax reporting does not necessarily simplify the rules businesses must follow, but it is becoming part of the operational infrastructure required to do business across Europe.
The true business impact of fragmentation
The European Commission’s own study of tax compliance costs illustrates the imbalance. A micro business spends around 1.9% of its turnover complying with its tax obligations. For a large company the figure is 0.1%.
The same rules, costing the smallest firms around nineteen times as much when measured against what they actually earn, which discourages smaller businesses from engaging in cross‑border activity and undermines the Single Market.
This study predates much of the current wave of e-invoicing mandates, so it may even understate the challenge businesses face today.
As companies offer more products and services in more countries, the reward should be added income. However, the compliance complexity also multiplies, increasing cost and eroding the benefits of growing their customer base.
These added costs come in multiple forms:
- Direct cost and resource drain – with more systems and regulations, teams must spend time focusing on ongoing compliance, rather than on growing as a business.
- Error and audit risk – with an increasing list of inconsistent interpretations and changing rules across nations, the chance of mistakes and disputes grows, bringing with it penalties that could undo years of steady growth.
- Growth friction – the burden can be high enough that firms delay launches or limit market entry altogether.
For many small businesses, the complexity is largely hidden. They rely on their point-of-sale provider, accounting software or payment technology to handle the requirements behind each transaction. But that complexity does not disappear; it shifts to the companies building and maintaining those systems.
A POS provider operating across five European markets may need to support five sets of technical requirements and implementation deadlines. In this sense, the technology layer between businesses and national tax authorities becomes critical.
What closing the gap actually takes
With mandates arriving on their own schedules, VAT compliance becoming a level playing field will take some time.
There are two approaches to handle that. One is to treat each market as its own project, with its own integration, vendor and renewal date. The other is to treat compliance as a single layer sitting underneath every market, extended as the business grows. Most companies never choose deliberately. They solve the first country in front of them, and the decision is made by the time anyone recognises it.
The difference shows up as a business expands. Under the first model every new market is another build, so growth and compliance cost rise together. Under the second, the next regime is a configuration rather than a rebuild, and the cost of entering a market falls as more of them are already supported.
The sharper difference is what happens when nothing is added at all. A project ends. A regulation does not. Every market a business already operates in can revise its requirements independently of the others, which means the maintenance burden of the first model grows even in years when the business enters nowhere new. That is a cost which tends to be discovered rather than planned for.
It also changes market entry decisions. When compliance is a project, entering a country is a technical commitment before it is a commercial one, and whether a market is worth serving gets answered partly by how much work it would take. When compliance is a layer, that question returns to a commercial one.
This is what lets compliance run in the background of an operation rather than in front of it, so attention can stay on growth and on the markets a business actually wants to be in.
What should business leaders do now
For business leaders who are staring down an increasing list of VAT compliance challenges, the answers they need now sit in technology solutions that support business operation without complicating processes.
CFO’s and COO’s should audit their existing tax stack to check for duplication across jurisdictions, prioritising tools that provide greater interoperable data and reduce national complexity.
As ViDA rolls out, the winners will be those that treat compliance as an opportunity, rather than a country-by-country project that becomes more complex with each new area of operation.
The competitiveness of businesses operating across Europe depends on making cross‑border activity routine. With policies being suggested and rolled-out at varying speeds, unified, interoperable technology is the best lever available to them right now.
About the Author
Johannes Ferner is CEO and co-founder of fiskaly, which helps to solve compliance challenges at the Point of Sale and checkout. Before founding fiskaly, which is based in Vienna, Austria, he worked in IT consulting and venture capital. His expertise spans tax compliance, regulatory technology, and helping cross-border businesses navigate fragmented fiscal rules across the EU and beyond.
