On November 9, the Serbian Ministry of Finance published a Draft Law on Amendments to the Law on Electronic Invoicing. The main changes concern:

  1. Scope: Natural persons who are not liable for income tax from self-employment in the sense of the law governing personal income tax will be excluded from the provisions of this law.
  2. Obligation on public sector entity: Public sector entities will have an obligation to receive an e-invoice from the foreign supplier, however that will only be applicable “after the establishment of technical and technological conditions in the system of electronic invoices”.
  3. Delivery of an invoice: In case there will be a temporary interruption in the operation of the electronic invoice system, the electronic invoice will be considered delivered at the time of re-establishment of the operation of the electronic invoice system.
  4. Postponement of the obligation: One of the provisions from the Draft Law is intended to apply from June 1, 2023, concerning the electronic invoice, which is issued and received in accordance with the Serbian standard of electronic invoicing.

The Draft Law envisages January 1, 2023 as the entry into force date.

New bookkeeping law – Lov om bogføring

On 19 May 2022, the Danish Parliament passed a new bookkeeping law – Lov om bogføring – introducing requirements for companies to use a digital bookkeeping system.

Section 16 of the Law requires many Danish companies to use a digital bookkeeping system and make their bookings electronically. The final deadline is yet to be announced but is expected to be July 2024, with the Danish Business Authority announcing they will give businesses enough time to comply with the e-bookkeeping requirements.

Scope of Denmark’s bookkeeping law

The subjective scope of the digital bookkeeping requirements covers all companies in Denmark that are liable for accounting according to section 3(1) of the Financial Statements Act. Moreover, other companies whose net turnover exceeds DKK 300,000 in two consecutive income years are subject to digital bookkeeping requirements. Finally, the rules cover bookkeepers and others who carry out bookkeeping for other companies.

These companies will be required to record company transactions and store records in a digital bookkeeping system. Companies can use a digital bookkeeping system registered with the Danish Business Authority, Erhvervsstyrelsen, or any other bookkeeping system. However, companies who choose the latter option must ensure their systems meet the requirements according to Law for digital bookkeeping systems.

Potential e-invoicing mandate and PEPPOL

While the new bookkeeping law doesn’t introduce any mandatory e-invoicing or continuous transaction controls (CTC) obligations for businesses, it is envisaged that the digital bookkeeping systems must support continuous registration of the company’s transactions and the automation of administrative processes. This includes automatic transmission and receipt of e-invoices.

This requirement was further detailed in the draft executive order on requirements for standard digital bookkeeping systems, which outlines that the taxpayers:

Moreover, the new bookkeeping law authorised the Minister for Industry, Business, and Financial Affairs to introduce rules:

(a) that require companies to record their transactions regarding purchases and sales with e-invoices as documentation of the transactions,

(b) on transmission of records by digital bookkeeping systems to a public receiving point through the shared public digital infrastructure for the exchange of e-documents and the storage of such records.

What’s next for Denmark?

Although Denmark’s e-invoicing journey is still in the early phases, it seems that the new bookkeeping law and requirements for digital bookkeeping systems lay the foundation for a future e-invoicing mandate to be duly introduced by the Minister for Industry, Business, and Financial Affairs.

It will be interesting to see how and when Denmark’s plans for e-invoicing will take shape and be affected by the upcoming results from the EU Commission on the VAT in the Digital Age project.

Need help for E-invoicing in Denmark?

If you have any question about Denmark’s new bookkeeping law or e-invoicing requirements in Denmark, please reach out to us: Speak to our tax experts.

Suriname is introducing a new VAT system that will replace the current sales (turnover) tax. A 10% VAT rate will come into effect on 1 January 2023. Businesses with annual taxable turnover exceeding SRD 1 million are required to register and others may voluntarily register.

Non-resident suppliers providing digital services to non-taxable persons in Suriname will also be required to collect and remit VAT on their supplies if their annual turnover exceeds SRD 500,000.

 

It’s a good year to be an IT leader. After far too many years of the phrase “do more with less” being the mantra of most organizations when it came to technology spending, things are finally looking up.

According to research firm Gartner, IT spending will reach an estimated $4.5 trillion in 2022. This represents a 5.1% increase over 2021 and is a much-needed boost for businesses in need of technology updates that may have been placed on the backburner due to the COVID-19 pandemic.

IT departments are also eager to switch focus from just keeping things afloat to more long-term projects that will strategically and successfully support the future of work. This assertion is backed by numbers provided by IT management solutions firm Flexera in its State of Tech Spend Report.

When asked where budgets were being allocated to this year, 54% of those surveyed expected increased investment and resources to be applied to technology that makes it easier and more seamless for employees to work from home. Another 42% of those surveyed stated a newfound willingness to move to the cloud to support the realities of a post-pandemic world. Participants in this survey were all executives and high-level managers in IT with significant knowledge of their organizations’ overall IT budgets, weighed in on what to expect in the year to come.

These findings show the level of importance businesses are putting on hybrid and flexible work environments. The likelihood that working from home, at least in some capacity, is here to stay has IT departments rethinking their strategies to be prepared to tackle any challenges that may arise.

Could the Government Stand in the Way?

The strategies being outlined by IT departments are sound and inline with the world in which we now exist. However, there is another post-pandemic force at work with the potential to derail the best laid plans and devour a vast amount of budget and resources. Government mandated e-invoicing.

If you work as an IT leader at a multinational company, you likely fall into one of the two following categories. One, you’ve been brought into deal with the new realities of real-time oversight and enforcement from regulatory authorities. Or two, you are about to be brought into the fray with your own internal mandate, solve this problem for good.

Why am I so definitive in this declaration? Because I work with some of the biggest brands on the planet and I am witnessing firsthand the impacts these mandates are having on their IT organization.

When it comes to IT projects, most are not reactionary but the result of careful and methodical planning over a long period of time. However, the government is changing the rules here. No longer are projects and upgrades on your timeline. When they implement new laws and mandates it’s either you move quickly to address the issue and make it right or you pay the consequences which can range from hefty fines to even losing your license to operate.

What Does This Mean for Me?

As government mandated e-invoicing laws quickly ramp up around the world, they represent a credible threat to your IT budgets. IT departments must be prepared for the new realities that accompany government mandated e-invoicing. With authorities now in the data stack of your businesses examining transactions in real-time as they traverse your network, you will need a solution that enables you to deliver the information in the format required in real-time.

Bottom line, compliance is no longer a tax issue. IT leaders and other senior leadership must work together to align business functions across the board. IT needs to ensure the resources and tools are in place to meet government mandated obligations, no matter the company’s industry or location.

A failure to address the problem early will only lead to more complex and costly problems down the road that will absorb critical budgets and resources earmarked for other priority projects.

Take Action

If you aren’t sure where to start in building your strategy, reach out to our experts.

It might not quite be THAT red phone that’s ringing, but rest assured, management is currently dealing with a serious problem, and they are looking at IT to solve it for them.

There are two things that make Boards and C-Suites nervous beyond all else. Risks that have the potential to impact the bottom line and company/brand reputation. This current issue can do both and fast if not dealt with timely.

I’m talking about government tax mandates.

Now you may ask, haven’t government mandates been around for decades? Why the urgency now? Yes, they have been around for a long time, but they have never existed in their current form or had the ability to impact your operations so quickly.

Allow me to explain. In the past, organizations around the world were required to report on transactions after the fact and pay the amounts they were legally obligated to pay. If they didn’t, the government might get around to auditing them a few months or years down the road and assess a penalty if things were found to be out of order. In the grand scheme of things, it was a minor inconvenience for businesses and not a real deterrent for having faulty processes or negligence.

That all began to change a few years back when governments began looking at a tax gap that was growing with no easy solutions to reign it in. Think I’m exaggerating? According to the 2021 report on the VAT Gap issues by the European Commission, in 2019 alone EU countries lost out on €134 billion in Value-Added Tax (VAT) revenues legally owed to them by businesses.

This was a wake-up call to every country that employs the VAT system of taxation anywhere in the world. Not only were they losing out on much needed revenues, but the problem was growing worse. Something needed to be done and done fast or they wouldn’t be able to fund vital programs in their countries.

Fast forward to today. Countries have taken a serious look at the problem and have decided that technology is the answer. They have invested heavily in digitization and have brought their capabilities not only up to par with business, but in many cases, probably for the first time in history, have surpassed the capabilities of private industry to monitor and report on financial transactions.

Today, there is no more reporting after the fact. Governments have set up shop right in your data stack and are reviewing transactions in real-time. And with real-time monitoring has come real-time enforcement. If you are not reporting the information the way the government has mandated, you can expect swift action ranging from expensive fines right up to the revocation of your business license in that country. Both would be devastating shots to your company’s financial outlook and reputation.

This is why there is so much urgency to get IT on board and have a strategy to address the issue on a global basis. Things are only going to get more complicated and the ability to scale systems to meet changing tax mandates in all places you do business has become a top priority for companies.

It’s a new world out there as far as VAT is concerned and this is a lot to come to terms with. If this is new information to you or you are in the process of coming to terms with how it impacts your organization, I’d encourage you to remember and share the following five things with your colleagues:

1. The government is in your data

Real time tax reporting is becoming the new norm for businesses worldwide. Governments are no longer satisfied with receiving data after the fact and are now requiring a permanent presence in your data stack.

2. Government data mandates are taking control away from companies  

With government mandated e-invoicing taking the world by storm, businesses are left with little time to prepare for this shift. To remain operational and comply with these mandates, IT must create a strategy to ensure that they are meeting mandate obligations while keeping with the parameters of long-term plans and budgets.

3. Data mandates are moving and evolving quickly  

As governments are rapidly moving towards mandated e-invoicing implementation, organizations are now faced with an extremely short window to update their tax codes and mandates. For IT departments, overseeing and executing these changes will become one of their top priorities.

4. Data mandates lack consistency from country to country  

For international organizations staying up to date on new processes, technologies and regulations are all essential components to running a successful business. However, the different approaches being adopted by each individual regulatory authority are causing a lot of uncertainty for businesses. The challenge for IT is to create the infrastructure that allows the business to meet the individual mandates of each country’s regulatory authority, while also integrating with one another to provide a real time global dashboard of the organization’s compliance status.

5. Governments have increased the severity and speed of enforcement

Tax authorities are becoming more aggressive than ever to close tax gaps. With the use of digital tools and processes, governments can quickly expedite compliance and track tax fraud effectively. In today’s digital world, penalties can be swifter and more severe than in the past. IT needs to ensure that transaction data is presented to regulatory authorities in the format and time frame they demand.

I’m hopeful this information will give you some things to think about as you work through the changing realities of global tax mandates.

Take Action

After reading this, if you have questions, feel free to reach out to our experts.

Staying ahead of IPT rules and regulations is a constant challenge, and specialist knowledge is necessary. Ever-changing jurisdictional requirements add to the stress of compliance for insurers.

This webinar covers the recent changes and updates in the IPT landscape in five European countries, with a question and answer session at the end, giving you a chance to learn more.

Join Sovos’ IPT experts Edit Buliczka and Christopher Branch as they share insight into the regulatory updates in the following territories:

Register here

Invoicing in Chile is changing on 1 December 2022. This is when resolution 66 from the Chile Internal Revenue Service comes into force.

This new regulation concerns organisations with foreign currency operations. Banks, stockbrokers, exchange houses and financial institutions are affected. Other intermediaries or entities that carry out foreign currency purchase and sale operations themselves or on behalf of third parties are also included.

All these organisations must issue the following:

How is invoicing in Chile changing?

Every electronic tax document must consider the specifications described by “Electronic Tax Document Format”. This document is available on the Internal Revenue Service’s website and is regularly updated.

What electronic information is required in Chile?

Resolution 66 also contains technical instructions. These establish the details necessary for electronic tax documents that support foreign currency purchase and sale operations.

The resolution states the following must be included:

There are other requirements not listed above, so it’s important to check the guidelines.

This change allows the Internal Revenue Service to receive, validate, and process electronic tax documents. This ensures the operations are accurately reflected and prevents inconsistencies.

More on rights, commissions and other charges in Chile

In the case of commissions, the taxpayer must issue an invoice or electronic ticket containing all the information indicated by the Technical Annex.

If the document doesn’t include an affected item, consider the following:

An example is when there is no commission.

Likewise, when differences in collections and values are ​​subject to VAT, an electronic credit or debit note must be issued.

The following information must be recorded separately as well:

  1. The total value of the instruments traded
  2. Value of commissions and charges, if any
  3. Total to be paid in favour of the client or total to be paid in favour of the company

Need help for invoicing in Chile?

Are you in financial services or working at a bank with more questions about invoicing in Chile? Speak to our tax experts.

The General Tax Directorate of the Republic of Uruguay has published on its website the following technical documents for the electronic fiscal documents (CFE) in the production environment:

CFE: CFE v23.2 format

Daily report: CFE Report Format v13

Response Message: Response Message Format v15

Schema: XSDs_FE_V1.42.1

XSD_Formato_Envío de Información Proveedores de SW v1.5.

The Mexican Tax Administration (SAT) recently published some adjustments to the Error code matrix that is used for the CFDI 4.0. Precisions were made in some error codes and a new error code was added to clarify when the Foreign Trade complemento should not be included.

The internal revenue service of Ecuador has published on its website a new version of the guide for taxpayers on the request for authorization to issue electronic receipts. The guide establishes the requirements and instructions to access the issuance of electronic receipts in a test environment and later in a production environment, and details the options enabled by the internal revenue service for the issuance of electronic documents.

The guide is available here.

The SAT published the second anticipated version of the ninth resolution of modifications to the miscellaneous tax resolution for 2022 and its annexes 1 and 1-A. Among its modifications, the fifth transitory article establishes that those who make payments for the concepts referred to in Title IV, Chapter I of the income tax law and who are obliged to issue CFDI for them, they may choose to issue them until March 31, 2023, in version 3.3 with a payroll supplement (Complemento de nómina) in version 1.2.

A recent preliminary ruling request to the European Court of Justice, Case C-664/21, NEC PLUS ULTRA COSMETICS, has re-emphasised the importance of collecting documentation when carrying out a zero-rated supply in the EU. The 2017 NEC PLUS ULTRA COSMETICS case involved a company established in Switzerland selling cosmetics products under the Ex Works clause from their warehouse in Slovenia to business customers established in Romania and Croatia. Ex Works (EXW) is an Incoterms rule, a set of definitions outlining the responsibilities of buyers and sellers in international transactions. With Ex Works the transport obligations, costs and risks are the buyer’s responsibility.

The tax administration of the Republic of Slovenia inspected NEC PLUS ULTRA COSMETICS and requested evidence and supporting documentation relating to these supplies to verify that goods had been transported to another EU Member State.

NEC PLUS ULTRA COSMETICS provided copies of the invoices and of the ‘Convention relative au contrat de transport international de marchansises par route’ (CMR) consignment notes. The company failed to provide the evidence requested by tax officers to prove the right to tax exempt the supplies to their customers (delivery notes and other documents mentioned in the CMRs).

The company clarified that the reason for the late submission was that the Hamburg office responsible for supplies to Croatia ceased its activities in August 2018, making it more difficult to find the documents asked for by the tax officers.

Consequently, the Slovenian tax authorities provided the company with an additional VAT assessment notice and ordered it to pay the relevant amount.

What documents do you need to keep for supplies carried out after 2020?

In the implementation of the Quick Fix related to the proof of transport in 2020, the European Commission has clarified that where the supplier arranges transportation of the goods, it must be in possession of either:

List A

List B

If the acquirer is responsible for transport of goods (i.e. under the Ex Works clause), they must provide the vendor with a written statement by the 10th of the month following the date of supply that the goods have been transported by the acquirer or on the acquirer’s behalf. The written statement must include the following:

How to ensure VAT compliance

In the case of the Ex Works clause:

If you don’t feel reassured by your customer, change the agreement and Incoterms clause before the supply takes place.

Need help with VAT compliance?

Still have questions about VAT exempt supplies and the Incoterms Ex Works clause? Speak to our tax experts.

New Zealand is implementing changes to its GST invoicing and record keeping requirements, which are set to enter into force from April 1, 2023.  These changes include:

  1. The use of tax invoices will be replaced by a more general requirement to provide and keep certain records known as taxable supply information.
  2. Terminology:                                                                                                                                                       a. The term ‘tax invoice’ will be replaced with the term ‘taxable supply information’. From an invoice content perspective, there will be no requirement to include this wording when providing taxable supply information.
    b. The term debit note/credit note will be replaced by the term ‘supply correction information’.
    c. The term ‘buyer-created tax invoice’ will be replaced by the term ‘buyer-created taxable supply information’.
  3. The GST invoice will be digitized, there will be no need to keep a physical document such as a tax invoice, credit note, or debit note. Transaction records, accounting systems, and contractual documents may, in combination, contain all the information necessary for GST returns.
  4. Taxable supply information can be provided using an automated direct exchange between a buyer’s and seller’s software, for example, PEPPOL e-invoicing.

What is the current situation for insurance for businesses?

Until the Covid-19 pandemic in March 2020, the view was that businesses provide insurance such as Employers’ Liability during normal day-to-day operations. Employers’ Liability insurance is compulsory, protecting a company’s employees and workplace visitors for accidents where a claim needs to be settled.

Following the Covid-19 pandemic, the definition of a workplace has changed. It’s no longer solely an office or factory, now a workplace is likely to include an employee’s home.

Although the world has gotten used to Covid-19, it is something we’ll all have to live with for the foreseeable. Therefore, all employers have had to consider what future working arrangements they need to have in place based on the type of business.

Companies primarily office-based before the pandemic have taken the opportunity to discuss these future arrangements with employees. Many have adopted hybrid working which includes a combination of office and home working where possible. It does seem very unlikely that in the short-term there will be a move for people to return to working in the office full-time.

How could this change in working arrangements affect the insurance businesses’ need?

Companies will need to consider the events they will need insurance for and how this will impact their current insurance policies.

This means that while they’ll still need mandatory insurance, such as Employers’ Liability, some requirements will likely have a greater impact on the insurance coverage and premiums moving forward.

This could include regular home Health and Safety checks to ensure employees’ working environment meets the company’s rules and regulations. Insurers could require all employers to provide evidence that their employees have passed annual health and safety tests to ensure ongoing compliance. Having this information on file ready to present to insurers if an accident happens at home to an employee during their working day would provide comfort to businesses for future claims that they won’t be rejected.

It’s also worth pointing out that the working day has changed for many, from a strict ‘9 to 5’ to more flexible arrangements to accommodate childcare and other responsibilities. This change in working hours should be taken into consideration by employers and insurers for accident claims that in pre-Covid times would have been outside regular working hours.

The other types of insurance policies likely to be affected by changes in working arrangements are:

What are the next steps for companies?

Businesses should review all their current insurance policies to ensure they have the necessary coverages in place to protect against these changes in working arrangements. The implications of not getting insurance coverages right could be serious for the company. If this isn’t something they’re looking at already, they should start the process sooner rather than later to avoid potential future problems for themselves and their employees.

Talk to our experts

Speak to our tax experts for help with business insurance compliance.

Imagine this scenario.

Your business partner changes the rules on you mid-stream and your ability to conduct business with them is now contingent on changing your entire reporting structure to meet their new demands.

Oh yeah, I should also mention the time frame to meet these demands is extremely tight and if you don’t, you can forget about doing business in their region until you get it right. And if at any point moving forward you fail to live up to these standards, they can fine you or shut you down.

Sound farfetched? It isn’t. It’s exactly what is playing out in major economic markets from Brazil to Italy and parts of Asia and Africa. You see, governments have caught up to businesses when it comes to technology, and in many ways, they have moved past them when it comes to digitization.

What does this mean for you?

It means that governments have now taken on a more proactive approach to reviewing financial transactions and are demanding real-time reporting. As part of that, they have implemented real-time enforcement to ensure that it’s meeting the proper mandated specifications. To accomplish this, they have taken up permanent residence within your data stack. And make no mistake, when it comes to e-invoicing, they are calling the shots.

A bit of background.

Governments throughout the world are implementing mandated e-invoicing for its ability to facilitate compliance and track fraud quickly and efficiently. After the fact reporting, which had been the norm until now, was more difficult to enforce and took lengthy and costly audits to recoup what was rightfully owed. Many organizations didn’t take the penalties seriously and would simply set aside some money to deal with these inconveniences as they emerged.

This approach resulted in a tax gap that is continuing to grow. In 2019, the VAT gap of the European Union’s 28 member states was over 134.4 billion euros for all member states combined. This had become unsustainable and unacceptable to many governments and thus a new technology that focused on digitization was made to ensure that all legally owed revenue was being collected timely and in full. Failure to comply would lead to faster and more impactful enforcement measures.

This trend is growing rapidly with countries across the globe adopting new mandates and methodologies for tracking and enforcing the rules. In the next five years nearly every country that employs the VAT system of taxation is expected to update their systems to some degree.

Make no mistake. Due to the demands for real-time information, this is an IT problem, not a tax issue. For multinational companies that do business in dozens of countries, there could be some painful moments along the way if they don’t plan early and develop a sound strategy for each of the locations in which they have operations.

Here is my advice for meeting government mandates and ensuring operations continue uninterrupted. 

IT should focus on the end goal: implementing a centralized approach to managing these government mandated e-invoicing laws to ensure a globally consistent approach to all digital filings. I can’t overstate the importance of implementation synergies as requirements increase and expand. This is only going to get more complex as time goes on.

And perhaps most importantly, don’t be afraid to ask for help. This is complicated stuff that is changing by the day. This is not the time or the issue to try going it on your own.

Take Action 

Reach out to our experts for more help and information.

HMRC has issued a new policy paper, Revenue and Customs Brief 11 (2022): VAT and children’s face masks, announcing a shift in their policy regarding children’s face masks. Children’s face masks are now considered children’s clothing and therefore qualifies for the application of a zero-rate of VAT. For the zero-rate to apply the masks must be “held out for sale” to young children, however unlike for other clothing items there are no specific size requirements that need to be met to qualify for the zero-rate. Face masks which can be worn by persons of any age, and which are not specifically marked as intended for children they will not qualify for the zero-rate. HMRC has indicated that sellers who previously charged VAT on their sales of children’s face mask may apply for a refund.

The Turkish Revenue Authority updated the e-Fatura package in line with the amendments made to Value Added Tax General Application Communique.

According to the changes, the withholding tax rate for the delivery of iron and steel products has been revised to 5/10 from 4/10.

Updated package is available here: https://ebelge.gib.gov.tr/dosyalar/kilavuzlar/e-FaturaPaketi.zip

The Chilean Internal Revenue Service published Circular No. 50 with instructions on the forthcoming entry into force of the modifications introduced by Law No. 21,420, which reduces or eliminates tax exemptions. Among its modifications is the change in the definition of the basic taxable event “service” which is defined as “the action or provision that one person performs for another and for which he receives an interest, premium, commission or any other form of remuneration”. With this change all services provided in Chile are taxed with VAT, even when the beneficiary does not have a domicile or residence in the country.

The modifications will become effective as of January 1, 2023, and, therefore, will apply to the services provided as of that date.