Russia introduces a new e-invoicing system for traceability of certain goods on 1 July 2021. Federal Law No. 371-FZ will amend the Russian Tax Code to introduce the new procedure for the traceability system, which will bring the introduction of mandatory e-invoicing for taxpayers dealing with traceable goods.
Since its introduction, B2B e-invoicing in Russia has remained voluntary. However, this is changing as of this summer when the issuance and acceptance of e-invoices will be mandatory for taxpayers trading goods subject to the traceability system.
The traceability system aims to monitor the movement of certain goods imported into Russia and the Eurasian Economic Union (EAEU). In the scope of the traceability system, each consignment of goods is assigned a registration number during import. This is then controlled at all transaction stages. Businesses within the scope of this new traceability system will need to include the registration number in invoices and primary accounting documents. They must also provide information on the transactions involving the traceable goods through VAT returns and related transaction reports.
Legal entities and individual businesses participating in the circulation of traceable goods are in scope of the traceability requirements. From 1 July 2021, invoices for these goods must be electronic. Buyers of goods subject to traceability must accept invoices in electronic form. Furthermore, the new requirement for mandatory electronic invoices for sales of traceable goods doesn’t apply to export/re-export sales and B2C sales.
The goods included in the list of traceable goods are currently:
Considering that by the end of 2024 Russia aims to have 95% of invoices and 70% of waybills in electronic form, it’s likely more digitization changes are coming. The digitization of accounting records is another area the Russian tax authority is making progress on. It would therefore not come as a surprise to see more changes in the Russian legislation in the next couple of years.
Get in touch to discuss the July 2021 e-invoicing requirements in Russia. Download VAT Trends to discover more about CTCs and how governments across the globe are enacting complex new policies to enforce VAT mandates.
It’s good to see light at the end of the tunnel. Nonetheless, it’s too little, too late for many smaller – but also plenty of larger – companies. Thousands couldn’t weather the storm because they were particularly dependent on human contact. Others were affected disproportionally simply because COVID-19 hit them just as they traversed a difficult period in their life cycle. As we see the first successes of anti-COVID-19 vaccines, businesses and markets are gaining confidence that by the last quarter of 2021, countries will be back at a new cruising speed. With a few notable exceptions, many of the world’s strongest economies will take years to recover from the aftermath.
As with all crises, the past year has accentuated weaknesses and accelerated failures. Whilst it must be acknowledged that the COVID-19 crisis would have been far worse without the internet and the current state of technology adoption worldwide, remaining pockets of legacy processes where companies were lagging in their digital transformation have become highlighted as employees struggled to balance health concerns with the imperative to keep things running in deserted offices and data centers.
One area where inefficiencies have been exposed is on-premises software. Many companies have started adopting cloud-based software to support different categories of workflows and connections with trading partners; however, many larger companies have been reluctant to move core enterprise systems – such as ERPs, logistics or reservation systems – to the cloud. The reason behind this reluctance is often that legacy systems have been highly customized. Whilst many enterprise software vendors offer public-cloud versions that present many benefits over on-premises deployment in theory, the practical challenges of adapting organizations and processes to ‘canned’ workflows designed around standard best practices have often outweighed them.
Another set of challenges are more intricate. Manual processes still dominate in order and invoice management across companies of all sizes globally. Where workflow software allows accounting personnel to access the system remotely, approvals and postings could be managed from home offices, but the prevalence of paper in many vendor and customer relationships still required people to manage scanning, printing, and mailing or – yes – faxing key documents from offices with limited access.
These problems will be harder to overcome, as expensive industrial-strength machines for the processing of paper documents cannot easily be put in home offices. The answer to this challenge doesn’t lie in creative ways to convert people’s kitchens into scan or print centers, but in finally taking the big leap towards end-to-end data integration.
Interestingly, if COVID-19 isn’t enough of a reason to take that automation leap, businesses can expect a helping hand from tax administrations. Many countries had already started large-scale programs to push continuous transaction controls (CTCs). Such as mandatory real-time clearance of digital invoices. The current global health crisis is pushing tax administrations to accelerate these programs. We have seen announcements of plans towards such compulsory e-invoicing or digital reporting of accounting data in countries like France, Jordan and Saudi Arabia. In addition to several countries including Poland and Slovakia who stated their intent to follow in the footsteps of countries in Latin America and also European frontrunners like Italy and Turkey. Even in Germany, which has long resisted the call of CTCs, a significant political party has proposed decisive action in this direction.
These initiatives are still often motivated by the need to close tax gaps. However the need for resilience in revenue collection is clearly another driver. Also, examples from countries like Brazil have shown that CTCs massively improve governments’ ability to track and monitor the economic effects of a crisis down to the smallest sectoral detail. This gives them granular data that can be used for surgical fiscal policy intervention to guide the most severely affected activities through a crisis.
With all circumstances conspiring to give businesses a reason to get across that last mile towards full automation – the interface between their and their trading partners’ sales and purchasing operations – you would think that companies are now putting plans in place to get ready for a fully digital, much more resilient set of processes and organizational structures.
Unfortunately, the way that CTC mandates get rolled out and the way that companies respond to them have historically rather slowed down investment in business process automation and the adoption of modern cloud-based enterprise software.
CTC mandates are unbelievably diverse, ranging from a full online second set of accounting books to be maintained through – among other things – additional classification of supplies in the government-hosted system in Greece, to a completely different setup including service providers and transaction payment reporting being designed in France. Representatives from China are talking about blockchain-based invoicing controls, whilst countries like Poland and Saudi Arabia prepare for centralized, government-run invoice exchange networks. Mandate deadlines tend to be too short, and tax administrations make countless structural adjustments – each typically also with short deadlines and only available in local language – during implementation periods and for years thereafter.
Tax administrations could however claim with some legitimacy that deadlines are always too short, almost regardless of how much transition time taxpayers are granted, because many businesses structurally prepare too late. The global trend towards CTCs, SAF-T and similar mandates has been apparent to companies for years, yet many are ill-prepared; particularly many multinational businesses continue to consider that VAT compliance is a matter to be resolved by local subsidiaries, which step by step creates a massive web of localized procedures which rather than corresponding to corporate best practices were designed by tax administration offices.
Which brings us back to why companies aren’t adopting flashy new releases of enterprise software packages in public cloud mode. Or further automating their trading partner exchanges, more quickly. All parties in this equation want the same thing. That is seamless and secure sharing of relevant data among businesses, and between businesses and tax administrations. However kneejerk reactions to regulatory mandates by businesses, and lack of tax administrations’ familiarity with modern enterprise systems, are creating the opposite effect. Companies panic-fix local mandates without a sufficient understanding of the impact of their decisions. Neither on their future ability to innovate and standardize. The enterprise resources come first to put systems in place post-haste. They then manage the problems stemming from adopting a patchwork of local tax-driven financial and physical supply chain data integration approaches. This comes from IT budgets that then don’t get spent on proper automation.
Several things can break this vicious circle. Businesses should change their way of addressing these VAT digitization changes as revolutionary rather than evolutionary. By being well informed and well prepared, it is possible to adopt a strategic approach to take advantage of CTC mandates rather than suffer from them. Tax administrations must do their part by adopting existing good practices in designing, implementing, and operating digital platforms for mandatory business data interchange purposes. The ICC CTC Principles are an excellent way to give the world economy that much-needed immunity boost, allowing businesses and governments to improve resilience while freeing up resources locked up in inefficient manual business and tax compliance processes.
To find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls and follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and other updates.
Technology can help businesses and governments measure and mitigate the impact of Covid-19. With further waves and recessions biting, technology offers an unparalleled opportunity for governments and business alike to gain a clearer picture of the current panorama. Digital tax returns and real-time or near-real time reporting offer up-to-date financial insight and many tax authorities are pressing ahead with digitisation plans.
The most powerful tool to harness amid economic strife and the most difficult to wield is clarity. Technology can offer this amidst Covid-19.
Technological developments and adoption of digitised processes offer an opportunity to measure tax lost at a macro level. Those nations already implementing continuous transaction controls (CTCs) are at an advantage having insight into lost revenue in the crisis. This year’s events highlighted the benefits of having a panoramic and timely digital view of a nation’s economic health, with economic recovery contingent on access to granular data.
Within Latin America, leading the way in terms of digitising compliance, highly detailed COVID-19 impact analysis reports have been published at key points during the crisis as a result of access to in-line invoice data for all transactions in their economies. The immediacy and quality of this data, and because it covers all or a very large proportion of a country’s economy, is a real game changer.
The trend towards CTCs was set before the pandemic, but the tendency has been catalysed faster than previously thought possible. Though the advantages of CTCs were evident before, with EY predicting that a full economic recovery isn’t achievable until 2024 at the earliest, they offer an unrivalled mechanism for businesses and governments to monitor the situation.
The benefits of digitalisation are more significant since ongoing and dynamic assessments are recognised as essential tools to inform government and business decision making. Firms submitting their actual invoice data from business transactions instead of summary returns directly to government platforms (B2G) in real or near-to-real-time, rather than periodically, can instantly view their outgoings; in turn, governments can gauge the macro picture based on overall VAT loss more accurately using digital means.
The advantages of a live dashboard that reveals the evolution of supply and demand are clear. In real-time tracks stock movements, imports/exports and price fluctuations. Having insight into these and many other data points allows a level of analysis into the minutiae of deep subcategories of goods and services offered and sold in an economy and provides clearer visibility for businesses and governments. This kind of data can dispel uncertainty, allowing companies and authorities alike to cut through risks and identify opportunities linked with policy and investment decisions.
Overall, if countries could see the loss in real-time, they can also track changing behaviours and market size, rather than relying on informed guesses without robust data to back up forecasts as currently. After all, to effectively plan for later scenarios, it’s key to understand what’s going on now.
Businesses both small and large are subject to the same rules on evidencing their fiscal activity and financial footprint, and so indirect tax measurement is the crucial indicator of the true damage of these troubling times.
Sophisticated, intricate supply and value chains are all implicated in a complex web, creating intense inter-dependency at all levels. Paramount to successfully surviving in this climate is the ability to monitor developments as they happen. For tax authorities, keeping a close eye on individual digital invoices and other key commercial data allows a forensic and accurate view of how many firms are still afloat. At a wider level, which economies are in serious hot water.
Major VAT discrepancies were already a concern before the crisis and are more so now as consumption tax rate reductions and other fiscal incentives linked with economic inactivity look set to have a devastating impact on both short and medium term revenue collection. Measuring and even reducing the VAT gap will be increasingly important.
Access to data will help unravel the spider’s web of complexities. It provides a better understanding of what the steps both through and out of the recession will be. For business and governments, investing in partnerships that operate across a global landscape will bolster knowledge needed to map out the road to economic recovery. For tax authorities, a clear priority is to understand markets and the impacts on them. This data analysis that keeps pace with developments as they happen is essential.
With whole economies already facing devastating deficit and profit loss from Covid-19, technology must continue to give us the clear vision we need to recover. At a macro level the insights technology can offer are unparalleled. However even on a micro level, individuals can harness data and keep an ongoing record of activity to guide strategic decisions and future investments. With the economic road ahead of many of the world’s economies looking rocky, technology and real-time data offers the potential for a clearer future.
To keep up to date with the changing VAT compliance landscape, download VAT Trends: Toward Continuous Transaction Controls. Follow us on LinkedIn and Twitter to keep up with regulatory news and other updates.
Find out why it makes sense to invest in tech and automation to streamline tax processes and alleviate the burdens finance teams face.
The shift towards digitisation necessitates a radical adaption and shift in existing tech for industries across the board. As this occurs, tensions and anxieties rise around automation and job losses. With Oxford Economics predicting that 12.5 million manufacturing jobs will be automated in China by 2030, a partially automated workforce is indeed on the horizon.
But human expertise and technology can go hand in hand, with tech supporting teams and boosting productivity tenfold. As a result, for businesses, the only way to thrive in an increasingly digital world is to invest in the right technology.
For organisations operating globally, this is of particular importance as an extensive knowledge of governmental financial legislation in many countries is needed. Financial frameworks are complex to navigate and are constantly changing. Real-time VAT reporting is increasingly prevalent worldwide, with continuous transaction controls (CTCs) tightly constricting many different jurisdictions. Without automation, the hours required to manually keep pace with new rules would far exceed realistic human capacity.
For global companies, manually submitting the paperwork for audits and reports is neither sustainable nor sensible. But an additional problem for those operating in multiple jurisdictions is how to keep pace with ever changing rules and government regulations required for business transactions.
Global governments are reviewing how they measure and collect tax returns. The aim is to improve economic standards in their countries. Digitising return processes gives way for a much more forensic and accurate view of a nation’s economic health. So it’s unsurprising that automated invoicing and reporting has pushed its way to the top of the agenda in recent years.
How the approach is taken to upgrading many transactions and interactions is contingent on specific country viewpoints – certain jurisdictions enforce varying levels of CTCs, real-time invoicing, archiving and reporting of trade documentation. Therefore those operating internationally will feel the additional pressure to accurately track and comply with multiple and complex laws with threatening hefty non-compliance fines. Trading and operating within the law now requires intelligent technology and infrastructure.
Approaches across the globe differ; Latin America pioneered mandatory B2B clearance of e-invoices, and Brazil requires full clearance through a government platform. In Europe, the EU-VAT directive prohibits countries from introducing full e-invoicing – though Italy bucked this trend in 2019, following a lengthy derogation process. As economies shift to a data-driven business model, the move towards a digital tax regime is inevitable.
The VAT gap continues to confound governments across the globe. Therefore to combat it, many nations have created their own systems. In turn, this makes a patchwork of mechanisms unable to communicate with each other. To add to this, the slow adoption of e-invoices in many countries has caused a completely fractured picture – VAT information is still being reported periodically in many countries, with each jurisdiction setting its own standard. We’re a long way from consistency in global digitisation.
As more countries develop their own specific take on digitising invoicing, things look increasingly complex. New regulatory legislation continues to surface and keeping track can cause headaches and accidental noncompliance. Global firms must maintain a keen eye on developments as they happen in all the countries where they operate and its essential they apply systems which can track and update new legislation as it happens.
But tech also needs to give an accurate reflection of an entire business’ finances. It needs to link together all the different systems to accurately report tax. This is why flexible APIs are the first order of priority. Programmes with sophisticated APIs enable tax systems to ‘plug in’ to a business and gather vital information. In turn allowing firms to showcase the necessary data, display accurate results and avoid government penalties. It’s essential that technology can integrate with a number of billing systems, ERPs, and procure-to-pay platforms when approaching sensitive government interactions. The volumes of data created and handled are enormous, and increasingly out of the realms of human possibility.
Likewise, tech can assist in formatting information as per the requests of each country, which is essential for digital reporting. Technology exists to monitor and adjust invoice formats. For example, to suit the country a business is operating in and avoid non-compliance penalties. With time usually of the essence and in short supply, tools that automate admin and free up time for strategic elements of business finance pay for themselves in dividends. Effectively, as machines are increasingly ingrained in operations, manual analytics become more challenging. Both governments and businesses are leaning on automation and advanced technology to ease the resulting administrative burdens.
A truly digital future is in the grasp of many economies, but it comes at a price. To capitalise on the rapid wave of digital transformation, businesses must arm themselves with technology. It’s time to manage the increasing realm of complex and data-driven regulations. It makes sense to invest in tech and automation to handle labour-intensive analysis and research, streamline processes, and alleviate the burdens faced by finance teams. That is without the need for costly expert staff or outsourced support. On the verge of a fully digital way of working, manually submitting the paperwork for audits and reports is no longer practical.
It is important to carefully select technology to synchronise and communicate vital information across a business’ IT infrastructure. In the current recession driven context, the pressure on finance teams is intense. The pressure to perform at their best, safeguard against any financial leaks and strictly monitor expenses and outgoings. In the face of adversity, tech can guide and support us – and could become business critical.
Investing in automation and tech doesn’t have to cost finance jobs. It can instead go hand in hand with human expertise. It can manage arduous and complex tasks. While also freeing up time and energy so businesses can concentrate on what they do best.
Find out how Sovos can help you central, standardize and automate your VAT and fiscal reporting obligations.
France is introducing continuous transaction controls (CTC). From 2023, France will implement a mandatory B2B e-invoicing clearance and e-reporting obligation. With these comprehensive requirements, alongside the B2G e-invoicing obligation that is already mandatory, the government aims to increase efficiency, cut costs, and fight fraud. Find out more.
France shows a solid understanding of this complex CTC subject, but some questions remain.
France announces VAT changes spurred on by international reforms for continuous controls of VAT transactions (“Continuous Transaction Controls” or “CTCs”). The French government aims to increase efficiency, cut costs and fight fraud through the roll-out of mandatory B2B e-invoice clearance. This coupled with an e-reporting obligation gives the tax administration all relevant data for B2B and B2C transactions. This will start with large companies.
In the report ‘VAT in the Digital Age in France’ ( La TVA à l’ère du digital en France), la Direction General des Finances Publiques – or DG-FIP – describes its aim to implement this mixed solution. Whereby mandatory clearance of e-invoices (ideally for all invoices, without exceptions such as threshold amounts etc) will lay the foundation.
This will provide the tax authority with data relating to any domestic B2B transaction. However, in order to effectively be able to combat fraud, including the carousel type, this is not enough; they need access to all transaction data. Therefore, data that the tax authority will not receive as part of the e-invoice clearance process – notably B2C invoices and invoices issued by foreign suppliers that will not be subject to a domestic French mandate, as well as certain payment data – will be subject to a complementary e-reporting obligation. (The requirement to report this latter data electronically does not mean that the underlying invoices must be e-invoices; parties can still transmit in paper between themselves.)
The report describes how the DG-FIP has considered two potential models for the e-invoice clearance process. This is via the central Chorus Pro portal (currently the clearance point for all B2G invoices). These are the V and the Y model.
In the V model there is one public platform that serves as the clearance point; the central Chorus Pro platform is the only authorized platform via which the invoice can be transmitted to the buyer, or where applicable, the buyer’s service provider.
The Y model includes in addition to the central platform certified third-party service providers, which are authorized to clear and transmit invoices between the transacting parties. This alternative is the preferred option by the service provider community. For that reason – and as this model is more resilient because it is not exposed to a single point of failure – the report appears to favour the Y model.
As to the timeline, starting in January 2023, all companies must be able to receive electronic invoices via the centralized system. When it comes to issuance, a similar roll out as for the B2G e-invoice mandate is envisaged, starting with large companies.
The report lays a good foundation for the deployment of this mixed CTC system. However many issues will need to be clarified to allow for smooth implementation. Some of which quite fundamental.
The report proposes a progressive and pedagogical deployment. This will ensure that businesses will manage this -for some radical – shift to electronic invoicing and reporting. The ICC’s practice principles on CTC are referenced, specifically noting the importance of early notice and ICC’s advice to give businesses at least 12-18 months to prepare. The first deadline comes up in just over two years’ time. It leaves only 6-12 months for the French tax administration to work out all details and get the relevant laws, decrees and guidelines adopted. This is if business should have what ICC believes is a reasonable time to adapt.
As anticipated, further information has been published by the Portuguese tax authorities about the regulation of invoices. Last weeks’ news about the postponement of requirements established during the country’s mini e-invoice reform, and the withdrawal of a company’s obligation to communicate a set of information to the tax authority, culminated in the long-waited regulation about the unique identification number and QR codes.
Back in 2019, the Law-Decree 28/2019 introduced the unique identification number and QR code as mandatory invoice content. Previously expected to be enforced on 1 January 2020, the details about what constitutes such a unique identification number and the content of the QR codes were missing. However, the Portuguese government has now published an Ordinance further regulating both requirements.
A new validation code
According to the Ordinance 195/2020, as of 1 January 2021, companies issuing invoices under Portuguese law must communicate the series used in invoices to the Portuguese tax authorities, prior to it being applied. Once the series has been communicated, the tax authority issues a validation code for each reported number series.
This validation code is later used as part of the unique identification number that has been named ATCUD. The ATCUD comprises the validation code of the series and a sequential number within the series in the format “ATCUD:Validation Code-Sequential number”. The ATCUD must be included in all invoices immediately before the QR code and be readable on every page of the invoice.
To obtain a validation code, taxpayers must communicate the following data to the Portuguese tax authority:
Once approved, the tax authority creates a validation code with a minimum size of eight characters.
According to the Ordinance, the sequential number that is also part of the ATCUD is a reference obtained from a specific field of the Portuguese version of the SAF-T file.
Although the Ordinance meant to introduce QR code details, it states that technical specifications will be published on the tax authority’s website. The Ordinance nevertheless says that a QR code should be included in all invoices and documents issued by certified software. It also states that the QR code should be included in the body of the invoice (on the first or last page) and be readable. Technical specifications for the QR code are available from the tax authority’s website.
Last week’s Ordinance doesn’t change the scope of companies that need to use certified software to issue invoices, nor does it change the certification requirements. However, Portuguese taxpayers must, once again, adapt their current business and compliance processes and are under pressure to change their systems before the 1 January 2021 deadline.
To keep up to date with the changing VAT compliance landscape, download Trends: Continuous Global VAT Compliance and follow us on LinkedIn and Twitter to stay ahead of regulatory news and other updates.
On 22 June, the joint Ministerial Decision that sets forth the myDATA framework was published. The decision specifies, among other things, the scope of application and applicable exemptions, the data to be transmitted, transmission methods and procedures, applicable deadlines and how transactions should be characterized.
Starting from January 2021, the required data must be reported to the myDATA platform in real-time. For information relevant to the year 2020, taxpayers have been awarded more breathing room: until the end of this year, the required data can be reported within 5 days after the issuance of an invoice, but not later than the 20th of the following month.
The implementation of myDATA will be performed in a phased manner, with ERP-based reporting of outbound and inbound data with their respective classifications starting from 1 October 2020. If a myDATA accredited e-invoicing service provider (according to the rules of the new framework) is used for e-invoicing, the reporting to myDATA through a service provider is possible from 20 July 2020.
To encourage businesses to adopt e-invoicing, the Ministry of Finance, through a draft bill published on 19 June, provided a number of incentives for businesses to use e-invoicing facilitated through service providers until the end of 2022.
The incentives provided are:
Based on these recent developments, it is clear that the Greek government wishes to promote the adoption of e-invoicing in Greece but does not yet go so far as to make it mandatory. A decision specifying the details of the e-invoicing scheme is expected to be published by the IAPR in the very near future.
For companies operating in Turkey, 2019 was an eventful year for tax regulatory change and in particular, e-invoicing reform. Since it was first introduced in 2012, the e-invoicing mandate has grown, and companies are having to adapt in order to comply with requirements in 2020 and beyond. Turkey’s digital transformation and e-invoicing landscape continues to evolve.
According to the General Communique on the Tax Procedure Law (General Communique), more taxpayers now need to comply with the mandatory e-invoicing framework. The General Communique published on 19 October 2019 covers other e-documents such as e-arşiv, e-delivery note, e-self-employment receipts, e-producer receipts, e-tickets, e-note of expenses, e-Insurance Commission Expense Documents, e-Insurance Policies, eDocument of Currency Exchange, and e-Bank Receipts.
From 1 July 2020, taxpayers with a gross sales revenue of TL 5 million or above in fiscal years 2018 or 2019 must switch to the e-invoice system. Taxpayers who meet these requirements in 2020 or later, should switch to the e-invoice system at the beginning of the seventh month of the following accounting year.
Turkey’s tax authority has set some sector-based parameters for businesses operating in Turkey. Companies licensed by the Turkish Energy Market Regulatory Authority, middlemen or fruits or vegetable traders, online service providers facilitating online trade, importers and dealers are some of the taxpayers also required to switch to e-invoices, irrespective of their turnover.
E-arsiv fatura documents B2C transactions. But also in case the transacting counterparty is not registered with the TRA for e-invoicing. Similar to e-invoice, the e-arşiv invoice, became mandatory for intermediary service providers; online advertisers; and intermediary online advertisers who switched to the system from 1 January 2020.
Taxpayers not in scope for e-invoice and e-arşiv must issue e-arşiv invoices through the Turkish Revenue Administration´s portal. That is if the total amount of an invoice issued, including taxes, exceeds:
Turkey’s Government continues to tackle its VAT gap through digital transformation. By taking greater control of reporting and requiring more granular tax detail. So, businesses operating in Turkey need powerful e-invoicing strategies to comply with the growing demands for digital tax transformation.
Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
With two weeks to go until the first mandatory phase of the Indian e-invoicing reform go live, the GST Council slammed the breaks. Or at least, bring it to a significant temporary standstill of 6 months. As a result, the India e-invoicing reform is now postponed until 1 October 2020
Following a long list of complaints — both from the private sector toward the GST Council, as well as from the GST Council vis-á-vis the IT infrastructure provider that powers the GST Network, Infosys — the council decided to revisit the 1 April go-live in a recent meeting held today, Saturday 14 March.
The GST council made a number of important decisions, including most notably:
The decisions made in the 39th meeting of the GST Council will require either that the legislative framework (Notifications) published in early December be amended or entirely replaced with new ones to reflect the new reality. However, it wouldn’t be unreasonable to expect even further delays to the roll out of this reform. This given to the recent economic volatility triggered by the ongoing pandemic. Only once both global markets as well as the underlying technical platforms of the GST control reform seem to stabilize will the post-October timeline of the roll out be fully certain.
Anyone predicting Italy’s clearance model e-invoicing system, FatturaPA, would undergo further reform would be right. Agenzia delle Entrate – AdE, the Italian tax authority, has issued new technical specifications and schemas for Italian B2B and B2G e-invoices. But – what do these changes really mean? And what impact do they have on business processes?
Over recent weeks, three updates have been introduced:
The inclusion of withholding taxes (especially social contributions) is one of the new content requirements for the B2B and B2G XML formats. There are also 12 new document types (including self-billed invoices and integration documents) and a further 17 new nature of transactions options (such as reasons for exemptions and reverse charges).
These content updates now require Italian companies to have a deeper understanding of the Italian tax system. The changes impact the moment taxpayers classify their supplies: under the current model, Italian companies don’t have to worry about this until the submission of their VAT returns but under the new schema this classification will be performed in real-time. These updates are likely to impact business processes. They are a necessary next step in paving the way ahead of the upcoming introduction of pre-completed VAT returns, an initiative largely considered to eliminate administrative burden and make life easier for most Italian businesses.
In parallel, further changes resulting from the new versions of the FatturaPA formats have a technical impact on businesses, demanding IT implementation readiness. Among the technical updates are the inclusion of additional fields, length of content, permitted characters, shifting from optional to mandatory field fulfillment and vice-versa, and how often a field can be repeated.
The new technical specifications also introduced new validations that will be performed by the Sistema di Interscambio – SDI, the Italian government-platform responsible for clearance of e-invoices. Most of the new validations check the content of the e-invoice against document types and the indicated nature of the transactions and require taxpayers to eventually be able to understand, process and react accordingly to new errors.
The SDI platform will start processing B2B invoices in the new FatturaPA format from 4 May 2020, but the AdE will enforce use of the new schema on 1 October 2020, triggering new validations and errors only after this date as per the Provvedimento from 28 February 2020. Different deadlines apply to B2G invoices, unless of course the AdE publishes new transition rules for these invoices before that date. The enforcement of the new schema for B2G invoices is set to begin on 1 May 2020.
In practice, the effect of these deadlines mean that while the schemas for B2B and B2G invoices are indeed the same from a technical perspective, taxpayers will must be ready for different deadlines and be prepared to work with two different invoice schemas from 1 May until 4 May.
To find out more about what we believe the future holds, download Trends in Continuous VAT Compliance.
In Turkey, the Revenue Administration (TRA) published the long-awaited e-Delivery Note Application Manual. The manual clarifies how the electronic delivery process will work in addition to answering frequently asked questions. It addresses the application as well as its scope and structure, outlines important scenarios and provides clarity for companies who are unclear about the adoption of e-delivery notes.
The e-delivery note is the electronic version of the “delivery note,” currently printed on paper. As a result, it allows the TRA to regularly monitor the movements of delivered merchandise in the electronic environment.
Electronic delivery has the same legal qualifications as the delivery note but is issued, forwarded, retained, and submitted digitally.
According to the circular published by the TRA at the end of February, taxpayers in scope of the e-delivery note application are;
Taxpayers engaged in fruit and vegetable trade as brokers or merchants completed their transitions of January 1, 2020. Other taxpayers covered by the mandate must be ready by July 1, 2020.
Taxpayers deemed to be risky or at low levels of tax compliance by the TRA must complete their transition to the e-delivery note application within three months after being notified.
Besides explaining the basic concepts, the manual also details the previously announced scenarios providing answers to many areas that were confusing for taxpayers.
The main scenarios are:
In addition, other topics covered include:
Full details on the Turkey E-Delivery Application Manual are available in Turkish from the TRA e-Document website.
Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
The upcoming tax reform in Greece is expected to manifest itself in three continuous transaction control (CTC) initiatives.
Earlier this month, new technical specifications were published for the online connection of cash registers with the government portal. From June 2020, all cash registers currently used in Greece must be updated to meet the new technical specifications (available in Greek) to be able to connect and transmit their transaction data to the government portal.
The technical specifications regulate two aspects:
These specifications are complementary to those published in late 2018, which mainly regulated the security and certification requirements of the new generation cash registers. This latest development is further proof that the Greek government is committed to moving forward with the CTC plans it initially outlined two years ago.
Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
Certification of e-invoice service providers is an important first step and milestone ahead of the implementation of e-invoicing in Greece. The Greek Government has now defined the regulatory framework for e-invoice service providers, their obligations, and a set of requirements needed to certify their invoicing software. Find out what you need to know about the accreditation scheme for e-invoicing service providers in Greece.
E-invoice service providers are entities the taxpayer authorises to issue invoices on their behalf electronically for B2B in addition to B2C transactions. They’re responsible for issuing, the authenticity and integrity, and the transmission of transaction data to the tax authority in real-time. Other outsourced functions include e-invoice delivery to the buyer directly and archiving on behalf of the issuer.
The service provider’s software must meet a number of requirements. It must for example be able to guarantee integrity and authenticity of the invoice according to the SHA-1 algorithm, provide real-time connection with the customer’s software, and make the invoice available to the customer in electronic (or, upon request, in paper) form. Any software which meets these criteria recieves a “Suitability Permit”, which is valid for five years.
Service providers must be a Greek registered entity or permanently established in Greece. They must also meet certain technical, security and financial criteria and the invoice data must be stored within the EU. Other obligations also include making a user manual available to the customer; notifying the tax authority of each outsourcing contract they have entered into; and addressing privacy-related matters.
The transmission method to the myDATA will be the myDATA REST API and the format of the e-invoice exchanged between the parties is based on the EN norm, as defined by law just a few days ago. The myDATA website will publish any details and further legislation.
Through this Decision, the Greek Government is introducing the long-awaited secondary legislation, as mandated in the budget law 2020 earlier this year. Precisely how these provisions will work together with the myDATA scheme, scheduled to be fully operational on 1 April 2020, is still to be defined by the authorities. However, Greece requires further legislation, as well as a formal derogation decision from Brussels. This is if the Greek government wishes to mandate e-invoicing in the country. As such a reform would deviate from principles laid out in the EU VAT Directive.
Need more information on the accreditation scheme for e-invoicing in Greece? Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
For those following the ongoing tax control reform in India, 2019 has been a very eventful year for Indian e-invoicing. Starting last spring, a group of government and public administration bodies have convened regularly with the mission of proposing a new way of controlling GST compliance through the introduction of mandatory e-invoicing. Given the vast impact such a reform would have on not just the Indian but the global economy, these discussions, often carried out behind closed doors, have triggered a large number of rumours, sometimes leading to misinformation on the market.
So far, not much information of a formal or binding nature has been published or made available to the public. After the public consultation held earlier this autumn, a high-level whitepaper describing the envisaged e-invoicing process was published; however, since then nothing formal or binding has been released. A recent media note made available by the relevant authorities to the press indicated that the timeline envisaged by the government for the roll-out would be:
1 January 2020: voluntary for businesses with a turnover of Rs.500 Crore or more;
1 February 2020: voluntary for businesses with turnover of Rs.100 Crore or more;
1 April 2020: mandatory for both of the above categories and voluntary for businesses with a turnover of less than Rs. 100 Crore.
While the clarity was welcomed, this timeline was not yet binding, and as a result, taxpayers were left with little information on how to meet the requirements of the tax control reform, and no binding indication of when they need to comply. However, this situation is now currently being remedied, and we are seeing the first codification into law.
On December 13, 2019, a set of Notifications (No. 67-72/2019) introducing amendments to the existing GST legislation framework were released and are currently awaiting publication in the Gazette of India. In a nutshell, these Notifications:
These Notifications issued on December 13 will be the first of many pieces of documentation that are needed to formally clarify the details of the upcoming e-invoicing reform. More important still, they serve as a clear indication that the relevant Indian authorities are nearing the end of what has been an analytical and consultative design period, and that they now instead are transitioning into a period of preparation for the first roll-out.
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Two months after closing the public consultation on the myDATA scheme, the Greek tax authority, IAPR, has yet to share the feedback received from the industry on the proposed scheme or make any official announcement in this regard. However, local discussions indicate that, the IAPR may reintroduce its initial agenda proposed back in August 2018, which would mandate electronic invoicing based on a clearance model.
Following input from stakeholders, the IAPR is believed to have realised that mandatory e-invoicing in a clearance model will be required to achieve its sought-after goals of reducing administrative burdens on businesses and combatting tax fraud. An EU derogation from the VAT Directive will still be required, and the IAPR will have to follow the logistics and formalities of the derogation process including justifying its request to implement special measures that deviate from the freedom of choice of the Directive regarding the invoicing method.
A first natural step towards e-invoice clearance would be to formalise the definition of e-invoice service providers (SPs). The current role of SPs in the myDATA framework is to help taxpayers with data preparation, consolidation and transmission to the government portal. The scope of the SPs role could either remain the same, in which case little or no governmental oversight would be required, or it could expand and include functions that usually are at the core of government tax controls, such as clearing an invoice by various means.
The former function would resemble a clearance model similar to India, where an Application Service Provider, ASP, (non-regulated function) can perform various functions, such as verifying the Invoice Reference Number on the invoice, which under the Greek framework could correspond to verifying the relevant reference number under the myDATA scheme, called MARK. The more expanded role would be a regulated function subject to government control and eligibility criteria that are usually restrictive. The SP would then act in its capacity of a government agency, similar to a PAC in Mexico which performs the government outsourced function of clearing the invoice. It remains to be seen which pathway Greece will take at this clearance cross-road.
Regarding the implementation timeline, the myDATA project is expected to be postponed by three months which would allow the authorities more time to complete the accreditation scheme for e-invoice SPs at the beginning of 2020. The new expected launch data for the myDATA scheme is 1 April 2020.
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Following India’s recent public consultation looking at the proposed introduction of an e-invoicing regime, the GST council has now released a white paper on the architecture of the new framework and also provided answers to a number of outstanding questions.
From 1 January 2020, taxpayers in India can start to use the new e-invoicing framework, which relies on connectivity to the GST system for reporting of all B2B invoice data. The first part of the roll-out starting from this date will be voluntary for businesses. It will only become mandatory at a later stage, the timing of which is still to be communicated by the relevant authorities.
The new e-invoicing system, considered to be not only a tax reform but also a business reform, has two key aims:
Under the e-invoicing system, taxpayers will be obliged to create the e-invoice in the structured JSON format and transmit it to the Invoice Registration Portal (IRP). The IRP will then check the e-invoice according to the requirements of the schema and determine if a duplicate record is already registered on the GST system.
After this check, the IRP will digitally sign the e-invoice, assign a unique number – the invoice registration number (IRN) – to the invoice and create a QR code, before submitting the invoice to the GST system. The QR code will help to authenticate the e-invoice by the seller and buyer and to confirm that the invoice is successfully registered in the GST system. Connection to the portal is needed to see all the e-invoice data and to view all the details online. A digital signature by the taxpayer is not mandatory, but it is permitted before submission to the IRP.
An IRN can also be generated by the seller with the required parameters, which would then be validated by the IRP and transmitted to the GST System if it meets the predefined criteria.
Once the e-invoice has been cleared by the IRP, it will be transmitted to both the seller and the buyer by email.
Taxpayers can use several methods to connect to the IRP including web, API, SMS, mobile app, offline tool or GSP based.
The IRP keeps the e-invoices for just 24 hours as its main function is to validate and assign the IRN. Invoices submitted to the GST system will be archived for the whole financial year by the GST system and taxpayers must keep the IRN for each invoice to ensure compliance.
The new system will simplify the preparation of Goods and Services Tax (GST) returns by auto-populating the returns with the data from the e-invoices. The GST System will update the ANX-1 of the seller (sales registers) and ANX-2 of the buyer (purchase register).
Data from the e-invoice will also be used as a basis to populate the current e-waybill (auto-generation of Part-A), where only the vehicle registration number will need to be added in Part-B of the e-waybill.
Whilst the white paper has provided some guidance for businesses ahead of the introduction of this e-invoicing framework, there are still some grey areas to be addressed in the coming months, including the timeline for submitting e-invoices.
Learn how Sovos helps companies handle e-invoicing and other mandates all over the world. To find out more about what we believe the future holds, download the Sovos eBook on trends in e-invoicing compliance.
Greece made an important step to digitise its tax system and introduce an innovative platform for taxpayers to fulfil their tax obligations. The new platform will offer businesses a collaborative environment where the data they provide to the Greek Independent Authority of Public Revenues (IAPR) will not only affect their own books but will also auto-populate their buyers’ tax situation.
As a result of this innovative solution, taxpayers will be relieved from some of their filing obligations, which will be fulfilled automatically as a result of this application.
Taxpayers will submit their required transactional data through an automated solution to the platform or through the web portal of the IAPR.
The new platform, called myDATA, which stands for My Digital Accounting and Tax Application, includes two books: The Record Book, and The Summary Book.
The record book records the submitted transactions to the myDATA platform. These transactions are classified as income/expense according to their type (e.g sale of goods, provision of services etc.). Classified data is then summarised within the summary book and depicts the accounting and tax result for the respective period.
Suppliers are required to submit a summary of all their domestic and cross-border sale transactions (wholesale/retail). The reported sales data will update its income books and the domestic transaction data will update the buyer’s expense books.
Buyers are required to submit a summary of their domestic and cross-border purchase invoices for B2C transactions in Greece and abroad. On the other hand they need to submit acquisitions from abroad and they also have a joint responsibility with their suppliers for reporting B2B transactions in Greece. If the suppliers don’t submit the related transactions on the myDATA platform, then their buyers, in order to comply with the e-books requirement, should transmit this transaction data.
Taxpayers will continue to file their tax returns on the basis of their accounting books, but following the submission of their tax returns the data declared in them will be reconciled against the result of the submitted data recorded in the e-books for the corresponding period. If there is a discrepancy between the e-books and VAT returns the taxpayer has to correct the discrepancy within a two month period. After this time (initial disagreement) the taxpayer has two options: 1) to correct the discrepancy and achieve consistency between the VAT returns and e-books or 2) they can explain the discrepancy and achieve justifiable consistency. This will be considered as agreed and no further action will be taken.
A tax audit or penalty may be triggered if no action is taken by the taxpayer within the two month period to correct or defend the discrepancy.
There is an online portal available from the IAPR for testing purposes, where taxpayers can test the integration of their accounting software with myDATA APIs and test their solutions.
The myDATA scheme proposal was open to public consultation until 6 September 2019; no response has been published to-date by the IAPR on the feedback received from the industry and other stakeholders on the scheme. It is expected that myDATA will be introduced as a pilot in Q4 2019 and be fully operational by the beginning of 2020.
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Back in June this year, many heads were turned when the French Minister of Public Accounts and Action, Gérald Darmanin, went on record stating that the French Government has the intention of making e-invoicing mandatory also for B2B transactions. Now it seems that the Government – spearheaded on this topic by Minister Darmanin as well as by the Minister of Finance Bruno Le Maire – has moved from word to action. The French Finance Bill for 2020, formally presented after the meeting of the Council of Ministers on 27 September, codifies the plan to extend the B2G e-invoicing obligation in force today to cover also B2B e-invoices.
In just three short paragraphs, the draft finance law outlines the major principles for the budding reform. While much is left to be clarified by later decrees, art. 56 of the Finance Bill introduces the main rule that electronic form for invoices will be mandatory and that, as a result, paper invoices will no longer be permitted. It also introduces language that means that e-invoices most likely also will be cleared by the tax authority, or otherwise have the data transmitted to the tax authority to enable control of the VAT on the invoice. France will effectively, and not surprisingly, be joining the ranks of other countries such as Mexico, Turkey, Italy and Brazil, who have implemented measures to tackle its VAT gap through real-time VAT control mechanisms.
The timeline of the roll-out of the mandate will, just like the roll-out of the B2G mandate currently in force, be scheduled in stages; gradually becoming applicable for companies depending on the size of the business. The first stage of the mandate will begin on 1 January 2023, and according to the bill the entire economy should be up-and-running under the new e-invoicing system no later than 1 January 2025.
The Government also states that it, during the course of next year, will present a report to parliament, the Assemblée Nationale, presenting how the reform will be carried out as well as the underlying analysis of which method and what regulations constitute the most appropriate technical, legal and operational solution, particularly as regards the clearance/transmission of invoice data to the tax administration.
In addition to the analysis and drafting of both laws and reports that the Government announced, it’s also clear that one more critical element needs to be covered before the reform becomes a reality: Brussels.
Ever since Italy went down this same path and became the first EU country to introduce mandatory clearance B2B e-invoicing, many parallels have been drawn between the two countries. They share a similar situation in terms of VAT gap and IT infrastructures, which have made many experts (rightly) assume that France would follow down the path Italy set out. However, in order to lawfully do so, Italy had to seek and obtain permission from the EU Council to deviate from the provisions of the EU VAT Directive (2006/112/EC). The French Government has acknowledged that it will need to do the same.
Want to learn more? For a continued and in-depth analysis of the French e-invoicing reform and its challenges, please join a webinar hosted by Christiaan van der Valk, e-invoicing expert and VP of Strategy at Sovos, on this topic on 3 October.
Inscrivez-vous ici si vous désirez rejoindre le webinaire de Christiaan van der Valk le 3 Octobre.