In less than six months, Poland is going to introduce its long-awaited CTC clearance e-invoicing mandate – a tax reform that will impact a large amount of businesses.

It has been possible to issue and receive e-invoices voluntarily via Krajowy System E-Faktur (KSeF) since January 2022, but from 1 July 2024 it will become mandatory for suppliers and buyers that are in scope of mandatory e-invoicing to do this via KSeF.

A detailed understanding of the new regime, plus timely and proper preparation, is critical for compliance. Whilst there is a six-month grace period on financial penalties, non-compliance can negatively impact your business in many other, often unexpected, ways.

In this 45-minute deep-dive webinar, Marta Sowińska from our Regulatory Analysis and Design team will cover:

Join us on 8 February at 2pm GMT | 3pm CET for a thorough review of the Polish KSeF e-invoicing mandate and the opportunity to submit your questions.

Register today

As tax authorities continue to digitize processes in their mission to reduce fraud and close their VAT gaps, they are introducing requirements that provide greater visibility into a company’s financial operations in the form of Continuous Transaction Controls (CTC).

It would be a mistake to think that being prepared to meet obligations in one of the countries where you operate can simply be replicated in another – CTCs are far from a ‘one-size-fits-all’ solution.

Join us on 24 January 2024 in our latest quarterly VAT Snapshot webinar series where regulatory experts Dilara Inal and Marta Sowinska will examine how tax authorities in Poland, Romania, Israel, Greece and Spain – all simultaneously implementing CTC regimes – are doing so with different sets of requirements.

Don’t miss this opportunity to learn more about these unique regimes and what they mean for your business.

Register now.

With the rate of change in tax digitization not set to slow down any time soon, it’s more important than ever to keep up with what’s happening where you do business.

This quarter, our VAT Snapshot webinar looks in detail at CTC and e-invoicing implementation timelines across six different countries.

Join Dilara İnal and Carolina Silva from our Regulatory Analysis and Design team for an examination of scope, key timelines and essential milestones for compliance across these jurisdictions.

The webinar will cover:

As always, please bring your questions for our experts in the Q&A at the end.

Stay up to date with the evolving landscape of tax mandates by registering today.

Register now.

Sovos is one of a short list of applicants to register as a Partner Dematerialization Platform (PDP). The company, with its 20 years of international business process and data expertise in international tax compliance, will benefit from an SAP extension, one of the few available on the market. 

London, 27, June 2023 – International tax compliance software provider Sovos announces its application for registration as a dematerialization platform partner (PDP).

France is introducing a major e-invoicing and e-reporting reform which will be rolled out in a phased approach initially to the largest companies from 1 July 2024 and run beyond 2026.  Since the beginning of May this year various software publishers and ERPs have been able to submit their applications to the French government to become an approved PDP.

PDPs are playing a key role in this VAT reform. As trusted third parties, these portals will act as the interface between companies and the French government and will be directly involved in issuing and receiving invoices. The aim is for companies to choose the methods and formats for exchanging their electronic invoices (incoming/outgoing) with the obligation to communicate invoicing, transaction and payment data to the authorities.

International e-invoicing experience 

Sovos has 20 years of business process and data expertise and a global reach with modern cloud architecture that currently processes over 6 billion compliant transactions a year.

The company has extensive experience as a delegate of tax authorities around the world, with several certifications already obtained in various countries in Latin America, as well as in Turkey, where electronic invoicing is now well established. In addition, Sovos is set to be one of the only platforms to feature an extension for SAP, which is designed to provide dematerialization operator (DO) capabilities.

“We’ve seen high demand for a demo of our solution and initial demonstrations to many of the companies that rely on Sovos have been extremely positive and have provided valuable feedback. Our solution not only integrates the legal and technical requirements for France, but also leverages all the best practices from our decades of experience, and the compliance suite we’ve built, supporting complex obligations for tens of thousands of companies in other jurisdictions” says Cyril Broutin, Product Manager at Sovos.

Providing agility and anticipating future regulatory changes 

E-invoicing regulations are regularly modified and updated and are therefore constantly evolving. In Italy, for example, the e-invoicing mandate has been revised more than 40 times. In France, the tax authorities have already published four versions of the specifications for the next reform, which are likely to be further amended or supplemented. Added to this is the European “VAT in the Digital Age” (ViDA) initiative and the many changes it will bring. Sovos intends to assert itself as a PDP capable of supporting companies over the long term, taking into account the regulatory changes which will occur after the application of the reform, at both national and European level. Indeed, the e-invoicing reform is part of a more global drive to digitalize taxation.

“Sovos believes that companies want to remain agile and not be held back by the changing compliance requirements they face in France and around the world. That’s why we’ve adopted a deliberate strategy of loosely coupling tax compliance obligations with the process automation requirements sought by businesses. Our aim is to enable companies to focus on their core business by removing the friction of complex tax digitization mandates. ” explains Cyril Broutin.

About Sovos
Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting, and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe and is owned by Hg and TA Associates. For more information visit sovos.com and follow us on LinkedIn and Twitter.

In July 2023, the French authorities postponed the implementation timeline. A new timeline will be announced with the adoption of the finance law for 2024.

When your organisation trades cross-border, regular changes to the regulatory landscape are a given. Whether those changes are brand-new requirements in a country where you do business or the evolution of existing legislation, you must be ahead of the developments to remain compliant.

With global tax authorities continually making progress with their digitization strategies, the e-invoicing revolution continues at speed.

In this quarter’s instalment of our VAT Snapshot webinar, Kelly Muniz and Enis Gencer from Sovos’ Regulatory Analysis and Design team, will look in detail at anticipated changes in countries with emerging digital strategies and discuss updates to some of the more established regimes.

They will cover:

Join our 30-minute update on 13 July for the latest news, and for an opportunity to put your questions to our speakers.

Register today

5 Questions to Ask Yourself

Important NoteThe Finance Law for 2024 is presently in draft form and remains subject to ongoing modifications prior to adoption. Our blog, France: B2B E-Invoicing Mandate Postponed, is promptly updated whenever there are changes to the rollout of the French mandate .

 

Tax compliance in France is already complicated. New e-invoicing and e-reporting regulations being introduced by the DGFIP will mean companies doing business in the French Republic face some of the most onerous compliance obligations of all VAT jurisdictions. 

One significant change for many businesses will be the need to use Partner Dematerialization Platforms, also known as PDPs. The role of a PDP is highly specialised. Indeed, strict legal requirements and technical specifications must be met to become a registered PDP. 

The timeline affecting all businesses is clear. However, depending on your industry, you may need to rely on a PDP to ensure you’re fully compliant with the new requirements. Key industries include: 

Companies that need to use a PDP to achieve compliance with the French mandate face an additional, critical decision in what is already a complex new process to navigate. The need for a PDP raises the stakes, making it crucial to have dependable answers to the following: 

We’ve created a rundown of key questions to consider when choosing a PDP. 

1. Can your PDP cope with the growing compliance obligations of these new e-invoicing processes?

In addition to the existing requirement for B2G invoices (Public Procurement), the French Mandate reform will require B2B invoices to be exchanged electronically. As each B2B e-invoice is progressed, its status will shift. There are 14 status possibilities that need to be communicated between trading parties. Of these 14, 4 must also be automatically reported to the tax authority platform. The result will be a huge amount of additional data flowing in multiple directions. 

Additionally, the transaction details of B2B cross-border sales and purchases – excluding non-EU imports of goods – and B2C sales and payment data for Services Sales must be reported electronically to the tax authority. 

Meeting these processing and capacity demands will be a significant undertaking for solution providers. For context, 100 million B2G e-invoices are processed annually. With the addition of B2B e-invoicing to the French mandate, this number will now be in the billions. 

Why does this matter? 

You want to be able to trust that your PDP can cope with increased capacity and processing needs as well as evolving compliance requirements. You want to set yourself up for success for France as well as to deal with the growing obligations across Europe and beyond. 

 

2. The only constant is change – is your PDP equipped to handle France’s e-invoicing regulations as these evolve?

The French Mandate is part of a global trend towards tax digitization. E-invoicing mandates are constantly changing, being modified and updated. 

Take Italy, for example. Since January 2019, the e-invoicing mandate has been revised over 40 times. 

The French tax authority has already released four versions of the upcoming French Mandate  specifications and these will continue to evolve. Will your chosen software solution be robust enough to handle these changes so they don’t negatively impact your business? By asking the right questions, you may find that some aspiring PDPs, who also happen to be existing e-invoicing providers, are out of their depth. 

On top of this, there’s the EU-wide VAT in the Digital Age initiative and the changes it will bring. Your future PDP must have the bandwidth and agility to keep up with the inevitability of these future developments. You will also need to consider whether this PDP can take care of your compliance needs beyond France too. 

Trust is everything. A seasoned partner with experience navigating and solutioning for diverse e-invoicing obligations is important for your business. As government interest in business data grows, it’s essential to avoid blind spots, often created by complex supply chains, across multiple countries, within and beyond the EU. You’ll need a holistic view of your data that’s broader than e-invoicing and CTCs (continuous transaction controls). Think SAF-T and the other domestic obligations you face, alongside compliance challenges like VAT determination and periodic reporting. 

If you’re also doing business beyond France, these need your attention too. 

 

3. Are you aware of the total impact not meeting increasingly strict compliance requirements can have?

Let’s be clear. Despite what you may have heard about France’s e-invoicing mandate, this is not more of the same. 

Yes, electronic invoice requirements used to be relatively manageable. They needed to be readable and unalterable, providing clear proof of the original supplier’s identity. 

The scheme that will be introduced with France’s mandate complicates matters, adding requirements for: 

Failure to meet the exact stipulations of the reform will result in invalid invoices. 

Without legally valid invoices, not just VAT collection and VAT recovery are jeopardised: This would impact your company revenues and your trading partners, creating cash flow and profitability risks. 

Make no mistake, the commercial and reputational impact of not meeting these minimum requirements are even more significant than the potential penalties. 

  

4. Are you 100% confident of e-invoicing continuity?

French companies may be used to correcting e-invoice errors at a later date, but soon that will no longer be an option. The mandate ushers in continuous transaction controls, so any data or syntax errors will be glaring. If problems arise with e-invoicing, it won’t be possible to revert to paper or PDFs producing a significant cash flow risk for suppliers. E-invoices must be correct and compliant first time, every time. 

Reliance on an experienced and knowledgeable PDP for e-invoicing and associated compliance obligations doesn’t just join the dots in your data. It makes good business sense. 

  

5. Network size will no longer matter – is your would-be PDP saying otherwise?

For traditional e-invoicing, a large business network has been a supply chain advantage. A large network allows any one business to connect with a multitude of suppliers and buyers that choose to automate billing and invoice payments. 

However, the interoperability requirements of the upcoming mandate erode the power of network size. Every supplier and buyer will need to connect through France’s e-invoicing system (Portail public de facturation or PPF) either directly, or indirectly through a PDP. Giving you more freedom when selecting the right PDP for your business. 

While each registered PDP is required to cover both inbound and outbound invoice flows, they’re not required to cover all 36 specific use cases mentioned in the official documentation so far. Each use case needs an adapted treatment, which creates complexity that PDPs must address. 

It’s important to ask any PDP you’re considering about their plans to address these use cases and any future ones that could arise as requirements evolve. 

 Looking for a PDP you can genuinely trust to take care of the complex obligations you face due to France’s upcoming e-invoice mandate?

Our experts remain close to the requirements of the French Mandate. Especially as these evolve. Make it easy for yourself; connect with us.

Speak to us about our future-proof tax compliance solution, for the French Mandate and beyond, or download our deep dive guide on preparing for France’s mandatory continuous transaction controls.

Update: 8 March 2023

South Korea has recently approved a tax reform which introduces several measures for 2023, among which is the possibility of issuance of self-billing tax invoices.

This tax reform amends the current VAT law to allow the purchaser to issue invoices for the supply of goods and services.

However, this will only be allowed in specific circumstances, such as when the supplier cannot issue the invoice. The purchaser can claim a deduction for the related input VAT by issuing a self-billing invoice.

Therefore, issuing self-billing invoices for VAT-exempted supplies of goods and services will not be permitted. However, the issuance of self-billing invoices by the purchaser depends on confirmation from a district tax office.

What’s next?

This amendment will enter into force and apply to all supplies of goods and services from 1 July 2023.

This South Korean tax reform will expand the transactional scope of the country’s e-invoice issuance and continuous transaction control (CTC) reporting system (e-tax invoicing), as the transactions in the scope of e-tax invoicing are generally the same as those in the scope of VAT invoicing.

Interested in learning more about e-invoicing in South Korea? Contact a member of our expert team today.

 

Update: 17 January 2021 by Selin Adler Ring

The South Korean E-invoicing System in a Nutshell

Collection of real-time fiscal data is becoming one of the core public finance decision making tools. Transactional data provides a timely and reliable overview of the business sector, enabling governments to rely on analytical data in the decision-making process.

This is what has led many governments to adopt CTC regimes that require taxpayers to transmit their transactional data in real/ near-real time to government services. South Korea was one of the first countries to appreciate the benefits of a CTC regime and mandated reporting of e-invoice data to the government for certain taxpayers as early as 2011.

Mandate scope expanded

The year after the first implementation, the South Korean authorities expanded the mandate scope and the e-invoicing system became mandatory for more taxpayers. 2014 saw another expansion of the CTC mandate to reach its current scope.

The current system requires any business that is a corporate entity or an individual whose aggregate supply value for the immediately preceding tax year is KRW 300,000,000 or more to issue an e-invoice to the recipient of goods or services subject to VAT, as well as to report the invoice data to the government.

The South Korean e-invoicing system mandates the issuance of an e-invoice to the recipient and reporting of this invoice data to the government portal within a day of its issuance. Before e-invoices are transmitted, suppliers must digitally sign them with a PKI electronic signature. E-invoices are reported in an XML format to the National Tax Agency (NTS) Portal. Due to the near-real time reporting time-limit, the South Korean e-invoicing system falls under the category of CTC.

South Korea has implemented a comprehensive e-invoicing system from the beginning and as a result there haven’t been any major changes to the requirements or practices. This is a big relief for taxpayers in South Korea compared to other CTC jurisdictions where there are constant changes.

In addition to the benefits for taxpayers, a considered CTC regime is also less burdensome for the state as the implementation costs of the constant regulatory changes can be significant.

More and more governments are considering the adoption of CTC regimes and should look to South Korea as a success story for this approach which has worked well for both the government and taxpayers.

Take Action

Please get in touch to discuss how Sovos can help your business comply with CTC regime reporting in South Korea or other jurisdictions subject to e-invoicing mandates.

Northern European Jurisdictions: CTC Update

The European Commission’s VAT in the Digital Age (ViDA) proposal continues to unfold with the latest details published on 8 December 2022. As a result, many EU countries are stepping up their efforts towards digitising tax controls – including mandatory e-invoicing.

While we see different approaches to initiate this transition across Northern Europe, the trend towards continuous transaction controls (CTCs) and e-invoicing mandates has accelerated.

Germany plans for e-invoicing mandate

Recent statements indicate that Germany is taking steps towards a B2B e-invoicing mandate, however, without a centralised reporting or clearance element – at least for now. During a VAT conference on 10 March, the Federal Ministry of Finance announced that a draft paper will be published in a couple of weeks for the introduction of the e-invoicing mandate.

It is worth noting that Germany had previously requested a derogatory decision from the European Commission to implement a mandatory e-invoicing regime, as announced by the Ministry of Finance in November 2022.

Sweden edges towards mandatory B2B e-invoicing

Sweden is another country where it would not be surprising to see an e-invoicing requirement emerge. The Swedish Agency for Digital Government (DIGG) has expressed the desire to implement mandatory e-invoicing in the country.

With the Swedish Tax Agency and the Swedish Companies Registration Office, DIGG has requested the government research the conditions for mandating e-invoicing in B2B and G2B flows, which would be added to the current B2G e-invoicing mandate.

The reasoning behind this request is that if the European Commission’s ViDA proposal is adopted, it will result in mandatory e-invoicing in cross-border flows. Therefore the national system should align for efficiency purposes. DIGG does not believe that alignment will occur voluntarily, but a mandate will be necessary.

Finland supports the ViDA package

In Finland, no mandatory B2B e-invoicing mandate is in place. However, buyers can receive a structured electronic invoice from their suppliers if requested. This regulation has been in effect since April 2020 for all Finnish companies with a turnover exceeding €10,000.

Furthermore, the Finnish government recently demonstrated their support of electronic invoicing by sending a letter to Parliament outlining its benefits. The government sees electronic invoicing as a means of increasing business efficiency and combatting VAT fraud through the ViDA package.

Lithuania introduces Peppol-based e-invoicing platform

Lithuania is laying the groundwork for the broader use of e-invoices. It has announced plans to build a technological solution that complies with the European standard for the transmission of electronic invoices.

The platform is expected to be available free of charge to businesses for at least five years and should be ready by September 2023. Additionally, the platform will meet Peppol Network requirements and comply with Peppol BIS 3.0.

Denmark enables automated e-invoicing via e-bookkeeping systems

Denmark has also been working on digitizing the business processes by implementing a new bookkeeping law. The Danish Business Authority has initiated implementing the Bookkeeping Act’s digital bookkeeping provisions by adopting draft executive orders for standard digital bookkeeping systems and their registration.

As a result, providers of standard digital bookkeeping systems must adapt their systems to the new requirements by 31 October 2023 at the latest. The new provisions stipulate that traditional digital bookkeeping systems must support the automatic sending and receiving of e-invoices in OIOUBL and PEPPOL BIS format.

While Denmark has not announced the final dates, it expects taxpayers to adhere to the digital bookkeeping rules between 2024 and 2026.

Speak to a member of our team if you have further questions about e-invoicing.

Update: 4 October 2022 by Enis Gencer

Northern Europe Continuous Transaction Controls Update

The recent EU Commission report on the VAT in the Digital Age Initiative indicates that continuous transaction controls (CTCs) will become more prevalent across Europe. The final report suggests introducing an EU-wide CTC e-invoicing system covering both intra-EU and domestic transactions as the best policy option. While Eastern European countries have been at the forefront of local implementations, acting swiftly and introducing CTCs, it’s also worth keeping an eye on some of the developments in Northern Europe.

Germany

Following the 2021 national elections, the new coalition government in Germany  identified  VAT fraud as a policy question. It announced its intention to introduce a nationwide electronic reporting system as soon as possible, which will be used for the creation, checking, and forwarding of invoices. Although there are no details about the nature of the system, discussions are ongoing with stakeholders from the private sector, mainly focusing on the implementation timeline and the government’s role in such a system.

B2G e-invoicing has been mandatory for invoices issued to the federal administration since 2020. The scope was expanded from 1 January 2022 to include state-owned authorities in Baden-Wurttemberg, Hamburg, and Saarland, with the next states joining in 2023 and 2024. Moreover, the IT Planning Council, the Central Body for the digitization of administration in Germany, issued the decision 2022/31  advising all contracting authorities to accept electronic invoices via the PEPPOL network by 1 October 2023 to connect the entire public area in a uniform manner.

Denmark

Denmark is also aiming to introduce new requirements to digitize the business processes of Danish companies. On 19 May 2022, the Danish Parliament passed a new accounting law requiring taxpayers to make their bookings electronically using a digital accounting system. The mandate will take effect gradually between 2024 and 2026, depending on the company’s form and turnover.

While the new accounting law doesn’t introduce any mandatory e-invoicing or CTC obligations, it is envisaged that the digital accounting systems must support continuous registration of the company’s transactions and the automation of administrative processes, including automatic transmission and receipt of e-invoices. The Ministry of Finance has been authorised to adopt rules requiring companies to register purchase and sales transactions with electronic invoices as the documentation of the transactions, which in practice would amount to an e-invoicing mandate.

The Danish Business Authority, Erhvervsstyrelsen, has prepared drafts for three executive orders concerning the new digital bookkeeping requirements. According to draft regulations, digital accounting systems are required to support the automatic sending and receiving of e-invoices in OIOUBL and PEPPOL BIS format. These systems must be able to share the company’s accounting data by generating a standard file, which is the Danish SAF-T Standard recently published by Erhvervsstyrelsen.

The draft regulations will be available for public consultation until 27 October and the requirements are expected to enter into force on 1 January 2023. There will be a conversion period until 1 October 2023 for digital accounting systems to comply with the requirements.

Sweden

Sweden is another country looking at introducing digital reporting requirements. The Swedish Tax Administration, Skatteverket, is considering different ways to ensure the correct collection of VAT while obtaining useful economic data from businesses. The project is still at an early phase, and while such requirements could mean introducing Standard Tax Audit File (SAF-T) requirements or a type of CTC, e-reporting, or e-invoicing, the tax authorities would still strive to implement a smooth system for businesses.

Latvia

The Latvian Ministry of Finance has been working on digitizing invoicing processes for a while. They conducted a public consultation and took into consideration opinions of companies and non-governmental organizations to find out the readiness to start using e-invoices in Latvia.

As a result, the Ministry of Finance prepared a report discussing the current situation and the implementation of e-invoices, and possible technological solutions. The report focuses on different e-invoicing systems, such as post-audit e-invoicing, centralised e-invoicing, and decentralised e-invoicing, comparing the advantages and disadvantages of such systems.

The report favours the PEPPOL BIS standard for the introduction of mandatory e-invoicing in B2B and B2G transactions and proposes the use of e-invoices must be defined as an obligation in Latvian regulations, setting a mandatory requirement for the use of e-invoices to start no later than 2025.

The Latvian government approved the report, and the necessary regulatory acts, hence implementation of technological solutions are expected to take shape in due course.

What’s next?

It’s clear that CTC initiatives are becoming increasingly popular among governments and tax authorities in Europe, with the Northern European countries starting to follow this trend, even if they seem to be acting more cautiously. It will be very interesting to see how and when these CTC projects take shape and be affected by the upcoming results from the EU Commission on the VAT in the Digital Age project.

Take Action

Need help with e-invoicing requirements? Get in touch with our tax experts.

 

 

 

 

 

Update: 2 November 2023 by Dilara İnal

Israel Extends CTC Implementation Timeline

On 23 October 2023, the Israeli Tax Authority (ITA) announced that it had extended the continuous transaction controls (CTC) implementation timeline to offer businesses more time to complete their technological development. According to the announcement, the ITA will allow the deduction of input tax from a tax invoice, even in the absence of an allocation number, until 31 March 2024.

The new Israeli invoicing framework will require businesses engaged in B2B transactions that exceed a specific threshold to obtain an allocation number. The first phase starts on 1 January 2024 for invoices exceeding 25,000 NIS. Businesses must ensure that their invoices include the allocation number to be eligible for input VAT deduction as of this date. In light of this recent announcement, buyers will receive an additional three-month period to comply.

It is important to emphasise that although the ITA has extended the time for input tax deductions, the clearance platform will be fully operational as originally planned from 1 January 2024. From this date, invoice issuers who will request allocation numbers will receive them.

Looking for more information on Israel’s invoicing developments? Find out more.

 

Update: 6 July 2023 by Enis Gencer

Israel Announces CTC Implementation Timeline and Guidelines

The Israel Tax Authority has released a set of guidelines encompassing technical details and other relevant information regarding the implementation of the Israeli Invoice model.

The guidelines state the new model will be a phased implementation that begins with a pilot program in 2024. A key objective of this new model is to address and mitigate the long-standing issue of fictitious invoices in Israel.

Israel invoicing model

Under the newly introduced Israeli Invoice model, taxpayers involved in B2B transactions which exceed a specific threshold will be required to obtain an invoice number. This will be done by contacting the designated tax authority service via APIs and sending the invoice information prescribed by the tax authority.

The guidelines define the set of information that must be reported to the tax authority, including:

Once acquired, the invoice number must be included on the tax invoice. Without this number, taxpayers will not be eligible to deduct input VAT. It is important to note that the tax authority reserves the right to not assign the invoice number if there is reasonable suspicion of any legal inconsistencies concerning the invoice.

Buyers can use the invoice number to access invoice details through the tax authority service. This feature is designed to optimise the process of incorporating the invoice into the taxpayer’s accounting system.

Implementation phases

The Israeli Invoice model will be a phased implementation, beginning with a pilot program in January 2024 for invoices exceeding 25,000 NIS (approximately 6,500 euros). During this phase, the tax authority can only reject the request for invoice numbers in cases of technical errors.

As implementation progresses, the threshold will be gradually reduced as follows:

Israel is quickly taking steps towards the introducton of its invoicing system by publishing technical details and its implementation timeline soon after introducing the system formally in February 2023. Taxpayers should now prepare their systems according to the legal and technical guidelines that the tax authority has recently published.

Looking for more information on Israel’s upcoming regulations? Contact our team of experts.

Israel: Progress on Implementing Continuous Transaction Controls (CTCs)

Update: 26 May by Enis Gencer

More details have emerged regarding the implementation of the continuous transaction control (CTC) model in Israel, which was announced to be introduced in the country in February 2023.

As we reported earlier, Israel’s government approved the 2023-2024 budget on 24 February 2023, setting the stage for the adoption of the CTC model. Since then, the proposal has gone through the standard legislative process and it has recently received approval from the Finance Committee, with some modifications.

New scope and timeline of CTC system

According to the latest announcement, the modified plan introduces a CTC e-invoice clearance model for invoices exceeding NIS 25,000 (approximately 6,500 Euros) in business-to-business (B2B) transactions. Under this model, invoices must be issued through the tax authority’s system and obtain real-time approval. Taxpayers will not be allowed to use unvalidated invoices for deducting input tax.

The implementation of the CTC e-invoicing model is scheduled to start in January 2024, and by 2028, the threshold will be reduced to NIS 5,000, thus covering smaller amount transactions.

Despite the short implementation timeline, it is important that the authorities publish regulatory and technical specifications in time for taxpayers to prepare their invoicing systems to fully comply with the new requirements by January 2024.

Find more information about Israel’s current e-invoicing system here.

 

Update: 14 March 2023 by Enis Gencer

Israel Closer to Introducing Continuous Transaction Control (CTC) in Tax System

Israel’s government approved the 2023-2024 budget on 24 February 2023 to introduce a continuous transaction control (CTC) model in its tax system.

This long-awaited move will have significant implications for businesses operating within the country. It is essential to know the changes that may impact your company.

Proposal for e-invoice clearance model

The new plan, prepared by the Ministry of Finance and approved by the government, envisages an e-invoice clearance model for invoices over NIS 5,000 (appx. 1300 Euros) issued between businesses. Under this model, invoices must be issued through a tax authority system and receive real-time approval.

The tax authority system will issue a unique number as proof of clearance for each invoice, which businesses can then use to deduct input VAT. The government has also proposed that the tax authority be entitled to refuse a request to assign a number and not clear the invoice if there is a reasonable doubt that the invoice is not issued legally.

While this plan is an exciting development, it is only the beginning of a long journey towards implementing a CTC model. The above proposal is currently only outlined in a budget document, which will be subject to further readings and approvals before the government can implement it.

Additionally, an amendment to VAT Law and the publication of technical details will be necessary to make it legally and technically enforceable.

For further information on the digitization of tax in Israel, speak to a member of our team.

 

Update: 9 April 2020 by Joanna Hysi

Israel on the Road to Continuous Transaction Controls (CTCs)

With the long-lasting problem of fictitious invoices in Israel, a move towards some form of mandatory e-invoice clearance might be the answer. After having been withdrawn once due to failing support, the idea of a continuous transaction control (CTC) model is being revived by the Israeli tax authority. The proposed model, similar to Chile’s e-invoicing system (clearance), would include a direct connection between the tax authority and businesses in real time for each transaction. The proposal, which is currently being reviewed with interested stakeholders, will be presented to the Knesset Finance Committee, with the hope of promoting legislation for implementing the planned reform measures as soon as a new government is formed.

Subject to final adoption in law, the core points of the reform are:

It’s an interesting observation that for years Israel appeared to be heading towards the EU approach of a post-audit system, yet recently they seem to have pivoted and be heading towards the more Latin American style of continuous transaction controls.

Either way, the Israeli tax authorities are now taking firm measures to combat VAT fraud, as to whether they go for a model similar to Chile, or something close to home in India or Turkey, we will have to wait and see.

Important Note: The Finance Law for 2024 is presently in draft form and remains subject to ongoing modifications prior to adoption. Our blog, France: B2B E-Invoicing Mandate Postponed, is promptly updated whenever there are changes to the rollout of the French mandate .

France will implement a mandatory B2B e-invoicing and an e-reporting obligation. Every company operating in France is affected. 

Electronic invoicing in France requires using a (partner) dematerialization platform. The already enacted legislation leaves the choice of which platform up to companies. 

Should you use the public platform (‘PPF – Portail Public de Facturation’, i.e. Public Invoicing Portal) or a third-party private platform (‘PDP – Plateforme de Dématérialisation Partenaire’, i.e. Partner Dematerialization Platform)? And which organisation registered as a PDP should you opt for? 

There is a lot to consider – including the type of invoices, data management, customer/supplier relations, transmission, functionalities, and more – this blog will help you make a decision. 

The electronic invoicing process includes formatting, controlling, reporting, routing tracking, transactions, whether between trading parties (domestic B2B e-invoices) or with the PPF (domestic B2B e-invoices, cross-border B2B sales and purchases, B2C sales, payments received on services). In this respect, PDPs are essential. 

French legislation allows companies to choose their dematerialization platform for submitting and/or receiving domestic B2B invoices and reporting transactions.  A public solution exists, the PPF, alongside which other PDPs position themselves. 

What parameters should you consider when choosing a dematerialization platform? What are the conditions for becoming a PDP and when will they be operational? 

This blog discusses the elements that enable companies to understand the role of dematerialization platforms in managing electronic invoicing. If you wonder how to choose the right PDP for your organization, read this blog about Choosing the right PDP – 5 Questions to ask Yourself. 

1. Understanding the role of dematerialization platforms

The need to use a dematerialization platform is part of the electronic invoicing requirements, which come into force for business-to-business (B2B) transactions with go-live of the mandate. 

Electronic invoicing in France: who is affected? 

2. PDPs and electronic invoice formats

An electronic invoice must be delivered in a structured format, leaving it to the trading parties and their PDPs to agree on the standard. By default, PDPs must be able to process the three core set formats, UBL, CII, or UNCEFACT, with the obligation for the platforms to produce a legible version of each invoice, or Factur-X hybrid format (XML+PDF/A-3). 

PDPs may also offer to process any other structured formats (e.g. EDI formats such as EDIFACT), subject to acceptance by both the buyer and the seller. In both cases, PDPs will have to extract mandatory data from the issued e-invoice and map it into one of the core set formats – and then report them to the PPF within 24 hours of the e-invoice issuance. 

The corresponding flows can be exchanged under various communication protocols (EDI, API, etc.) 

3. Public platform or PDP?

Using a PDP isn’t mandatory from a legal point of view. However, using a PDP will be necessary for companies who want to exchange invoices in specific formats due to the specificities of the invoice flow (not supported by the PPF). 

The role of the public platform 

The PPF will be used for the obligatory transmission of invoice data to the tax authorities. 

It will manage the following for companies: 

The PPF performs other functions including management of the Central Directory (in which any registered company subject to VAT will be identified), data collection and transmission to the tax authorities, and retention of e-invoices. 

The advantages of Partner Dematerialization Platforms (PDPs) 

Like the PPF, a Partner Dematerialization Platform (PDP) ensures the submission of invoices and conversion into one of the three core-set formats – CII, UBL or Factur-X. 

But, contrary to the PPF, they will allow the exchange of invoices in any EDI format (other than the three core-set formats). 

The PDPs will allow the following: 

In addition to these mandatory functionalities, they may also offer the following: 

4. Conditions to become a PDP

A PDP is a platform registered and authorised by the French tax authorities. The official registration number will be issued based on an application file submitted by an operator. This file will have to document how the regulation requirements (decree and order published in October 2022) are met, particularly the ability to perform the functions expected of a PDP. These requirements are meant to be slightly revisited with a new decree/order to be published beginning of 2024 (more precisely, with the removal of connectivity tests with TA Platform as a PDP Registration Criteria) 

In addition to the guarantee provided by this registration (mainly from the point of view of compliance with stringent security rules), what distinguishes a registered platform from a simple dematerialization operator is the possibility of transmitting invoices to other dematerialization platforms (PPF or other PDPs). 

This registration is valid for three years and then must be renewed, based on audits to be regularly provided by the PDPs (first audit to be conducted no later than 12 months after the registration entering into force). 

The first certified PDPs should be announced in the beginning of 2024 and will be published on the tax authority’s website.  

Find out how Sovos can help you comply with e-invoicing regulations by speaking with one of our experts. 

France is implementing a decentralised continuous transaction control (CTC) system where domestic B2B e-invoicing constitutes the foundation of the system, adding e-reporting requirements for data relating to B2C and cross-border B2B transactions (sales and purchases).

Under this upcoming regime, data or invoices can be directly sent to the Invoicing Public Portal ‘PPF’ (Portail Public de Facturation, so far known as Chorus Pro) or to a Partner Dematerialization Platform ‘PDP’ (Plateformes de Dématerialisation Partenaires). In addition, there are also Dematerializing Operators (Operateurs de dématérialisation) that are connected to either the PPF or a PDP.

Requirements for these portal and platforms have been published.

New details on requirements for portals and obtaining PDP status

The Ministry of Economy published Decree No. 2022-1299 and Order of 7 October 2022 on the generalisation of e-invoicing in transactions between taxable persons for VAT and the transmission of transaction data (together known as ‘new legislation’),  providing long-awaited details for PDP operators and PPF.

The new legislation introduces rules concerning the application process for PDP operators. Although French establishment isn’t required, PDP operators must fulfill a number of requirements, such as operating their IT systems in the EU.

France is implementing a model where third-party service providers are authorised to transmit invoices between the transacting parties. With the mandatory use of the PPF or PDPs for exchanging e-invoices, trading parties cannot exchange invoices between them directly. Therefore, PDPs must be able to receive and send invoices in structured formats, whether the ones supported by the PPF (CII, UBL, or FACTUR-X) or any other required by their clients. Also, to ensure interoperability, PDPs are expected to connect with at least one other PDP. Besides this requirement, it’s stated by the new decree that PDPs must be able to send e-invoices to PDPs chosen by their recipients which implies a complete interoperability between PDPs.

Transitional period for submitting PDF invoices

It was previously announced that taxpayers could submit PDF invoices for a transitional period. The new legislation outlines the transitional period as until the end of 2027. During this period PDPs and PPF must be able to convert the PDF into one of the structured formats.

New details on e-invoicing and e-reporting in France

The new legislation also provides information about the content of e-invoices, which has new mandatory fields, and the content of transaction and payment data to be transmitted to the tax authority.

It also announced frequencies and dates of data transmission. Deadlines for transaction and payment data transmission are based on the tax regimes of taxpayers. For example, taxpayers subject to the normal monthly regime should transmit payment data within ten days after the end of the month.

With the aim of having traceability over documents, the lifecycle statuses of the domestic B2B e-invoices are exchanged between the parties and transmitted to the PPF. Lifecycle statuses that are mandatory (“Deposited”, “Rejected”, “Refused” and “Payment Received”) are listed in the new legislation.

Further details regarding the Central Directory, which consists of data to properly identify the recipient of the e-invoice and its platform, are provided within the Order.

The road ahead for service providers

PDP operator candidates can apply for registration as of Spring 2023 (precise date still to be confirmed), instead of September 2023 as previously set. From January 2024, a six-month test run is expected to be conducted for enterprises and PDPs before the implementation in July 2024.

Talk to a tax expert

Still have questions about France’s upcoming continuous transaction control mandate? Get in touch with our tax experts.

On 30 August 2022, the Ministry of Finance published draft legislation amending the Regulation on the use of the National e-Invoice System (KSeF). The purpose of the draft amendment is to adapt KSeF’s terms of use to the specific conditions that apply to the local government units and the VAT groups that will operate as a new type of VAT taxpayer from 1 January 2023.

The current regulatory status in Poland

The concept of VAT groups was introduced in Poland in October 2021. VAT groups are a legal form of cooperation, a type of taxable entity that exists solely for VAT purposes. On joining a VAT group, a group member becomes part of a new separate VAT taxpayer possessing one Polish tax identification number (NIP).

The regulation on the use of KSeF didn’t take into consideration the uniqueness of the legal nature of the VAT group, as well as the VAT settlements in the local government units. Based on current regulation, the governmental units are treated as a single VAT taxpayer, using one NIP number.

Similarly, in the case of VAT groups, separate VAT taxpayers who create one new taxpayer (a VAT group) use one NIP number. The proposed changes resulted from the ongoing public consultations that took place in December 2021. Additionally, the change was also requested in May 2022 by the Union of Polish Metropolises.

Proposed amendments to the current e-invoice regulation

The draft law provides the possibility to grant additional limited rights for the local government units and members of VAT groups. Moreover, local government units and VAT groups will be able to grant administrative rights, to manage permissions in KSeF, to a natural person who is their representative.

Thanks to such delegated rights, there will be an option to manage authorisations for the local government unit and for the entity that is a member of a VAT group. Moreover, it is significant that a person with such authorisation will not have simultaneous access to invoices in other units within the local government or within other members of a VAT group.

For local government units and VAT groups, granting or withdrawing authorisation to the natural person must be performed electronically. It’s not possible to submit a paper form to notify the competent tax authority.

Remaining issues for KSEF and enforcement date

As mentioned, the proposed amendments are in response to concerns that were raised by the impacted entities. However, they don’t meet all the needs of local government units and VAT groups. For instance, the question of how to assign an inbound electronic invoice to a particular internal unit or member of a VAT group remains open. This is because invoices contain only the data of the taxpayer, which in this case is the local government unit or a VAT group, and not data of the internal unit or member of a VAT group.

The regulation will enter into force 14 days after the date of publication. However, provisions that apply to VAT group members will be effective from 1 January 2023.

Take Action

Want to ensure compliance with the latest e-invoicing requirements in Poland? Get in touch with our tax experts. For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.

The European Commission (EC)’s action plan for fair and simple taxation – ’VAT in the Digital Age’- continues to progress. After a public consultation process, the EC has published Final Reports discussing the best options for the European market to fight tax fraud and benefit businesses with the use of technology.

The areas covered are:

  1. VAT reporting obligations and e-invoicing
  2. VAT treatment of the platform economy
  3. Single EU VAT registration

The EC is expected to propose legislative amendments in the VAT Directive this autumn.

Conclusions on VAT reporting and e-invoicing pillar

The report focusing on VAT reporting and e-invoicing evaluates ‘Digital Reporting Requirements (DRR)’. This is any obligation for VAT taxable persons to periodically or continuously submit transaction data digitally to the tax authority, e.g. by use of SAF-T, VAT listing, real-time reporting or e-invoicing.

According to the report, the best policy choice would be the introduction of a DRR in the form of an EU-wide continuous transaction controls (CTC) e-invoicing system covering both intra-EU and domestic transactions. Member States with an existing e-invoicing system would be able to keep this in the short term via a standstill clause, provided they ensure interoperability with the new EU system. However, in the medium term of five to ten years, national e-invoicing systems would be required to converge to the EU system.

An EU-wide CTC e-invoicing system

The report clearly favours the policy option of a full EU harmonisation through a CTC e-invoicing system, meaning the invoice will be submitted to the authorities before or after issuance. The harmonisation focus seems to be primarily on form, with a suggestion of an EU-wide common protocol and format. Whereas important decisions regarding architecture risk being left to the Member States include whether the system will be clearance or simply reporting, whether to leverage an existing domestic B2G platform and the periodicity of the reporting etc. The only requirement on Member States seems to be accepting issued and transmitted e-invoices based on a common protocol and format.

The report suggests aligning the scope of requirements and excluding non-registered taxable persons and those covered by the SME VAT scheme. In the short term, only B2B and B2G transactions are covered, with B2C transactions remaining out of scope.

Finally, the report suggests that to ease the burden on businesses Member States must consider a number of measures such as jointly removing other reporting obligations, providing pre-filled VAT returns, supporting the investment in business automation (especially for SMEs) and providing public support to the adoption of the IT compliance systems

How this will be jointly coordinated isn’t discussed but it doesn’t sound like the EC expects such measures to be harmonised by the EU.

Future expectations

Although the report concludes implementing an EU-wide mandatory e-invoicing system is the best and most future-proof measure, how to design an effective e-invoicing system is not explained in the report and doesn’t seem to be in scope for harmonisation.

However, the design of the e-invoicing system may have an important impact on fiscal and economic results. As the independent expert report ʻNext Generation Model Decentralized CTC and Exchange’ (supported by EESPA, openPEPPOL and other key stakeholder groups) describes, the greatest benefits can only be realised when an e-invoicing system allows businesses to automate other processes as well as invoicing.

It’s a welcome start that the Commission is aiming for an EU-wide CTC e-invoicing scheme. It remains to be seen how effective this harmonisation will be. When Europe’s politicians return from this year’s summer break, we’ll start to gain more insight into the overall feasibility of the Commission’s views.

As a vendor that has implemented CTC and VAT compliance solutions around the world for several decades now, our desire would be for the debate to go beyond interoperability on a data level, so that Europe can take bold steps towards a future that preserves supply chain automation and technological innovation.

Take Action

To find out more about what we believe the future holds, download the 13th Annual Trends. Follow us on  LinkedIn  and  Twitter  to keep up-to-date with regulatory news and updates.

The Philippines continuous transaction controls (CTC) Electronic Invoicing/Receipting System (EIS) has been officially kicked off for the 100 large taxpayers selected by the government to inaugurate the mandate. Although taxpayers were still struggling to meet the new e-invoicing system’s technical requirements just before the go-live date, the Philippines upheld its planned deadline and went live with this pilot on 1 July 2022.

The Philippines roll-out has once again highlighted the challenges of complying with new mandates and shown that readiness is vital.

Together with one of the six initial pilot companies, which started testing early this year, Sovos has developed the first software solution to obtain approval by the EIS to operate e-invoice transmission through the government’s transmission platform. Sovos’ solution is up and running in the Philippines.

Release of new regulations

One day before the EIS go-live, the Philippines tax authority, BIR (Bureau of Internal Revenue), published Revenue Regulations n. 6-20228-2022, and 9-2022, containing the new system’s policies and guidelines and documenting the rules and procedures adopted by the EIS.

While the regulations do not represent news for pilot taxpayers who have successfully implemented their CTC e-invoice reporting systems, the same might not be accurate for those preparing to comply with the new mandate. The legislation officially establishes the country’s e-invoice/receipt issuance and reporting initiative, first introduced in 2018 by the Tax Reform for Acceleration and Inclusion Act (TRAIN), and documents relevant information.

Who needs to comply?

As of 1 July 2022, 100 selected pilot taxpayers have been obliged to issue and transmit e-invoices and e-receipts through the EIS. The BIR is planning a phased roll-out for other taxpayers within the scope of the mandate, starting in 2023, but no official calendar has been announced yet.

Taxpayers covered by the mandate are:

The mandate requires electronic issuance of invoices (B2B), receipts (B2C), debit and credit notes and transmission through the EIS platform in near real-time, that is, in up to three (3) calendar days counted from issuance date. Documents must be transmitted using the JSON (JavaScript Object Notation) file format.

Issuing and transmitting

Issuance and transmission can be done through the EIS taxpayer portal or using API (Application Programming Interface), in which taxpayers must develop a Sales Data Transmission System and secure certification before operating through the EIS. This entails the application for the EIS Certification and a Permit to Transmit (PTT) by submitting documentation with detailed information about the taxpayer’s system.

Although the regulations state that the submission of printed invoices and receipts is no longer required for taxpayers operating under the EIS, archiving requirements have not been modified. This means that during the 10-year archiving period, taxpayers must retain hard copies of transmitted documents for the first five (5) years, after which exclusive electronic storage is allowed for the remaining time.

Additionally, the legislation states that only the invoices successfully transmitted through the EIS will be accepted for VAT deduction purposes.

Taxpayers were not ready to comply

Many of the 100 pilot taxpayers struggled to comply with the country’s deadline. For this reason, the EIS has allowed alternations to the deadline for certain taxpayers, provided they submit a Sworn Statement detailing the reasons why they are not able to meet the requirement on time and a schedule with the date they intend to comply by, which are subject to the EIS’ approval.

Regarding non-compliance, the regulations state that the tax authority shall impose a penalty for delayed or non-transmission of e-invoices/receipts to the EIS and that unreported sales will be subject to further investigation.

What’s next?

After the pilot program kick-off and legally establishing the CTC framework, the government plans to gradually roll out the mandate to all taxpayers included in the scope in 2023. However, taxpayers who are not in the mandatory scope of the EIS may already opt to enrol in the system and be ready to comply beforehand.

Sovos was the first software provider to become certified, in conjunction with one of the pilot taxpayers, to transmit through the EIS, and is ready to comply with the Philippines CTC e-invoice reporting. Our powerful software combined with our extensive knowledge of the Philippines tax landscape helps companies solve tax for good.

Take Action

Need to ensure compliance with the latest e-invoicing requirements in the Philippines? Speak with a member of Sovos’ team of tax experts

Eastern European countries are taking new steps concerning the implementation of continuous transaction controls (CTC) systems to reduce the VAT gap and combat tax fraud. This blog provides you with information on the latest developments in several Eastern European countries that may further shape the establishment of CTC systems in other European countries and beyond.

Poland

Previously announced on 1 January 2022, taxpayers have been able to issue structured invoices (e-invoices) using Poland’s National e-Invoicing System (KSeF) voluntarily, meaning electronic and paper forms are still acceptable in parallel. On 30 March 2022, the European Commission announced the derogatory decision from Article 218 and Article 232 of Directive 2006/112/EC. The decision will apply from 1 April 2023 until 31 March 2026, after receiving the last approval from the EU Council. Moreover, on 7 April 2022, the Ministry of Finance published the test version of the KSeF taxpayer application that enabled the management of authorisations issuing and receiving invoices from KSeF. The mandatory phase of the mandate is expected to begin the second quarter of 2023, 1 April 2023.

For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.

 

Romania

The Romanian CTC system is one of the fastest developing in Eastern Europe, with the E-Factura system being available for B2G transactions since November 2021. Based on the Government Emergency Ordinance no. 41, published in the official gazette on 11 April 2022, the use of the system will become mandatory for transporting high fiscal risk goods domestically as of July 2022.

Moreover, Draft Law on the approval of the Government Emergency Ordinance no. 120/2021 on the administration, operation, and implementation of the national e-invoicing system (Draft Law) on 20 April 2022 was published by The Romanian Chamber of Deputies. According to the Draft Law, the National Agency for Fiscal Administration (ANAF) will issue an order in 30 days following the derogation decision from EU VAT Directive and establish the scope and the timeline of the B2B e-invoicing mandate. As derived from the proposed amendments, B2G e-invoicing will become mandatory as of 1 July 2022, and mandatory e-invoicing for all B2B transactions is in the pipeline.

For more information see this overview about e-invoicing in Romania or VAT Compliance in Romania.

Serbia

Serbia has introduced a CTC platform called Sistem E-Faktura (SEF) and an additional system to help taxpayers with the processing and storage of invoices called the Sistem za Upravljanje Fakturama (SUF).

To start using the CTC system Sistem E-Faktura (SEF) provided by the Serbian Ministry of Finance, a taxpayer must register through the dedicated portal: eID.gov.rs. SEF is a clearance portal for sending, receiving, capturing, processing and storing structured electronic invoices. The recipient must accept or reject an invoice within fifteen days from the day of receipt of the electronic invoice.

The CTC system became mandatory on 1 May 2022 for the B2G sector, where all suppliers in the public sector must send invoices electronically. The Serbian government must be able to receive and store them from 1 July 2022. Additionally, all taxpayers will be obliged to receive and store e-invoices, and from ​1 January 2023, all taxpayers must issue B2B e-invoices​.

Slovakia

The Slovakian government announced its CTC system called Electronic Invoice Information System (IS EFA, Informačný systém elektronickej fakturácie) in 2021 through draft legislation.

The CTC e-invoicing covers B2G, B2B and B2C transactions and will be conducted via the electronic invoicing information system (IS EFA).

The official legislation regulating the e-invoicing system has not been published yet although it is expected to be published soon. However, the Ministry of Finance has recently posted new dates concerning the implementation of the electronic solution:

The second phase will follow for B2B and B2C transactions.

Slovenia

Slovenia has not progressed in introducing its CTC system. Due to the national elections in April 2022, the CTC reform was not expected to gain much traction until at least the summer of 2022. Nevertheless, there are still ongoing discussions around the CTC reform, which intensified soon after the Slovenian parliamentary elections.

The fast pace of the developments happening within Eastern European countries brings challenges. The lack of clarity and last-minute changes makes it even harder for taxpayers to stay compliant in these jurisdictions.

Take Action

Staying compliant with CTC changes throughout Eastern Europe is easier with help from Sovos’ team of VAT experts. Get in touch or download the 13th Annual Trends report to keep up with the changing regulatory landscape.

The Italian government has taken important steps to broaden the scope of its e-invoicing mandate, more specifically by widening the scope of taxpayers subject to electronic invoice issuance and clearance obligations, starting 1 July 2022.

On 13 April 2022, the draft Law-Decree, known as the second part of the National Recovery and Resilience Plan (Decreto Legge PNRR 2 – Piano Nazionale di Ripresa e Resilienza), was approved by the Italian Council of Ministers (Consiglio dei ministri).

The Italian government-approved National Recovery Plan is part of the European Union’s Recovery and Resilience Facility (RRF), an instrument created to assist Member States financially in recovering from the economic and social challenges raised by the Covid-19 pandemic.

The expansion of Italy’s e-invoicing mandate is one element of the government’s anti-tax evasion package and addresses, in particular, the advancement of digital transformation, one of the six pillars of the RRF.

New taxpayers in scope

The draft Law-Decree PNRR 2 expands the obligation to issue and clear electronic invoices through the Italian clearance platform Sistema di Intercambio (SDI) to certain VAT taxpayers exempt from the mandate thus far. This means that from 1 July 2022, the following additional taxpayers are obliged to comply with the Italian e-invoicing mandate:

The regime forfettario is available to taxpayers who fulfil specific requirements, allowing them to adopt a reduced flat-rate VAT regime of 15%, decreased to 5% for new businesses during the first five years. These taxpayers have, up until now, been exempt from the obligation to issue e-invoices and clear them through the SDI, according to Legislative Decree 127 of 5 August 2015.

Additionally, amateur sports associations and third sector entities with revenue up to EUR 65,000 who have also been exempt from the e-invoicing mandate, are included as new subjects. Starting 1 July 2022, e-invoicing will also become mandatory for them.

The mandate still excludes microenterprises with revenues or fees up to EUR 25,000 per year, which instead will be required to issue and clear e-invoices with the SDI starting in 2024.

Short grace period introduced

The draft decree also established a short transitional grace period from 1 July 2022 until 30 September 2022. During this time taxpayers subject to the new mandate are allowed to issue e-invoices within the following month when the transaction was carried out, without being subject to any penalties. This gives the new subjects time to conform to the general rule stating electronic invoices must be issued within 12 days from the transaction date.

What’s next?

The definitive text of the decree has not yet been published in the Italian Official Gazette; only once this final step is taken will the decree formally become law, and the extended scope become binding. The start of the second semester of this year brings additional significant changes in Italy concerning the mandatory reporting of cross-border invoices through FatturaPA, also set to begin on 1 July 2022.

Take Action

Need help ensuring your business stays compliant with evolving e-invoicing obligations in Italy? Contact our team of experts to learn how Sovos’ solutions for changing e-invoicing obligations can help you stay compliant.

The Philippines continues in constant advance towards implementing its continuous transaction controls (CTC) system, which consists of near real-time reporting of electronically issued invoices and receipts. On 4 April, testing began in the Electronic Invoicing System (EIS), the government’s platform, with six companies selected as pilots for this project.

The initial move toward a CTC system in the Philippines started in 2018 with the introduction of the Tax Reform for Acceleration and Inclusion Act, known as TRAIN law, which has the primary objective of simplifying the country’s tax system by making it more progressive, fair, and efficient. The project for implementing a mandatory nationwide electronic invoicing and reporting system has been developed in close collaboration with the South Korean government, considered a successful model with its comprehensive and seasoned CTC system.

Electronic invoicing and reporting are among many components set forth by the TRAIN law as part of the country’s DX Vision 2030 Digital Transformation Program. With this, the Philippines is making headway toward modernising its tax system.

Introduction of mandatory e-reporting in the Philippines

The Philippines CTC system requires the issuance of invoices (B2B) and receipts (B2C) in electronic form and their near real-time reporting to the Bureau of Internal Revenue (BIR), the national tax authority. The EIS offers different possibilities in terms of submission, meaning that transmission can be done in real-time or near real-time. Documents that must be electronically issued and reported include sales invoices, receipts, and credit/debit notes.

According to the Philippines Tax Code, the following taxpayers are covered by the upcoming mandate:

However, taxpayers not covered by the obligation may opt to enroll with the EIS for e-invoice/e-receipt reporting purposes

E-invoices must be issued in JSON (JavaScript Object Notation) format and contain an electronic signature. After issuance, taxpayers can present their invoices and receipts to their customers. The tax authority´s approval is not needed to proceed. However, electronic documents must be transmitted to the EIS platform in real-time or near real-time.

E-archiving requirements

The Philippines introduced somewhat unusual requirements in this period of digitization, when it comes to e-invoice archiving. The preservation period is ten years and consists of a system in which taxpayers are obliged to retain hard copies for the first five years. After this first period, hard copies are no longer required, and exclusive storage of electronic copies in an e-archive is permitted for the remaining five years.

What’s next for taxpayers?

With tests officially underway, the next phase should begin on 1 July 2022, with the go-live for 100 pilot taxpayers selected by the government, including the six initial ones. After that, the government plans to advance a phased roll-out in 2023 for all taxpayers under the system’s scope. Meanwhile, taxpayers can take advantage of this interim period to conform with the Philippines CTC reporting requirements.

Take Action

Need to ensure compliance with the latest e-invoice requirements in the Philippines? Speak to our team.

Transition from voluntary to mandatory e-invoicing expected from 1 April 2023

From 1 January 2022, taxpayers have been able to issue structured invoices (e-invoices) using Poland’s National e-Invoicing System (KSeF) on a voluntary basis, meaning electronic and paper forms are still acceptable in parallel. Introduction of the KSeF system is part of the digital transformation happening in Poland following the establishment of continuous transaction control (CTC) mandates all around Europe, supporting faster and more effective identification of tax fraud.

The KSeF system enables taxpayers to issue and receive invoices electronically. It is one of the most technologically advanced tools in Europe for exchanging information on economic events. Structured invoices issued via the system are prepared in accordance with the invoice template developed by the Ministry of Finance. After issuance, the invoices are sent from the financial and accounting system via an interface (API) to the central database (KSeF). Afterwards they are available in the system and can be downloaded by the recipient.

For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.

Poland’s derogation requests

On 5 August 2021, the Republic of Poland requested authorisation to derogate from Articles 218, 226 and 232 of the VAT Directive to be able to implement an obligation to issue electronic invoices, processed through the National e-Invoicing System (KSeF), for all transactions that require the issuance of an invoice according to Polish VAT legislation.

Subsequently, on 9 February 2022, Poland modified its request, asking for the authorisation to derogate only from Articles 218 and 232 of the VAT Directive and specified that mandatory electronic invoicing would only apply to taxable persons established in the territory of Poland.

Poland considers the introduction of a generalised obligation to issue electronic invoices would bring significant benefits in terms of combating VAT fraud and evasion while simplifying tax collection. Moreover, the implementation of the measure will accelerate the digitalization of the public sector.

 The European Commission derogatory decision

As derived from Article 218 of the VAT Directive, Member States are obliged to accept all documents or messages in paper or electronic form as invoices. Poland strived to obtain a derogation from the above-mentioned Article of the VAT Directive so that only documents in electronic form could be considered as invoices by the Polish tax administration.

Additionally, based on Article 232 of the VAT Directive the use of an electronic invoice is subject to acceptance by the recipient. Therefore, the introduction of an electronic invoicing obligation in Poland requires a derogation from this Article, so that the issuer no longer has to obtain the consent of the recipient to send an invoice in a paperless format. Currently, under Article 106n of the Polish VAT law, the use of electronic invoices requires the approval of the invoice recipient, which hinders the possibility to impose mandatory electronic invoicing.

As announced by the European Commission on 30 March 2022, Poland has been granted the derogatory decision both from the Article 218 and Article 232 of Directive 2006/112/EC. The decision will apply from 1 April 2023 until 31 March 2026, after receiving the last approval from the EU Council. The mandatory phase of the mandate is expected to begin on 1 April 2023.

The KSeF taxpayer application – on the horizon

To allow taxpayers to issue and make electronic invoices available using KSeF, the Polish Ministry of Finance will offer several tools free of charge:

On 31 March 2022 the Ministry of Finance announced that the test version of the KSeF Taxpayer application will be made available on 7 April 2022. It will enable management of authorisations, issuing and receiving invoices from the KSeF.

Next steps

With the published decision of the European Commission Poland has entered into the next implementing stage of mandatory e-invoicing. The next steps will follow after receiving the approval from the EU Council (which is now a formality and should take place within a few weeks). Subsequently, the Ministry of Finance will implement universal electronic invoicing in Poland giving adequate time for the businesses to adapt to new solutions.

Need help with Poland’s evolving CTC requirements?

Development of Sovos’ CTC solution for Poland is already well-advanced and will shortly be ready for implementation. To get ahead of the inevitable rush to comply with Poland’s CTC mandate, contact us today.