The digital business landscape is forever changing, yet one thing is certain: electronic archiving is more than a convenience – it’s a matter of compliance.
As governments worldwide invest in digital tax transformation initiatives like e-invoicing and e-reporting, a complex web of e-archiving requirements that vary across borders is also developing.
Understanding your e-archiving requirements is essential for maintaining proper tax evidence, surviving audits, and preventing potential business disruptions.
E-invoicing refers to the issuance and exchange of digital invoice documents, often in structured formats, replacing traditional paper processes. As countries implement mandatory e-invoicing and other types of Continuous Transaction Controls (CTCs) to close tax gaps and reduce fraud, these electronic documents must adhere to increasingly complex country-specific requirements.
While e-invoicing addresses the transaction process, e-archiving focuses on the long-term storage and preservation of these electronic documents in their original format to allow subsequent audits. This means proving that an archived invoice is precisely the same as when it was originally issued or received, with no unauthorised alterations.
According to research conducted between 2024 and 2025 by the Digital Innovation Observatories, “document archiving and management is the most commonly adopted service as a consequence of the introduction of e-invoicing mandates.”
This trend reflects a broader shift: regulatory compliance is no longer just about issuing invoices correctly, but also about how those documents are managed and retained throughout their lifecycle. As such, understanding the fundamentals of both e-invoicing and e-archiving is critical for organisations aiming to remain compliant, efficient and prepared in an increasingly digital and regulated environment.
E-archiving requirements are frequently underestimated but are critical to tax compliance globally.
While CTC systems provide real time granular data to the authorities, the possibility to conduct audits persists after the e-invoicing process, i.e. during the storage period, when the authorities will access e-archives to verify compliance. This makes a robust e-archiving system essential for businesses operating across multiple jurisdictions, each with unique regulatory requirements.
Importantly, businesses must maintain their own e-archiving strategy even when tax authorities offer centralised archiving services as part of CTC frameworks. In the event of an audit or legal dispute, it is ultimately the taxpayer’s responsibility to disprove or challenge the data held by the authorities. Relying solely on tax authority systems – or worse, on a counterparty’s archive – could leave businesses vulnerable, with limited control over the integrity or availability of critical documentation.
Moreover, businesses should view e-archiving not merely as a compliance obligation but as an opportunity to improve document management, streamline operations and strengthen audit defence. Without proper archiving, companies risk substantial penalties during audits and may face difficulties demonstrating compliance with local tax laws.
While there are several varying requirements from country to country, the following represent some of the essential general elements businesses must keep in mind when implementing a compliant e-archiving system:
As mentioned before, businesses often overlook the fact that e-archiving regulations can be as diverse and specific as e-invoicing mandates themselves, with each jurisdiction imposing its own distinct set of requirements.
While general requirements are present in almost every country, there are also unique complexities. As requirements differ from country to country, companies will find that certain jurisdictions have more complex and stringent e-archiving rules
Some country-specific e-archiving complexities examples are listed below:
Developing and implementing an effective e-archiving strategy presents significant challenges for businesses operating across multiple jurisdictions. With varying retention periods, technical requirements and constantly evolving regulations, organisations often struggle to establish compliant archiving processes that scale efficiently while minimising risk. A well-designed e-archiving approach ensures compliance, optimises operational efficiency and supports business continuity.
To develop an effective e-archiving approach, businesses should:
Tax audits can occur unexpectedly, requiring immediate access to archived invoices. Businesses should regularly test the retrieval and readability of archived documents and ensure staff understand how to access and present them during audits.
Beyond meeting regulatory requirements, a well-designed e-archiving system delivers significant business advantages:
Implementing a globally compliant e-archiving solution requires careful planning across technical, legal and operational dimensions. Rather than treating e-archiving as an afterthought to e-invoicing, it should be part of the foundation of your compliance strategy.
Sovos eArchiving offers compliant storage across over 60 countries from a single platform, ensuring country-specific compliance and continuous regulatory updates. This approach allows businesses to maintain compliance with constantly evolving requirements via one universal compliant e-invoice archive, regardless of the number of service providers and e-invoicing software solutions a company uses.
As tax authorities worldwide continue embedding compliance into business transactions, a robust e-archiving system isn’t just good practice—it’s essential for business continuity and audit readiness in our increasingly digital tax environment.
We recently partnered with StudioID on a global survey of 150 finance leaders to reveal significant insights into how companies are navigating the increasingly complex world of indirect tax compliance. The research, which included CFOs, EVPs/SVPs/VPs of Finance, and Finance Directors from companies with revenues ranging from $500 million to over $5 billion, provides a comprehensive look at the strategies finance leaders are implementing to stay ahead of changing regulations.
The survey found that an overwhelming 95% of finance executives believe ensuring accurate real-time data reporting is important or extremely important for improving tax and compliance operations. This shift reflects a fundamental change in how tax authorities operate globally.
Previously in indirect tax, the way that the government could enforce the law was always through periodic reporting, but it was an unsophisticated instrument. Now, continuous transaction controls have become very popular since it’s about sending data in real time to the government.
This transition means businesses are no longer simply reporting their subjective view of a period’s aggregate sales and purchasing numbers —tax authorities are increasingly gathering authenticated data in real-time and informing companies of their liability instead. The stakes are higher than ever, with non-compliance potentially halting business operations entirely rather than just resulting in penalties.
The complexity of global tax compliance is staggering. Approximately 30% of both US-based and international companies surveyed sell products and services across 2,000 to 5,000 different tax jurisdictions. Each jurisdiction has its own rules, rates, and reporting requirements. Requirements are also increasingly dynamic, with laws and technical specifications evolving to reflect tax administrations’ fine-tuning operations at an ever-increasing rate.
With initiatives like VAT in the Digital Age (ViDA) and e-invoicing mandates rolling out across Europe and beyond, companies must stay ahead of regulatory changes. Encouragingly, 87% of finance executives report having systems and processes in place to anticipate these upcoming mandates.
When it comes to successfully implementing current and upcoming e-invoicing mandates, finance leaders identified two primary challenges:
Additionally, 56% of respondents mention difficulty in making business decisions due to limitations around tax and compliance data accessibility and accuracy.
Finance leaders are implementing several key strategies to improve their indirect tax and compliance operations:
These investments are paying off—76% of finance executives report seeing a positive return on investment from their tax compliance software. However, cost remains a significant concern, with 91% identifying “lowering or maintaining compliance costs” as a top priority.
The Problem of Point Solutions
One notable finding is that 73% of respondents believe their companies use too many point systems to meet tax obligations across different geographical locations. The median number of systems currently in use is 40, with most wanting to reduce this number significantly.
There seems to be a lot of confusion in the market, whereby a lot of businesses think they need to replace their business software with regulatory-driven software. This simply isn’t true as there are multiple ways that leaders can make existing business software compliant.
As tax authorities worldwide continue advancing their technology, making compliance more complex and demanding, finance leaders must balance compliance requirements with business objectives. The most successful approach integrates tax considerations into core business processes rather than treating them as separate functions.
The message is clear: while tax compliance is becoming more complex, the right strategies and technologies can transform this challenge into an opportunity for greater efficiency and intelligence about your business. Whatever you set as your business objectives, make sure that your compliance software works in such a way that the tax is never a burden.
By staying ahead of regulatory changes and investing in the right solutions, finance leaders can ensure their organizations not only remain compliant but thrive in an increasingly complex global tax landscape.
Want to learn more about how finance leaders are adapting to the changing indirect tax landscape? Download the full research report, “The Future of Indirect Tax: How Finance Leaders Are Staying Ahead of Changing Regulations” for comprehensive insights and strategic recommendations. Download Now
In the first blog in our series, we introduced SAP Clean Core concept and how much is being made about its impact on business, specifically the ability to customize an ERP to meet operational needs.
In part two, we addressed how businesses can use the SAP Clean Core principles to create a system that better supports their business objectives and positively impacts their tax and compliance management.
For our third installment in this series, I’d like to spend time talking about your business’ path to Clean Core and what that means for your tax and compliance programs and initiatives.
As outlined in our first two posts, aligning with Clean Core holds a number of significant advantages for companies including making them more nimble, efficient and cost efficient. It is a move I would encourage any business using SAP to consider sooner than later.
With any large-scale update, migration or platform change, getting your business ready for Clean Core is a process that takes advanced planning, a sound strategy and buy in from the highest levels of the organization to execute effectively.
In assessing your business’ readiness to adapt to Clean Core, it is important to understand both the short and long-term goals of the project and outline the specific actions that you will need to take to get there. My recommendation is to determine what your ultimate goal is, and then work backwards from there. This will help to ensure that no important steps are missed in the planning process.
With a project of this size and scope, it’s also critical to detail which parts of the project will be assigned to which departments and determine a method of oversight to ensure that all areas of the business are making progress and on track to meet associated deadlines.
When you are dealing with large, multi-faceted organizations, it is not uncommon for departments to move at different paces. This is where having executive buy-in becomes critical as it ensures that the project remains an organizational priority.
No two organizations are exactly the same in terms of their makeup and infrastructure. Therefore, you will need to conduct a self-assessment of where you are before you can determine which transformation trajectory makes the most sense for your business.
It is important to realize that an ERP transformation journey is a commitment that will require change. Assessing your organization’s appetite for change and the pace at which these changes can be implemented are critical success factors.
For organizations with the ability and desire to move faster, they will accelerate their time to modernization and be in a position to reap the benefits more quickly. However, I will caution that moving faster than your organization can realistically support can have serious consequences as well, which makes your initial assessment such an important part of your transformation journey.
Embracing the tenets of Clean Core can ensure that critical Tax and Compliance functions and decisions are no longer driven by complex and often difficult to maintain customizations within core ERP functions. Moving to an infrastructure with reduced complexity will enable your organization to more easily integrate specific tax solutions that are automated and maintained by third parties. This is an issue of great importance as governments and tax authorities around the world embark on their own technology journey and implement systems that are far more complex than previous generations.
Many countries have moved towards the complete digitization of tax compliance which requires real-time transactional data and complete transparency into your end-to-end transaction processes. Meeting these requirements can be the determining factor in your ability to conduct business within certain regions. Aligning with Clean Core is an important step in enabling your technology to react to changing regulatory conditions faster and more efficiently.
This type of transformation project should always be supported by and aligned with a solid business strategy. Having a set criterion of what you are trying to achieve and how you will measure effectiveness should be established up front. And global tax compliance should be a foundational element of any transformation event.
Tax and compliance are a great place to start your journey to begin unlocking the full power of aligning Clean Core principles with best-in-class tax solutions.
For more guidance on your journey, please download our free ERP Transformation eBook.
Update: 12 March 2025 by Kelly Muniz
The VAT in the Digital Age Package (ViDA) has been adopted by the EU on 11 March 2025, 27 months after it was initially proposed by the Commission in late 2022.
The package includes a directive, regulation, and implementing regulation, focusing on three key areas: digitalizing VAT reporting by 2030, requiring online platforms to collect VAT on short-term accommodation and passenger transport services, and expanding the online VAT one-stop-shop to simplify cross-border VAT registration.
The new rules will take effect on the 20th day after publication in the Official Journal of the EU, with Member States required to transpose the directive into national law.
While many rules will come into effect only a few years from now, some will be effective immediately, such as Member States’ right to introduce mandatory domestic electronic invoicing without needing prior authorization from the EU.
The ViDA package marks a significant step towards modernizing VAT in the digital era, streamlining processes for businesses, and improving cross-border efficiency.
For more details about ViDA, download our ViDA e-book.
Update: 14 February 2025 by Kelly Muniz
The European Parliament has approved the VAT in the Digital Age (ViDA) proposal, bringing it one step closer to official adoption. The proposal will now head to the Council of the EU for final approval, marking a key step in the effort to modernize VAT systems throughout the European Union.
The long-awaited VAT in the Digital Age (ViDA) proposal has been approved by Member States’ Economic and Finance Ministers. On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed on adopting the ViDA package. This decision marks a major milestone in modernizing the VAT Directive, setting the stage for a more efficient and digital VAT system across the European Union.
Certain changes will take effect immediately once the package comes into force, while others will roll out in stages over the coming years.
The text will proceed to formal approval by the Parliament, after which it will be ready for official adoption.
Read our blog below for a detailed breakdown of the amendments impacting e-invoicing obligations, the new Digital Reporting Requirement (DRR), and the timeline for these changes.
The Council of the European Union has released a new proposal regarding the VAT in the Digital Age (ViDA) reform.
The proposal aims to modernise and streamline VAT systems across the EU, notably e-invoicing and Continuous Transaction Controls (CTC). Members States will review it on 5 November at the upcoming ECOFIN meeting.
If approved, a series of changes will take place over time – some of which will take effect as soon as the Directive enters into force. Here is an overview of the key updates, particularly on e-invoicing and CTC requirements.
What is new, and why the delay?
The new proposal does not substantially modify its previous version. The main change in the new ViDA proposal concerns the dates when measures become effective. Deadlines have been postponed as a result of the setbacks ViDA has faced since its initial draft.
The ViDA proposal has faced delays due to the complexity of its objectives, which are mainly to harmonise the varying VAT systems within the EU. In addition to the extensive consultations held during this process to balance different stakeholders’ interests, an approval of ViDA requires the alignment of Member States’ views and priorities.
This has proved a significant hurdle, as Member States have raised their concerns regarding different aspects of the proposal, such as implementation costs and alignment with EU data privacy rules, among others. ViDA must also go through the formal steps for approval by the European Parliament and the Council of the EU.
These factors combined have made ViDA adoption a lengthy process, but its implementation promises significant benefits in public and private sectors across the EU.
Removal of EU approval for domestic e-invoicing: Under the current VAT Directive, EU approval is required for Member States to introduce domestic mandatory B2B e-invoicing. Countries such as Italy, Poland, Germany, France, Belgium and Romania have applied for derogations to mandate e-invoicing. With ViDA, Member States may impose domestic e-invoicing without needing EU approval, provided it applies only to established taxpayers.
Buyer e-invoice acceptance eliminated: The current EU VAT Directive states that the use of e-invoices is subject to buyer acceptance. Under ViDA, Member States that have introduced mandatory domestic e-invoicing will no longer require buyer consent.
Redefinition of electronic invoicing
ViDA redefines electronic invoices. Under the proposal, electronic invoices are those issued, transmitted and received in a structured electronic format that allows its automated processing. This means that non-structured formats, such as pure PDFs or JPEG images, will no longer qualify as an e-invoice. Hybrid formats, such as ZUGFeRD and Factur-X, can remain due to their structured portion.
In principle, electronic invoices must comply with the European standard and the list of its syntaxes pursuant to Directive 2014/55/EU (the “EN” format). However, ViDA allows Member States to use other standards for domestic transactions upon meeting certain conditions.
From 2030, B2B e-invoices compliant with the European standard will be the default and no longer requiring buyer acceptance. However, if a Member State opts for a different mandatory domestic standard, they may either waive or require buyer acceptance for e-invoices using the European standard.
Digital Reporting Requirements (DRRs) for cross-border transactions
One of the most impactful updates in ViDA is the requirement for near-real-time digital reporting of cross-border transaction data.
Starting in 2030, taxpayers engaging in cross-border transactions within the EU must report invoice data electronically following the EN format. Such DRR will be a condition for taxpayers to exempt VAT in a cross-border transaction or claim input VAT. Each Member State will provide electronic mechanisms for submitting this data.
With ViDA, cross-border e-invoices within the EU must be issued in up to 10 days after the chargeable event. In these cases, DRR must happen at the same time the e-invoice is issued or should have been issued.
Invoices issued by the recipient on behalf of the seller (known as self-billing) and the invoices related to intra-community acquisitions must be reported no later than five days after the invoice is issued or should have been issued or received, respectively.
As expected, DRRs may be carried out by the taxpayers themselves or outsourced to a third party on their behalf.
Digital Reporting Requirements for domestic transactions
ViDA grants Member States the option to mandate digital reporting for domestic B2B/B2C sales, purchase data, and self-supplies for VAT-registered taxpayers within their jurisdiction. Domestic reporting requirements must align with ViDA’s cross-border DRR standards, and Member States must permit submissions in the European standard format, although other interoperable formats may be allowed.
For Member States with domestic real-time reporting systems in place as of 1 January 2024, compliance with ViDA’s standards will be required by 2035. On the other hand, the proposal clarifies that other reporting obligations, such as SAF-T, can still exist. This alignment will ensure consistency across the EU in preparation for full ViDA implementation.
Member States have until 30 June 2030 to integrate ViDA’s e-invoicing and DRR provisions into their national legislation, making the Directive effective across the EU by 1 July 2030.
ViDA’s impact on businesses
The ViDA proposal represents a significant shift for businesses operating within the EU, promising both opportunities and challenges. By introducing DRRs, ViDA aims to replace obsolete requirements, reduce administrative burdens, improve accuracy, and combat VAT fraud.
The move towards structured e-invoicing and near-real-time digital reporting will require businesses to update their invoicing and reporting systems, driving digital transformation across sectors. While the transition may entail initial adjustments, it is expected to increase efficiency, create a level playing field, and facilitate smoother interoperability between companies using different systems.
Find out more by reading our dedicated VAT in the Digital Age guide.
By Christiaan Van Der Valk
The French tax administration has just announced structural changes to the 2026 French e-invoicing mandate that will discontinue the development of the free state-operated invoice exchange service. This decision will put increased pressure on taxpayers and software vendors to select a certified ‘PDP’ to fill the void created by this decision.
When France introduced mandatory business-to-business e-invoicing in its 2020 Finance Law, the tax administration conducted a broad comparative study of how other countries had implemented similar obligations. However, France adopted a unique approach, creating the complex ‘Y model,’ which combined elements from several countries’ systems. Like Italy for example, it included a central state-operated platform (the ‘PPF’) that businesses could use as a free, basic service for the exchange and reporting of e-invoices.
In parallel with the PPF’s own ability to exchange e-invoices for French taxpayer, the French tax authority solicited candidate PDPs to perform the same function for more complex business use cases.
These organizations were registered, put through vigorous testing and some were pre-approved, pending final testing with the PPF. PDPs are designed to seamlessly exchange invoices with each other and are required to report these transactions to the PPF.
And as it turned out, many companies in the French market decided to use a PDP to organize the exchange of invoice data with trading partners in a way that fits their unique business circumstances. Other French businesses counted on the availability of the free-of-charge PDP services to be provided by PPF, rather than selecting a private PDP.
The overall architecture of data flows between the public and private entities involved in the French scheme led to unprecedented complexity in the technical specifications released by the public administration. It has been clear for some time that this complexity was putting strain of budgets and timelines for the technical development of the PPF by the French public administration.
The French tax administration (DG-FIP) announced on 15 October that while the development of the PPF will continue, its focus will shift to providing directory services for routing e-invoices, without offering PDP services.
As a result, many French businesses and software vendors now face the challenge of securing the services of a private PDP. Although the e-invoicing mandate’s go-live date on September 2026, initially applies only to the largest businesses, more than four million companies will have to rely on PDP-enabled accounting software to receive those transactions regardless of their size.
Sovos was one of the first PDPs to be pre-authorized by the French tax authority and brings more than two decades of experience providing compliance technology for businesses in France. Sovos is uniquely positioned to meet the needs of companies that must now choose a reliable provider.
Learn how Sovos can help your business
In the first blog in our series, we introduced SAP Clean Core concept and how much is being made about its impact on business, specifically the ability to customize an ERP to meet operational needs.
For part two, I’d like to address how businesses can use the SAP Clean Core principles to create a system that better supports their business objectives and positively impacts their tax and compliance management.
In an article in Forbes last year entitled, SAP: Why Modern Software Needs A ‘Clean Core,’ the author makes the argument, correctly so in my opinion, that the old way of adding functionality by customizing the core has often become overly complex, cumbersome and costly. He explains how a new model was developed that decouples two components: one focused on predictability and the other on exploration. This evolution model is known as ‘bimodal IT.’
Now, bimodal IT is not a new term. According to TechTarget it was coined by Gartner back in 2014 and was the subject of a Gartner report in April of 2015 entitled, “How to Achieve Enterprise Agility with a Bimodal Capability,” by analysts Simon Mingay and Mary Mesaglio.
So, why the history lesson on the subject matter? I think it’s important to establish the fact that over-customization of technology platforms is not a new concern. It has been around for a while, but what has changed is the environment surrounding it.
Today, digital economies are moving at a pace where traditional methods and countermeasures are no longer effective. Today’s environments demand more structure, standardization and flexibility so that they can react fast when called upon.
Over the last decade, we have seen an explosion across core areas of the technology sector that makes agility critical. Whether it is preparing for cyberattacks, or the ability to quickly analyze data to take advantage of business opportunities, agility is an essential tool in your arsenal and old methods simply aren’t cutting it.
Today’s digital economies are demanding the rapid adoption of new technologies. A crucial step in keeping up with these changes is to adopt agile business-critical connected technologies that aligns with the principles of SAP Clean Core.
Adopting a global compliance solution that aligns with Clean Core principles will become critical to ensure you can keep up with the pace of digitization as it continues to evolve.
There is perhaps no other business segment that has felt the impact of technology on a global scale more than the area of tax and compliance. Heavy investment by government tax authorities over the past decade has completely changed the process of collecting and remitting tax obligations.
In an effort to close or eliminate tax gaps, gone or soon to be gone are the days of collecting and analyzing tax data and remitting after the fact. Today, it’s all about real-time analysis across the complete spectrum of the transaction. This requires the use of automated tax platforms that can quickly adapt to changing regulatory environments, ensuring compliance across every transaction.
Through applying the principals of Clean Core businesses can now attach dedicated and highly functional compliance platforms into their technology stacks without the need to customize their core SAP environment. This eliminates the need for long testing cycles, customization and many of the manual process updates that would otherwise be required.
Stay tuned for the next part in this series, where we will dive deeper into how Clean Core impacts specific tax processes. Upcoming segments will cover:
Part III: Your business’ path to Clean Core
Part IV: Clean Core benefits and business performance
Part V: Eliminating Tax’ dependency on IT
Much is being made about the introduction of SAP’s ‘Clean Core’ concept and how it will impact a business’ ability to customize its ERP to meet the unique needs of its operation. In this first blog in a series taking on the issue of Clean Core, I’d like to focus on the realities of what it is, why it’s important and the reasoning behind it.
SAP defines ‘Clean Core’ as a method of integrating and extending systems in a way that is cloud-compliant, while ensuring governance over master data and business process. In simpler terms, the move to SAP Clean Core helps protect the integrity of the SAP platform by limiting the extent of customization. And for good reason.
As a software vendor, you can’t lose control of your own code because you’re allowing so much customization and additional code to be added by your customers and or their consultants. These customizations are often intended for very specific use cases that may impact only a small number of customers. A ‘Clean Core’ architecture protects the SAP platform and its customers by limiting these excessive customizations.
When a platform becomes overly customized, SAP, the platform owner, must deploy a tremendous amount of development and support resources to ensure that they are accounting for all the changes and capturing feedback from the field.
This generally requires the platform owner to be in a perpetual state of developing hot fix code patches to repair ‘breaks’ in the system brought on by over customization. While customers would only be required to implement the code patches there were relevant to them, SAP was still on the hook for developing thousands of these patches. The cost and resources of doing so were growing exponentially, and needed to be reined in.
As anyone who has worked in or with IT for any period of time can attest to, the most complicated environments are ones where there is a great deal of customization. Early on in Information Technology, it was the Wild West, where based on the knowledge and experience of your architect, is how your businesses network would be constructed.
Then, thankfully, platforms and standards entered the discussion and businesses were able to construct environments that enabled them to operationalize new capabilities quickly, while simultaneously lowering costs and driving down dependencies within IT departments. The position SAP is taking here, and one that I agree with, is that clean core will be the next stage in making your environment more productive and efficient.
One of the most significant implications of Clean Core is in tax compliance. Clean Core opens up new possibilities for businesses to employ personalized tax technology outside of their traditional SAP environments. Rather than trying to build complex coding to tackle increasingly complex tax rules within their ERPs, they can integrate dedicated tax engines that are automated and seamlessly update to changing regulatory environments.
SAP Clean Core offers businesses the opportunity to simplify their IT environments, reduce customization, and improve system stability. The implications of Clean Core on taxes are especially promising, as businesses can now leverage specialized tax technology that integrates smoothly with their SAP systems, ensuring compliance without added complexity.
Stay tuned for the next part in this series, where we will dive deeper into how Clean Core impacts specific tax processes. Upcoming segments will cover:
Part II: The Need for a Clean Core
Part III: Your business’ path to Clean Core
Part IV: Clean Core benefits and business performance
Part V: Eliminating Tax’ dependency on IT
On 21 May 2024, the Italian tax authority published a ruling (No. 110/2024) on the IPT treatment of warranty services provided in relation to the sale of used vehicles.
The ruling dealt with a scenario in which a company (the ‘Applicant’) provided warranty services to dealers within the same company group, with the latter offering these warranties to the purchasers of the vehicles. The Applicant also separately entered into insurance contracts with an insurance company to obtain coverage for the costs it incurred in repairing the vehicles sold when required under the terms of the warranty.
The insurance contract concluded between the Applicant and the insurance company would only be subject to IPT in Italy if the policyholder’s relevant establishment was located in Italy, in line with the location of risk rules.
More significantly, however, the ruling also addressed the warranty services provided by the Applicant to the dealers. For these, the ruling assessed that guarantees such as these do not satisfy the requirements of an insurance contract with an insurance company as the contracting party. The VAT treatment of this arrangement was outside the scope of the ruling, but it was conclusive in outlining that IPT does not apply to such an arrangement.
Comparing this ruling to the position in Germany highlights the possibility of a lack of harmonisation in this area without an EU-wide position.
Read our blog on general matters of IPT in Italy for additional information.
Following the publication of various circulars by the Federal Ministry of Finance in Germany in 2021, rules on the taxation of guarantee commitments were made effective 1 January 2023. This blog explains how this affects insurers and other suppliers.
The Ministry of Finance published its initial circular in May 2021. This was in response to a Federal Fiscal Court judgment. It concerned a seller of motor vehicles providing a guarantee to buyers beyond the vehicle’s warranty.
In these circumstances, the circular confirmed that the guarantee is not an ancillary service to vehicle delivery but is deemed to be an insurance benefit. As such, it would attract IPT instead of VAT – unless the guarantee is considered a full maintenance contract.
The circular did not prompt immediate concern within the insurance sector. Markets outside the motor vehicle industry weren’t concerned either. The presumption was that it was limited to the specific context of the motor vehicle industry.
Matters changed the following month. The Ministry of Finance clarified that the tax principles it outlined in fact applied to all industries. As a result, the scope of these rules became potentially limitless in Germany. All guarantees provided as additional products to goods or services sold are now within the scope of the application of IPT.
The clarification could impact industries like those organisations selling electrical items and household appliances.
The effect on traditional insurance companies should be relatively limited as they do not usually provide guarantees as part of the sales of goods and services. There could arguably be a significant impact on other suppliers that do provide such guarantees.
First and foremost, there is a potential increase in the cost of providing the guarantees caused by the application of IPT. Unlike input VAT, a supplier cannot deduct IPT from its taxable income – it must either increase prices to compensate or accept a less favourable profit margin.
Any companies that purchase the guarantees cannot reclaim the IPT either, as they can do with VAT. The standard IPT rate of 19% in Germany is high compared to most European countries. This exacerbates these issues.
There are also practical considerations to bear in mind for suppliers obliged to settle IPT with the tax authority. They are presumably required to be registered for IPT purposes like insurers, although the Ministry of Finance has not formally confirmed this.
Perhaps more difficult is the issue of licensing. The Ministry of Finance circulars focus on taxation, leaving it unclear whether other suppliers are now required to obtain a license to write insurance under German regulatory law.
Looking for more information on general IPT matters in Germany? Our German IPT page can help.
Following a webinar covering regulatory updates alongside key points of the VAT recovery process, this blog aims to shed light on the crucial aspects of VAT recovery – especially fast-approaching deadlines.
Understanding the nuances of VAT recovery applications is essential for businesses seeking to optimise operational costs by recovering VAT incurred in a different country. Let’s explore the fundamental aspects of the VAT recovery process.
Businesses can reclaim VAT incurred during their operations through VAT returns if registered in the country where costs are incurred. However, for those not registered and with no obligation to do as such, alternative routes such as the EU Refund Claim or 13th Directive procedure are available – provided specific criteria are met.
Before initiating a VAT refund claim, companies must carefully evaluate their taxable activities. Failure to identify taxable activity in the relevant country may result in the rejection of the VAT recovery application. In such cases, registering for VAT becomes imperative to facilitate input VAT recovery through VAT returns, subject to each country’s rules regarding retrospective VAT registration.
The range of recoverable expenses varies across countries, encompassing equipment, tooling, event costs, professional fees, accommodation and so on. However, due to varying regulations, conducting a comprehensive recoverability assessment based on each country’s VAT legislation is crucial before applying.
Adhering to deadlines is critical for successful VAT recovery.
EU businesses seeking VAT refunds from other Member States must submit an EU Refund Directive application by 30 September of the subsequent calendar year. Non-EU businesses aiming to reclaim VAT incurred in EU Member States should file a 13th Directive application by 30 June of the following year.
While some countries share a common deadline of 30 September, missing deadlines may restrict refund requests. Notably, even though in most cases, these deadlines cannot be extended, there are countries like the Netherlands where refund requests can be submitted to tax authorities up to five years back rather than just for the previous fiscal year.
Reciprocity agreements are pivotal in VAT refund claims, with most EU Member States mandating reciprocity. Understanding these laws is essential to avoid failed attempts at reclaiming VAT in non-reciprocal jurisdictions.
Recent updates include the UK-Italy agreement under the 13th VAT Directive, streamlining VAT refund claims for UK businesses. Notably, the deadline for a 13th directive application in Italy is September 30th, 2024, for all costs incurred during 2023 (i.e., purchase invoices dated in 2023). This represents a significant advancement toward streamlined cross-border VAT recovery processes for UK businesses. Additionally, it may be advantageous for businesses to revisit already submitted 13th Directive claims in Italy that were previously on hold due to the lack of reciprocity.
In conclusion, mastering the intricacies of VAT recovery empowers businesses to enhance financial efficiency and mitigate costs effectively. By navigating the essentials outlined above, businesses can embark on a journey toward unlocking their full VAT recovery potential.
Want to learn more about the VAT recovery process? Our expert team can help.
In Austria, the insurance premium tax law regulates the indirect tax that applies to elements of coverage under a motor insurance policy. This blog details everything you need to know about this particular indirect tax in the country.
As with our dedicated overviews of the taxation of motor insurance policies in Spain and Norway, this blog will focus on the specifics in Austria. We also have a blog covering the taxation of motor insurance policies across Europe.
In Austria, Vehicle Insurance Tax (VIT), or the so-called motor-related insurance tax, is payable in relation to:
VIT is payable in addition to the 11% insurance premium tax (IPT).
The calculation of VIT is complex. The tax is determined by the type of vehicle, the engine capacity/displacement and CO2 emissions for motorbikes, the performance of the combustion engine and the emission in grams per kilometer for passenger automobiles and the power of the combustion engine for all other engine types.
The date of registration is another item to consider when calculating the amount of VIT. The computation for automobiles registered before 1 October 2020 is different, however.
The following rates are effective for passenger cars registered after 1 October 2020 are as follows:
In 2020, the first component, power, was lowered by 65 Kwatt, while the second component, emission, was reduced by 115 grams per kilometre. Since 2021, the deduction has been lowered annually. Every year, the first component is reduced by one and the second by three. As a result, in 2024, the deductions are 61 Kwatt and 103 grams per kilometre.
To complicate this further, the aforementioned calculation only applies to M1 passenger cars whose CO2 emissions were established using the WLTP (Worldwide Harmonised Light Vehicle) test method. If this process is not followed, the calculation will be different.
Special rates apply to motorhomes, motorcyclists and other multi-track motor vehicles.
The computed amount is due monthly. Prior to 2020, the regularity of the payment was another aspect to consider in the computation.
First and foremost, VIT is required on motor vehicles weighing up to 3.5 tonnes. If the vehicle’s weight exceeds this limit, another type of tax – motor vehicle tax – is due.
The exemptions in Austria follow the usual considerations mentioned in our blog on taxation of motor insurance policies across Europe. Exemptions are dependent on:
Read our IPT Guide to learn more about Insurance Premium Tax compliance.
If you still have questions about the taxation of motor insurance policies or IPT in Austria, speak to our experts.
Canada’s Border Services Agency (CBSA) has introduced CARM, a new process to modernise and digitalize import of goods in Canada.
The agency’s vision is to deliver a globally leading customs experience that facilitates legitimate trade, improves compliance and revenue collection and contributes to securing Canadian Borders.
CARM, which stands for CBSA Assessment and Revenue Management, is a mandatory multi-year initiative. CARM aims to simplify, modernise and streamline the importing process via the new web portal known as CARM Client Portal (CCP).
The agency will launch all functionalities of the CARM project in a phased roll-out of two releases. The first release has been live since May 2021, and the second will be live on 2 October 2023.
CARM will impact all importers, both resident and non-resident businesses, who import goods into Canada.
CARM is already available for voluntary registration to importers, customs brokers and trade consultants.
From the second release of CARM on 2 October 2023, all importers must register for the online CCP to continue importing goods into Canada. Otherwise, it will impede the importation of goods.
The critical element of CARM is that it consists of electronically communicating information regarding importing goods in Canada to the CBSA. It includes many changes to digitalize the communication process.
The most significant change is introducing a new customs form and abolishing previous forms in paper format. CARM will no longer accept current B2 (request for adjustments) and B3 (customs coding form) forms in a paper format.
The process will replace the forms with the new commercial accounting declaration (CAD).
B2 and B3 forms have been mandatory since 2013. They account for goods imported into Canada by reporting information about the value, classification, country of origin, tariff treatment and exchange rate of imported goods.
The submission of the new digital CAD will automate the customs process as the CARM system will automatically calculate the duties and taxes. The CAD form will enter into effect with the second release of CARM.
With the second release of CARM, the methods available for the electronic submission of the CAD are:
From 2 October 2023, every company that imports goods into Canada must register in the online CARM Client Portal (CCP). Any delay or failure to comply could impede the company’s importation of goods and its supply chain. Do you need help or further information? Just get in touch with one of our experts.
Argentina has recently expanded its perception VAT (Value Added Tax) collection regime to ensure efficient tax administration. It has included selling food and other products for human consumption, beverages, personal hygiene, and cleaning items under its scope.
The Argentinian Federal Administration of Public Revenue (AFIP) established this through Resolution No. 5329/2023 in early February 2023.
The new resolution aims to further expand the regime known as “Régimen de Percepción del Impuesto al Valor Agregado” to the categories related to food and other products for human consumption, beverages, personal hygiene, and cleaning items.
Taxpayers who issue invoices concerning these provisions must ensure compliance with the document data requirements, used as evidence of the collection for the final VAT calculation. This will be further discussed in this article.
The VAT Collection Regime in Argentina is a scheme by which the seller, designated as “Collection Agent”, charges the buyer an amount additional to the sale price. As a result, the supplier will charge the fee on top of the purchase value, which includes the price and the VAT.
This new regime obliges VAT-taxable persons to act as collection agents when selling food products for human consumption, beverages, personal hygiene and cleaning items. A few exceptions include meats, fruits and bread made exclusively from wheat flour, among others. Taxable people registered for VAT purposes will also be subject to this regime when acquiring said products.
The collection regime will only apply when each transaction amount exceeds ARS 3000.
The fee amount is determined by applying 3% to the net price of the operation resulting from the invoice or equivalent document.
This percentage will be 1.50% in the case of operations taxed with a rate equivalent to 50% of the general VAT tax rate.
The information and payment of the perceptions carried out under this regime will be reported through the Withholding Control System (SICORE), using code 602.
The resolution also establishes that the only valid document to prove the payment of the perceptions will be the invoice or equivalent document (issued under the current invoicing regulations). The document will record the amount received in a discriminated manner and with express mention of this regime.
Those taxable persons using “Fiscal Controllers” documents of “New Technology” to comply with the provisions of the preceding paragraph must use the section “Other Taxes” on the document.
The collection regime will be applicable for taxable events perfected as of 1 April 2023. As a result, sellers of food and other products for human consumption, beverages, personal hygiene and cleaning items will charge the buyer an additional 3% or 1.5% as appropriate on the sale price according to the applicable fee.
Need to ensure VAT compliance in Argentina? Get in touch with our tax experts.
On 10 February 2023, the Italian Tax Authority introduced the possibility for 2.4 million professionals and companies to view and download the pre-filled Annual VAT declaration related to transactions carried out in 2022.
This return must be submitted by 2 May 2023.
The service is available for taxpayers defined by the provisions of announcement no. 183994 of 8 July 2021 and announcement no. 9652/2023 of 12 January 2023.
These are taxable residents established in Italy who carry out quarterly VAT payments. Exclusions include those operating in sectors of activity or for which special regimes are provided for VAT purposes, including:
This service is not available for companies established outside of Italy that are registered for VAT in Italy through direct registration or a fiscal representative.
The Italian Tax Authority prepared the pre-filled draft thanks to the following data:
Taxpayers can access this new functionality by entering their credentials in the ‘Invoices and fees’ (‘Fatture e corrispettivi’) portal of the Italian Tax Authority. They must access the section dedicated to pre-filled VAT documents where the new “Annual VAT return” section is present.
Pre-filled returns were made available on 15 February. Since then, taxpayers have been allowed to modify the pre-filled draft, integrate it and proceed with the submission.
Taxpayers using the aforementioned portal will be allowed to:
Taxpayers should cross check the data in the pre-filled Annual VAT Return and the data in their management systems and edit the return accordingly before accepting and submitting.
If you have more questions about the pre-filled Italian annual VAT return or need support with tax compliance in Italy talk to our experts.
Update: 3 May 2024 by Dilara İnal
The Israeli Tax Authority (ITA) has postponed the rollout of the continuous transactions controls (CTC) mandate.
The deduction of input tax is allowed with this second postponement, even in the absence of an allocation number, until 4 May 2024. The previous cut-off date was 31 March.
Starting 5 May 2024, businesses engaged in B2B transactions exceeding 25,000 NIS (approx. EUR 6,500) are required to obtain an allocation number assigned by the ITA.
Contact our expert team for more information on Israel’s CTC changes.
Update: 2 November 2023 by Dilara İnal
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
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.
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.
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.
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.
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’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.
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
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.
Portugal’s state budget entered into force on 27 June 2022 after protracted negotiations. The budget contained an interesting provision: the obligation to present invoice details to the tax authorities was extended to all VAT-registered taxpayers including non-resident taxpayers, who had long been exempt from this obligation.
VAT-registered non-residents now have three options for communicating invoice details:
In practice, the Billing SAF-T file is the least onerous option for taxpayers. It is worth discussing the contents of this file, which is submitted separately from Portugal’s Accounting SAF-T file.
Portugal was the first country in the world to adopt SAF-T, and its requirements are based on the original OECD 1.0 schema. The current schema for the Billing SAF-T is set out in Portaria no. 302/2016 consisting of a specified header, master files, and source documents.
Master files can include customer and/or supplier tables, product tables, and tax tables. Source documents can include sales and purchase invoices, documentation on movements of goods, and payment information, as applicable. For the most part, information in the schema is conditionally required, meaning most fields only need to be submitted if the relevant data exists in a taxpayer’s source system.
Importantly, the Billing SAF-T file must be generated by “certified billing systems,” as designated by the tax authorities, a requirement unique to Portugal. As of 2021 this requirement extends to non-resident taxpayers as well, a strong indicator that they would eventually be required to submit Billing SAF-T.
Although the Billing SAF-T only has four sections, it is nevertheless a complex file to generate. Portaria no. 302/2016 containing guidance on fields and definitions is over 100 pages long in the official gazette. Taxpayers must be able to generate required fields within their source systems and must know what conditionally required data they are able to provide.
The latest state budget has adjusted the monthly deadline for submitting Billing SAF-T. The deadline is now the fifth day of the month following the reporting period, previously taxpayers could submit by the twelfth day of the month following the reporting period.
For these reasons, the introduction of this obligation to non-resident taxpayers represents a significant burden. Existing and potential non-resident taxpayers in Portugal should immediately familiarise themselves with the Billing SAF-T requirement and ensure they are using certified billing software to remain compliant.
Need to ensure compliance with Portugal’s Billing SAF-T requirements? Get in touch with our tax experts.
Many countries have recently started their continuous transaction controls (CTC) journey by introducing mandatory e-invoicing or e-reporting systems. We see more of this trend in the European Union as the recent reports on the VAT in the Digital Age Initiative discuss that the best policy choice would be to introduce an EU-wide CTC e-invoicing system covering both intra-EU and domestic transactions.
However, the efforts to fight tax fraud aren’t limited to mandatory e-invoicing or e-reporting systems. Many governments prefer to look beyond and introduce another tool that gives them greater insight into their economy: e-transport documents. When introducing e-transport systems, we see that one country differs from other EU Member States with the early adoption of an e-transport system – Hungary.
The Electronic Public Road Transportation Control System or Elektronikus Közúti Áruforgalom Ellenőrző Rendszer (EKAER) has been in place in Hungary since 2015. Operated by the Hungarian tax authority, the EKAER is intended to monitor compliance with tax obligations arising from the transportation of goods on public roads in the national territory.
The system was initially introduced to monitor the movement of all goods in the national territory. However, after several letters from the EU Commission asking Hungary to bring their system in line with the EU regulations, the scope of the system was narrowed down to the so-called risky products in January 2021. The risky products are defined in 51/2014. (XII. 31.) NGM decree, which consists of foodstuffs or other risky products (such as flowers, all kinds of natural sands, different types of minerals, etc.).
According to 13/2020. (XII. 23.) decree on the operation of the Electronic Road Traffic Control System, Hungarian taxpayers are required to report specific data regarding the transport of risky products by using the EKAER system before the transportation of goods begins. It’s also important to mention that it’s necessary to be registered in the EKAER system and provide a risk guarantee for certain types of transport unless there is an exemption in the law.
Taxpayers are obliged to report the transport of risky goods in XML format to the EKAER system. This information includes data regarding the sender, the recipient, and the goods. Moreover, businesses must also report additional specified data to the tax authority based on the transport type (domestic, intra-community acquisitions and intra-community supplies).
Following the report by the taxpayer, the EKAER system generates an EKAER number, an identification number assigned to a product unit. This number will be valid for 15 days; therefore, the delivery of goods must be performed within this period. Businesses must communicate the EKAER number to the carrier, and it should accompany transported goods.
Although no future changes are foreseen for the EKAER system, different countries worldwide continue to introduce e-transport requirements similar to the EKAER system. Taxpayers must ensure that their transport processes are flexible and compatible with changes that the tax authorities are introducing to stay compliant.
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 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.
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.
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.
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.
For the UK and other non-EU businesses it’s vital to determine the importer of the goods into the EU as this will impact the VAT treatment.
For goods under €150 there are simplified options such as the Import One Stop Shop (IOSS) or special arrangements through the postal operator. However, when supplying goods over €150, businesses need to consider how they want to import the goods.
One option is for businesses to deliver on a Delivered Duty Paid (DDP) basis and be the importer of the goods into the EU. This improves the customer experience for B2C transactions but creates a liability to be registered in the county of import and to charge local VAT, along with additional compliance requirements. If goods are moved from that country to other EU countries, then depending on the supply chain, the One Stop Shop (OSS) could be used to avoid further VAT registration requirements.
Due to increased compliance costs many businesses have chosen not to be the importer and pass this obligation to the end customer. If a business chooses this route, options are still available.
The business could simply place the full obligation on the customer., The customer would be sent a payment request for the VAT and any duty by the carrier before delivery., There could also be a handling fee passed on to the customer. Once paid the goods would be delivered This approach doesn’t provide the best customer experience.
This is why many businesses have opted for a ’landed cost method’ offered by many couriers. The customer is still the importer on the import documentation, but the business collects the VAT and duty from the customer at the time of sale and settles the carrier’s invoice on their behalf. In theory, this avoids the need for the business to register in the EU and still offers the customer a seamless experience. However, this raises the question: is the customer actually the importer?
Some tax authorities are beginning to take a different view of arrangements for goods with a value above €150 where goods are imported directly into the Member State of delivery. A law change on 1 July 2021 included the concept “where the supplier intervenes indirectly in the transport or dispatch of the goods”. This is to counter arrangements that allowed the seller to argue they were not distance selling but making a local sale, so only had to account for VAT in the Member State of dispatch of the goods.
Following the law change some tax authorities are arguing this concept means if a seller sells to a private individual in their country and the seller arranges for the goods to be delivered from a non-EU country and customs cleared in their EU Member State, the place of supply is the Member State as the supplier has indirectly intervened in the transport.
As a result, the supplier must register and account for VAT in the Member State even if the customer is the importer of the goods. This argument could result in double taxation and can create additional compliance obligations along with tax authority audits – all of which add additional costs and time for businesses.
It’s important that businesses adopting a method where the customer is the importer put correct arrangements in place. This includes ensuring website terms and conditions reflect the fact the customer is the importer and giving the company the power to appoint a customs declarant on their behalf. It’s also important that customs documentation is completed correctly. Avoiding terms such as DDP on the website is also key as this implies that the business is the importer.
For help with EU import queries or if your company needs VAT compliance assistance get in touch to speak with one of our tax experts.