On 22 July, the EU Commission opened four new infringement proceedings against the United Kingdom for allegedly breaching the 2021 Northern Ireland Protocol on conditions related to customs requirements, excise tax and VAT. The EU has brought seven proceedings against the UK over the Protocol since 2021.

The Northern Ireland Protocol

Following the UK’s departure from the EU in 2020, the parties agreed that customs checkpoints on the land border between Northern Ireland and the Republic of Ireland could lead to political instability. The Protocol was an attempt to avoid border posts between the two countries.

Instead, the Protocol ensures customs checks are done in Northern Irish ports before goods are released into the Republic of Ireland. This process effectively created a customs border on the Irish Sea. In addition, the Protocol allows Northern Ireland to follow EU rules on product standards and VAT rules related to goods.

Potential UK Protocol Amendments

The Protocol has been controversial in the UK, as it creates special rules for Northern Ireland that don’t apply in England, Scotland or Wales. Members of the UK’s governing Conservative Party – including Liz Truss, a frontrunner to replace Boris Johnson as UK Prime Minister – have recently introduced a Northern Ireland Protocol Bill that would allow the UK to amend the terms of the Protocol.

Among other things, the draft legislation seeks to remove dispute settlement from the jurisdiction of the Court of Justice of the European Union, authorises “green [fast track] channels” for goods staying within the UK, and allows for UK-wide policies on VAT. Proponents of the bill claim it is necessary to protect the “essential interest” of peace in Northern Ireland.

Protocol Amendment Controversy

However, European Union Representatives have condemned this draft legislation as a potential violation of international law. In its most recent infringement proceedings, the EU alleges that the UK has not substantively implemented parts of the Protocol at all.

In particular, the EU claims that:

The last point is particularly interesting for VAT purposes, as the IOSS scheme is a signature piece of the EU’s “VAT in the Digital Age” initiative.

At the time of writing the Northern Ireland Protocol Bill has not yet been adopted by the UK Parliament. It awaits review in the House of Lords. The UK and the EU have stated that further negotiations over the Protocol would be the preferred option. The parties, however, remain far apart on the details.

The EU has set out two months for the UK to respond to the infringement action. Failing any new agreements, the action could lead to possible fines and/or trading sanctions between the parties. Taxpayers conducting cross-border trade between the UK and EU should ensure they stay on top of future developments.

Take Action

Need more information on IOSS and how it could impact your business’s compliance? Get in touch with our team.

Data is one of the most valuable assets of companies and individuals. Data gathered, cleaned and analysed well enables businesses to realise their utmost capabilities. With the digitization trend, error-prone paper forms, ledgers and books are replaced by electronic versions. This development gave companies more control over their data and liquidated data for further analysis.

This is also true for governments. Since tax income is one of the most significant revenue sources for countries and transactional data is the basis of tax income calculation, transactional data analytics is also essential for governments.

Purpose of real-time data collection

Receiving data in electronic form enables tax authorities to estimate their tax income and income sources better and eventually collect taxes more efficiently. This process has led many global tax authorities to require taxpayers to transmit relevant tax data electronically. Furthermore, the reliability of real-time data has shown to be so appealing that taxpayers are required to transmit data in real-time to the tax authority in many countries.

The real-time or near-real-time tax-relevant data transmission requirement is a new trend often referred to as Continuous Transaction Controls (CTC). CTCs require each transaction to be transmitted to the tax authorities to enable immediate and continuous control. CTCs are becoming more and more common around the world. The initial purpose of the CTCs when it was first launched in Latin America, the origination point, was to reduce the VAT gap. By looking at countries which have adopted CTCs, it’s fair to say that CTCs have already achieved this goal. However, tax authorities subsequently noticed that the benefits of CTCs are not limited to closing the VAT gap.

The vast amount of data collected through CTCs presents immense opportunities for tax authorities. Tax authorities can achieve unprecedented levels of business transaction transparency. Tax authorities T can calculate taxpayers’ compliance risk, and can plan audits based on these risk calculations. Furthermore, data can be used to drive fiscal and economic policy and shared with other government bodies. For instance, during an economic crisis, it’s possible to determine the business sectors most affected through the sales data reported by taxpayers. Those effected can be granted support (through tax exemptions, reduced rates etc.). The OECD Forum on Tax Administration’s chart compares different tax jurisdictions’ data management and analytics abilities and can be used to understand different countries’ data analytics technology.

Challenges for businesses

Granular data collection and transparency of source data create challenges for businesses as there is little room for mistakes, shortcuts or later error correction. Businesses will need to ensure much more granular tax determination decision-making earlier in their processes and their trading partners’ processes.

Furthermore, ensuring compliance where CTCs are implemented can be challenging, especially for international companies, who have historically viewed taxes as something to be addressed by local accountants. Viewing tax as primarily a local concern by adopting local solutions that combine business and compliance functionality for each jurisdiction will be difficult to reconcile with a business’ broader digital and finance transformation and alignment, which is often global.

To step up their game, businesses should focus on data gathering and having a central data repository to have the “big picture” rather than acquiring local solutions to “save the day”. Real-time data transmission also requires clean data to maintain. The global digital transformation strategy must be in place to meet these requirements as well as a scalable technology to manage future tax demands.

Latest Changes

1 July begins the second half of 2022, and in line with that milestone, changes have started to be implemented in the CTC sphere. In this blog, we highlight vital developments that have taken place in and outside Europe that may influence the continuous transaction controls (CTC) landscape globally.

The Philippines: Pilot program

The Philippines has officially implemented its mandatory continuous transaction controls (CTC system, which consists of the near-real-time transmission of electronically issued invoices and receipts. On 1 July 2022, the Philippines tax authority launched the Electronic Receipt, Invoice and Sales Reporting System (EIS) pilot program.

This initiative was first introduced in 2018 by the Tax Reform for Acceleration and Inclusion Act, known as TRAIN law. 100 selected pilot taxpayers are now obliged to issue and transmit e-invoices/receipts to the Bureau of Internal Revenue (BIR) through the EIS platform. (Philippines Advances Towards Mandatory CTC Reporting | Sovos)

Romania: E-Factura system and E-Transport system

Romania has been taking steps toward implementing its continuous transaction controls (CTC system since 2021. As of 1 July 2022, Romanian taxpayers are required to use the CTC e-invoicing system e-Factura for the supply of high-fiscal risk products in B2B transactions and all B2G transactions. Suppliers must transmit structured invoices issued in XML format to the E-Factura system. Subsequently, the seal will be applied by the Ministry of Finance as proof of clearance. Such invoice will be legally valid under the Romanian regulation. (Romania: Questions Remain as Deadline Looms | Sovos)

Alongside the 1 July 2022 go live for the CTC e-invoicing mandate, the e-transport system has been introduced to monitor high-fiscal-risk goods transported domestically. Taxpayers must issue an e-transport document before certain goods are transported. Moreover, taxpayers must send files to the tax authorities in XML format. Based on Act No. 106 issued by the Romanian government on 30 June 2022 and the change of Articles 13 and 14 of GEO, the fines for non-compliance with the e-transport requirements will not be effective until 1 October 2022. Also, starting from 1 July 2022, SAFT began to apply to large taxpayers as the penalty grace period has ended.

Vietnam: CTC Mandate

On the list of countries expanding their e-invoicing requirements is also Vietnam, where the issuance of e-invoices became mandatory for all taxable persons operating in Vietnam as of 1 July 2022. Previously, the expected deadline was 1 November 2020, but the tax authority extended it due to the difficulties encountered by local companies to implement on time a compliant e-invoice solution.

Moreover, enterprises, economic organisations, other organisations, business households and individuals must register with the local tax administration to use e-invoices according to the rules established in Decree 123. (Vietnam: E-invoicing Roll-Out in July 2022 | Sovos).

Portugal – B2G invoicing postponement

Mandatory B2G invoicing has been postponed for small, medium, and microenterprises with the enactment of  Law Decree 42-A/2022. The initial date was 1 July 2022. Now, the B2G e-invoicing is going to be mandatory from 1 January 2023. The reason for this change is that, after extending the deadline for acceptance of electronic invoices in PDF until 31 December 2022, the Portuguese government considered it important to also extend the deadline for receiving and processing B2G electronic invoices for micro, small and medium-sized companies until 31 December 2022 (Portugal: Mandatory B2G invoicing for SME’s postponed again | Sovos)

Turkey, South Korea and Italy: Expansions of existing mandates

In Turkey, the tax authority expanded the scope of taxpayers required to use e-fatura, e-arsiv and e-waybill applications. This expansion was done by either adding new sector-based mandates or decreasing the annual revenue threshold. The new requirements became applicable recently, and the taxpayers in the scope of the changes started using e-documents as of 1 July 2022. (Turkey Expands Scope of E-Documents (sovos.com)

In South Korea, e-invoicing has been mandatory for all corporate businesses since 2011. An issued e-tax invoice must be transmitted to the National Tax Service (NTS) within one day of the invoice being issued. The current change concerns the threshold limit for individual businesses, which from 1 July 2022 has been lowered to KRW 200,000,000.

Italy has also entered another phase of implementing its CTC requirements. Starting with cross-border invoices, the Esterometro (the report of cross-border invoices) has been replaced with the transmission of cross-border invoice data to the SDI in a FatturaPA format from 1 July 2022. Additionally, the recently published Decree n.73 established a threshold for the cross-border invoice reporting mandate. Taxpayers are only required to report transactions that exceed the amount of EUR 5,000 for every single operation. This applies, more specifically, to purchases of goods and services not territorially relevant for VAT purposes in Italy, under Articles 7 to 7-octies of Presidential Decree 633/1972.

Moreover, e-invoicing through the SDI became mandatory from 1 July 2022 for taxpayers applying the flat-rate VAT regime (regime forfettario), as well as amateur sports associations and third sector entities with revenue up to EUR 65,000. Lastly, e-invoicing became mandatory between Italy and San Marino from 1 July 2022. The system for e-invoice exchange between Italy and SM will leverage the SDI as the access point for Italian taxpayers and a new, comparable hub for companies in San Marino.

Many countries around the world are either introducing or expanding their existing CTC Regimes with the active changes taking place globally. Sovos continues to monitor which countries are next on the list to build its local CTC regimes and comply with the international standards.

Take Action

With coverage across more than 60 countries, contact us to discuss your VAT e-invoicing requirements.

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

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

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

Release of new regulations

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

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

Who needs to comply?

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

Taxpayers covered by the mandate are:

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

Issuing and transmitting

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

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

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

Taxpayers were not ready to comply

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

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

What’s next?

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

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

Take Action

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

On 1 January every year, taxpayers operating in Peru must assess their monthly income over a certain period determined by law to verify if they fall under the obligation to keep electronic ledgers. Taxpayers above the established threshold or who wish to voluntarily keep their ledgers electronically may do so by using the Electronic Ledgers Program (Programa de Libros Electrónicos – PLE), which covers all electronic books, or through the System of Electronic Ledgers (Sistema de Libros Electrónicos Portal – SLE), exclusively for the records of sales and purchases.

Earlier this year, however, the Peruvian tax authority (SUNAT) approved a new system specifically for the records of sales and purchases, the Integrated System of Electronic Records (Sistema Integrado de Registros Electrónicos – SIRE). Through the new Resolution 40-2022/SUNAT, the Electronic Record of Purchases (Registro de Compras Electrónico – RCE) was introduced, a module similar to the Electronic Record of Sales and Earnings (Registro de Ventas e Ingresos Eletrónicos – RVIE) created in 2021 and already in use by taxpayers.

The two modules, RVIE and RCE, compose the SIRE. This new system will be rolled out gradually, starting in October 2022, obliging taxpayers to migrate from the PLE and SLE to generate their records of sales and purchases exclusively through SIRE while maintaining the PLE for other ledgers.

How the SIRE works

The primary purpose of the SIRE is to simplify the generation of records of sales and purchases for taxpayers. Through the SIRE, a proposal for the RVIE and the RCE is automatically generated. It is available from the 2nd calendar day of every month. The taxpayer may accept, modify or replace it with the information they wish to present to SUNAT. If there are no transactions during the monthly period, the taxpayer must still submit a blank file to SUNAT.

Under the current systems (PLE and SLE), SUNAT doesn’t generate a proposal; the taxpayer enters all sales and purchases information and generates the records. With the SIRE, however, SUNAT uses information from its Electronic Invoice System (Sistema de Emisión Eletrónica – SEE) to create a proposal of the RVIE and RCE, which the taxpayer submits in each declaration period. The record is updated daily with the information received on the previous day.

The RCE has certain peculiarities compared with the RVIE, already in use. The RCE requires the generation of two separate files, the records of domestic and cross-border purchases. Even if no cross-border transactions are carried out, a blank RCE must still be submitted to SUNAT. Additionally, taxpayers may exclude specific purchase invoices and include them in the RCE at any time for 12 months from the invoice issuance date.

After the taxpayer’s revision, the RVIE and RCE are filed in conjunction, and a receipt status message (Constancia de Recepcion), containing relevant information, is delivered to the taxpayer’s electronic mailbox.

The SIRE can be accessed through the SUNAT portal, using the SIRE application installed on the taxpayer’s computer or through SUNAT’s API web service.

What changes for taxpayers?

Once taxpayers become obliged to the exclusive maintenance of sales and purchase records through the SIRE, they must discontinue keeping such records in the PLE, SLE or paper ledgers. However, because the SIRE covers the RVIE and RCE exclusively, taxpayers will still need to maintain the PLE, which contains all other ledgers.

This means taxpayers must be aware of the distinct set of rules applied to the PLE and the SIRE. An example is that the SIRE allows modification of an already “closed” record from a previous period without waiting until the next period, as with the PLE and SLE. In the SIRE, adjustments can be made at any time using the different annexes provided by SUNAT, with no limitations on the year the record was generated.

Another significant change is that taxpayers will no longer have to store, file and preserve electronic records since SUNAT will do this for them.

Gradual roll-out of the SIRE

Implementation of the SIRE will happen gradually, according to the following schedule:

Taxpayers may also start using the SIRE voluntarily if they are obliged to keep the Records of Sales and Purchases and are enrolled in the SUNAT operations portal (clave SOL), according to the following calendar:

What’s next for the SIRE?

Resolution 40-2022/SUNAT becomes effective on 1 October 2022. However, because most companies in Peru are already obliged to keep Records of Sales and Purchases, the largest groups of taxpayers must be ready to comply with the new mandate starting 1 January 2023.

Take Action

Speak to our team if you have any questions about the latest tax requirements in Peru. Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.

There are many taxes (IPT) and parafiscal charges levied on insurance premiums throughout Europe. As a consequence of the lack of tax harmonisation, no general rules can be applied to establish which taxes exist in which countries and how to calculate the correct IPT amounts.

Some insurers do not have a dedicated IPT team; this is usually the case with smaller insurers. This could lead to IPT miscalculation and can trigger penalties. Without the proper and up-to-date knowledge, it is easy to be lost in the rules and regulations.

The following blog gives an overview of the tax calculation methods highlighting some unique elements of the IPT calculation.

Tax calculations methods

There are two basic tax calculation methods in the European IPT world

  1. Percentage of the premium
  2. Fixed amounts

In the first instance, there is a tax rate. For example in Bulgaria (2%) businesses can easily determine the tax amount by multiplying the taxable basis with this tax rate. Fortunately, several IPT calculations are based on this so-called basic rate model.

While in the second case, the local regulations determine the tax amount which needs to be settled on the insurance policies. Irish Stamp Duty can be mentioned as an example.

One can say that this is not rocket science. Furthermore, it is easy. These calculation models are just the basics. IPT regulations are built on these basic models adding several specific rules making the IPT calculations fairly complex. Here are some examples of these specific rules:

Reverse tax calculation

To add further colour to this topic, we can mention that reversing a policy line in the calculation does not always result in the same tax amount in a negative position. The best example is Malta, where the same amount of Stamp Duty is not refunded when the policy is cancelled after the cooling-off period. Instead of getting back the same stamp duty paid, an additional EUR 2.33 Stamp duty is triggered if certain conditions are met.

Although this is a unique regulation this highlights that when it comes to reversing a policy line, it is strongly recommended to check the rules beforehand and clarify whether or not the negative IPT can be offset or reclaimed and adjust the calculation method accordingly.

Take Action

IPT calculation requires detailed knowledge of the rules and regulations. Sovos has a dedicated team of compliance experts to walk you through even the most challenging calculations. Contact our team today.

Since many audits seem to occur at random, it’s not always possible to identify the reason why a tax office would decide to initiate one.

We’ve previously spoken about an increased interest in audits from the EU and audits for e-commerce. This article covers the most common reasons behind a VAT audit to help businesses anticipate and prepare for one when possible.

Trigger events for VAT audits

There are specific “trigger” events among the most common reasons that could cause further queries from the tax office. Generally speaking, these are changes in the company’s status such as a new registration, a de-registration, or structural changes within the company.

VAT refund requests also fall into this category. In some countries (Italy and Spain, for example) a refund request is almost certainly a reason for an audit to be initiated since the local tax office cannot release the funds before checks are completed. In this case, the likelihood of an audit increases when a refund is particularly substantial and the business requesting it is newly VAT registered. However, it doesn’t mean that the tax authority will not initiate an audit if the amount requested in a refund is relatively small.

Business model

Certain types of businesses are naturally more subject to audits due to their structure and business model. Groups commonly selected for scrutiny include, for example, large companies, exporters, retailers and dealers in high-volume goods. Therefore, elements such as a high number of transactions, high amounts involved and complexity of the business structure could be another common reason for an investigation to be initiated by the local tax authorities.

Taxpayer metrics

Tax authorities often identify individual taxpayers based on past compliance and how their information compares with specific risk parameters. This would include comparing previous data and trading patterns with other businesses in the same sector. Therefore, unusual patterns of trading, discrepancies between input and output VAT reported, and many refund requests may appear unusual from the tax office perspective and give rise to questions.

Cross checks

Another common reason for the tax authorities to request further information from taxpayers is the so-called “cross check of activities”. In this case, either a business supplier or client is likely to be subjected to an audit. The tax office will contact their counterparts to verify that the information provided is consistent on both sides. For example, if a business is being audited following its refund request, the tax office will likely contact the suppliers to verify the audited company didn’t cancel the purchase invoices and that they have been paid.

This category also includes cross checking activities on Intra-Community transactions reported by a business. In this scenario, the cross check would be based on information exchanges between local tax authorities through the VAT information exchange system (VIES). The tax authorities can check Intra-Community transactions reported to and from specific VAT numbers in each EU Member State and then cross check this information with what has been reported by a business on their respective VAT return. If any discrepancy arises, the tax office will likely contact the business to ask why they have (or haven’t) reported the transactions declared by their counterparts.

As we’ve already seen in an earlier article, audit triggers are also influenced by changes in legislation or shifts in the tax authorities’ attention to specific business sectors.

Regardless of whether it’s possible to identify the actual reason the tax authority initiated an audit, a business can undertake several actions in preparation for a check of activities, which will be covered in the next article of this series.

Take Action

Get in touch about the benefits a managed service provider can offer to ease your VAT compliance burden.

A recent report released by the European Commission has stressed the need for Member States to increase the number of audits they undertake, particularly in e-commerce businesses. The European Commission specifically highlighted the need for Malta, Austria and France to make additional efforts to improve their value-added tax audit practices. They highlighted the seriousness of the issue and that the consequences of inaccurate VAT reporting can be severe. VAT audits, therefore, promote accurate reporting and mitigate fraud, and as such, they are being encouraged by the Commission.

A strategic approach to VAT Audits

The European Commission specifically stated that tax authorities should have a strategic approach which must observe multiple elements, including:

The report notes some of the positive actions taken by Member States. Generally, they pay close attention to the audit process, with Finland and Sweden highlighted as particularly good. Furthermore, the report notes that some Member States have established special “VAT task forces” to deal with audits.

Following this report, the European Commission also announced that Norway should be authorised to participate in joint audits with their counterparts in the EU as a further measure to crack down on fraud.

Approach and scope of audits to be extended

E-commerce is a good example of an area that continues to grow, with the VAT stake ever increasing. With tax authorities globally struggling to keep pace with new technology and consumer offerings, local tax authorities are implementing further measures to ensure that fraud is combatted at an EU-wide level. Whether further changes occur through a difference in how VAT is reported or new forms of reporting such as continuous transaction controls (CTCs) that are in place in some Member States already, VAT audits are at the heart of this strategic plan. In this report, the European Commission has clarified that the approach and scope of audits should be extended.

With increased Member States co-operation and new measures adopted by the European Commission, such as the implementing regulation that provides details on how payment providers should start providing harmonised data to tax authorities from 2024, businesses should ensure that they have adequate controls in place to be able to handle any audit request. Future blogs in this series will focus on the audit trends we’ve noticed at Sovos and how businesses should prepare for an audit.

Take Action

For more information about how Sovos’ VAT Managed Services can help ease your business’s VAT compliance burden, contact our team today.

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

Poland

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

Romania

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

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

Serbia

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

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

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

Slovakia

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

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

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

The second phase will follow for B2B and B2C transactions.

Slovenia

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

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

Take Action

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

Over the past decade, the Middle East region has undergone impactful financial and fiscal changes. VAT was introduced as one of the solutions to prevent the impact of decreasing oil prices on the economy after the region’s economic performance started to slow down.

After realising the benefits of VAT to the economy, the next step for most governments is to increase the effectiveness of VAT controls. Currently, most Middle Eastern countries have VAT regimes in place. Like many countries, Middle Eastern countries are paving the way to introduce continuous transaction controls (CTC) regimes to achieve an efficient VAT control mechanism.

E-invoicing in the Middle East

Saudi Arabia is leading the way, introducing its e-invoicing system in 2021. This e-invoicing framework, in its current form, doesn’t require taxpayers to submit VAT relevant data to the tax authority in real-time. However, that is about to change, as the Saudi tax authority will enforce CTC e-invoicing requirements from 1 January 2023. This means that taxpayers will be required to transmit their invoices to the tax authority platform in real-time. More details on the upcoming CTC regime are expected to be published by the ZATCA.

The introduction of the CTC concept in Saudi Arabia is expected to create a domino effect in the region; some signs already indicate this. Recently, the Omani tax authority issued a request for information that revealed their plans to introduce an e-invoicing system. The tax authority’s invitation to interested parties stated that the timelines for implementing the system have not been set yet and could involve a gradual rollout. The objective is to roll out the e-invoicing system in a phased manner. The e-invoicing system is expected to go live in 2023 on a voluntary basis and later on a compulsory basis.

The Bahrainian National Bureau for Revenue (NBR) has made similar efforts. The NBR requested taxpayers to take part in a survey asking the number of invoices generated annually and whether taxpayers currently generate invoices electronically. This development signals upcoming e-invoicing plans – or at least a first step in that direction.

In Jordan, the Ministry of Digital Economy and Entrepreneurship (MODEE) published a “Prequalification Document for Selection of System Provider for E-Invoicing & Integrated Tax Administration Solution” that was, in fact, a request for information. The tax authority in Jordan previously communicated its goal to introduce e-invoicing. As the recent developments suggest, Jordan is moving closer to having an up and running platform for e-invoicing which will likely be followed by legal changes in the current legislation concerning invoicing rules.

The global future of CTCs

The overall global trend is clearly toward various forms of CTCs. In recent years, VAT controls and their importance and the advantages presented by technology have changed the tax authorities’ approach to the digitization of VAT control mechanisms. As governments in the Middle East countries are also noticing the benefits that the adoption of CTCs could unlock, it’s reasonable to expect a challenging VAT landscape in the region.

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E-businesses have recently been dealing with the change of rules within the EU with the introduction of the E-Commerce VAT Package but it’s also important to ensure compliance requirements are being met globally. In this blog we look at some of the low value goods regimes that have been introduced over the last few years together with those on the horizon.

Switzerland

Switzerland was one of the first countries outside the EU to introduce a low value goods regime when it revised the Swiss VAT law with effect from 1 January 2018. Previously, import of goods below CHF 62.50 were exempt from Swiss customs duty and import VAT. However, from 1 January 2018 any overseas sellers importing low value goods below CHF62.50 (standard-rated goods) or CHF 200 (reduced rated goods) that breach the CHF 100,000 threshold are required to register for and charge Swiss VAT on the sales of those goods.

Norway

On 1 April 2020, Norway introduced the VAT on E-Commerce (VOEC) scheme for foreign sellers and online marketplaces selling low value goods. These low value goods include those with a value below NOK 3,000 exclusive of shipping and insurance costs. The threshold applies per item and not per invoice, although doesn’t include sales of foodstuffs, alcohol and tobacco as these goods continue to be subject to border collection of VAT, excise duties and customs duties. Any foreign seller that exceeds the threshold of NOK 50,000 has an obligation to register for Norwegian VAT and apply this at the point of sale if they’re registered under the VOEC scheme.

Australia and New Zealand

Australia and New Zealand introduced very similar schemes to collect GST on low value goods being sold by overseas sellers. Australia introduced its scheme on 1 July 2018 for all goods with a customs value of less than AUD 1,000 and a turnover threshold of AUD 75,000 which once breached means the overseas seller must register for Australian GST and charge this at the point of sale.

New Zealand introduced a low value goods scheme on 1 October 2019 and applied this to low value goods valued at less than NZD 1,000. The turnover threshold in New Zealand is NZD 60,000 which once breached requires the overseas seller to register and charge New Zealand GST.

United Kingdom

Following Brexit, the UK abolished the low value goods consignment relief of GBP 15 and introduced a new regime on 1 January 2021 covering imports of goods from outside the UK in consignments not exceeding GBP 135 in value (which aligns with the threshold for customs duty liability). Under these new rules, the point at which VAT is collected moves from the point of importation to the point of sale. This has meant that UK supply VAT, rather than import VAT, will be due on these consignments. Making these supplies requires registration for VAT in the UK from the first sale.

Singapore

Singapore is the latest country to announce it will introduce new rules for low value goods. Effective 1 January 2023, private consumers in Singapore will be required to pay 7% GST on goods valued at SGD 400 or below that are imported into Singapore via air or post (the GST rate will rise to 9% sometime between 2022 to 2025).

An overseas vendor (i.e., supplier, electronic marketplace operator or re-deliverer) will be liable for GST registration where their global turnover and value of B2C supplies of low value goods made to non-GST-registered customers in Singapore exceeds SGD 1 million at the end of any calendar year. It may also be possible to register voluntarily if required.

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The Norwegian Ministry of Finance has proposed to amend the Norwegian Value Added Tax (VAT) Act regarding cross-border business to consumer sales of non-digital services. The proposal would require purchases of remotely deliverable services from suppliers established outside of Norway to consumers located in Norway to be subject to VAT.

Current requirements in Norway

Since 2011, Norway has operated a simplified VAT compliance regime for foreign suppliers of digital services to consumers. Non-resident suppliers who sell e-books, streaming media, software, or other digital services to Norwegian consumers and meet the NOK 50,000 VAT registration threshold must register and collect VAT on these sales, the same as resident businesses.

Non-resident suppliers not established in Norway may use the simplified VAT On E-Commerce (VOEC) scheme for registration and reporting. Additionally, suppliers in Norway must pay VAT on all purchases of remotely deliverable services from businesses located abroad. Currently, however, foreign suppliers of remotely deliverable services, which are not digital, are not required to register and pay VAT on their sales of such services.

Proposal

The Norwegian tax authority is concerned about the competitive advantage of non-resident suppliers over resident suppliers when providing deliverable services to Norwegian consumers. The Norwegian Ministry of Finance has presented a proposal to amend the Norwegian VAT Act to require non-resident suppliers to collect and report VAT on remotely deliverable services to consumers.

Under the proposal, foreign providers of traditional services would have to charge VAT for consulting services, accounting services, and other cross-border services provided to consumers located in Norway. When the customer is a business or a public authority, or when the transaction is considered a B2B sale, the VAT would still be charged and collected by the customer via the reverse charge mechanism. Suppliers that are not established in Norway would be able to use the existing VOEC scheme.

Status and timeline

The Norwegian Ministry of Finance has submitted the proposal for amendments to the Norwegian VAT Act regarding selling remotely deliverable services from abroad to recipients in Norway for consultation. The deadline for submitting comments on the proposal is 8 July 2022. Please stay tuned for updates on if the proposed amendments are adopted in Norway and when the amendments will take effect should they be adopted.

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

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

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

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

New taxpayers in scope

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

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

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

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

Short grace period introduced

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

What’s next?

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

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It’s been just over nine months since the introduction of one of the biggest changes in EU VAT rules for e-commerce retailers, the E-Commerce VAT Package extending the One Stop Shop (OSS) and introducing the Import One Stop Shop (IOSS).

The goal of the EU E-commerce VAT Package is to simplify cross-border B2C trade in the EU, easing the burden on businesses, reducing the administrative costs of VAT compliance and ensuring that VAT is correctly charged on such sales.

Under the new rules, the country specific distance selling thresholds for goods were removed and replaced with an EU wide threshold of €10,000 for EU established businesses and non-EU established businesses now have no threshold. For many businesses this means VAT is due in all countries they sell to, requiring them to be VAT registered in many more countries than pre-July 2021. However, the introduction of the Union OSS allowed them to simplify their VAT obligations by allowing them to report VAT on all EU sales under the one OSS return.

How the EU E-commerce VAT Package has affected businesses

Whilst for many businesses the thought of having to charge VAT in all countries they sell to may have been overwhelming to begin with, they are now seeing the many benefits that the introduction of OSS was meant to achieve. The biggest benefit for businesses is the simplification of VAT compliance requirements with one quarterly VAT return as opposed to meeting many filing and payment deadlines in different EU Member States.

Businesses who outsource their VAT compliance have been able to reduce their costs significantly by deregistering from the VAT regime in many Member States where they were previously VAT registered. Although some additional registrations may be required depending on specific supply chains and location of stock around the EU. Businesses also receive a cash flow benefit under the OSS regime as VAT is due on a quarterly basis as opposed to a monthly or bi-monthly basis as was the case previously in many Member States. As part of the implementation of the EU E-Commerce VAT Package we also saw the removal of low value consignment relief, which meant import VAT was due on all goods coming into the EU. This has brought many non-EU suppliers into the EU’s VAT regime with the European Commission (EC) announcing that there are currently over 8,000 registered traders.

We have seen some early hiccups with EU Member States not recognizing IOSS numbers upon import, leading to double taxation for some sellers. But for the majority of businesses IOSS has enabled them to streamline the sale of goods to EU customers for orders below €150. The EC has also recently hailed the initial success of this scheme by releasing preliminary figures which show that €1.9 billion in VAT revenues has been collected to date.

The future of OSS and IOSS

The EC is currently undergoing a consultation, gathering feedback from stakeholders on how the new schemes have performed with a view to making potential changes. Some of the changes being discussed include making the IOSS scheme mandatory for all businesses, which would significantly widen its use as it brings significantly more traders into scope. There has also been talk of increasing the current €150 threshold which would allow more consignments to be eligible for IOSS, although with the current customs duties threshold also being €150 it would be interesting to see how they align these rules. The EC will also be publishing proposals later in the year on the possible extension of the OSS to include B2B goods transactions, with a view to implementing this by 2024.

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E-commerce continues to grow, and tax authorities globally have struggled to keep pace. Tax authorities developed many VAT systems before the advent of e-commerce in its current format and the evolution of the internet. Around the world this has resulted in changes to ensure that taxation occurs in the way that the government wants, removing distortions of competition between local and non-resident businesses.

The European Commission made changes on 1 July 2021 with the E-commerce VAT Package, which modernised how VAT applies to e-commerce sales and also how the VAT is collected. As the previous system had been in place since 1 July 1993, change was well overdue.

Taxation at Place of Consumption

The principle of the taxation of e-commerce in the European Union (EU) is that it should occur in the place of consumption – this normally means where the final consumer makes use of the goods and services. For goods, this means where the goods are delivered to and for services, where the consumer is resident – although there are some exceptions.

Where the VAT is due in a different Member State than where the supplier is established, this requires the supplier to account for VAT in a different country. Micro-businesses are relieved of the requirement to account for VAT in the place of consumption. Though, most e-commerce businesses selling across the EU will have to account for VAT in many other Member States which would be administratively burdensome.

Expansion of the One Stop Shop (OSS)

To overcome this problem, the European Commission decided to significantly expand the Mini One Stop Shop (MOSS), which was previously in place for B2C supplies of telecoms, broadcasting and electronically supplied services. Three new schemes allow businesses to register for VAT in a single Member State and use that OSS registration to account for VAT in all other Member States where VAT is due.

Union OSS allows both EU and non-EU businesses to account for VAT on intra-EU distance sales of goods. It also allows EU businesses to account for VAT on intra-EU supplies of B2C services.

Non-Union OSS allows non-EU businesses to account for VAT on all supplies of B2C services where EU VAT is due.

Import OSS allows both EU and non-EU businesses to account for VAT on imports of goods in packages with an intrinsic value of less than €150.

Currently, none of the OSS schemes are compulsory, and businesses can choose to be registered for VAT in the Member State where the VAT is due. The European Commission is currently consulting on the success of the OSS schemes, and one of the proposals is that the use of Import OSS would become compulsory. There are also questions about whether the threshold should be increased, although that would require consideration of how to deal with customs duty as the €150 threshold is the point at which customs duty can become chargeable.

Benefits of OSS

The use of the Union and non-Union OSS schemes can provide a valuable alternative to registering for VAT in multiple Member States. However, there can be other reasons why a business will need to maintain VAT registrations in other countries. Businesses should carry out a full supply chain review to identify the VAT obligations.

There are also many benefits to using the Import OSS, including the ability to recover VAT on returned goods and a simplified delivery process for both the supplier and customer.

Any businesses using any OSS schemes should fully understand the scheme’s requirements.  Non-compliance can result in exclusion with the requirement to register for VAT in those countries where it is due. This will remove the benefit of the OSS schemes, increasing costs and administrative burden for the business.

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Insurance Premium Tax (IPT) in Luxembourg moved to online filing from the first quarter 2021 submission. Alongside this, they also changed the authority deadline to the 15th of the month following the quarter. This change caused some upheaval as many insurance companies were already pulling data from the underwriting systems, reviewing the information (sometimes manually), and ensuring the declarations would be correct for other territories also due by the 15th.

More European tax authorities going digital

Luxembourg wasn’t the first or last territory to move to an online platform. Germany and Ireland followed within a year of Luxembourg’s implementation. In contrast, French authorities have delayed implementing their online filing process until 2023. Additionally, more tax authorities require accounts for Direct Debit set up rather than the usual SEPA or priority payments being made with specific references.

Why is tax filing moving online?

It’s clear why tax authorities are moving to online platforms. Having a digital filing process is an easier and more efficient process for what could be thousands of declarations being submitted by various sources. Plus, online filing gives tax authorities greater visibility, meaning they have more opportunities for analysis. What puzzles us, is why so many tax authorities choose to have their deadlines on or around the 15th? This deadline only provides a short timeframe for insurance companies to close the month, pull the data and make the declarations.

IPT changes in Luxembourg

Apart from these updates, Luxembourg hasn’t implemented many changes in the past, regarding IPT. The most recent that we can recall is the introduction of the Tax for Rescue Services on Motor Class 10 policies, which came into effect on 1 October 2016.  As the tax rates are relatively low compared to other territories, it’s entirely plausible that we could see a future increase.

IPT is a niche tax that isn’t always at the forefront of the business radar. It wasn’t until we began to look at the actual process of filing the online declarations did we realize that the process is an adaption of what is used for VAT and other taxes or designed around domestic insurers rather than freedom of services. At least that’s what it seems for Luxembourg.

Over the past year, we have found that the online filing system has become quicker and easier to navigate, with the delays between authentication of a declaration taking seconds rather than minutes. The declaration is still similar to what was submitted on the paper form, breaking down the liabilities per class of business, entering the premiums and then an automatic application of the percentage rate.

Is this the end of territories moving to an online filing solution? Probably not. Will there be more digitization from tax authorities to bring IPT in line with most other tax reporting? We think so.

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

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

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

Introduction of mandatory e-reporting in the Philippines

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

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

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

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

E-archiving requirements

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

What’s next for taxpayers?

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

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Brazil is, without doubt, one of the most challenging jurisdictions in the world when it comes to tax legislation. The intricate fiscal system that encompasses rules from 27 states and over 5000 municipalities has created a burden on companies, especially for cross-state and cross-municipality transactions.

Furthermore, taxpayers must carefully examine the numerous e-invoicing formats and requirements (and, sometimes, the lack of such). Therefore, hopes for tax reform in Brazil have existed for quite some time.

Simplifying e-invoicing compliance

In recent years, several legislative initiatives towards integrating indirect taxation mandates across the country have not met successful outcomes. Meanwhile, a feasible step into bringing forth such changes may be through the unification of rules on digital compliance with tax obligations, such as VAT e-invoicing and e-reporting.

In late 2021 a draft law proposal (Projeto de Lei Complementar n. 178/2021) was initiated by the private sector. Named the National Statute for the Simplification of Ancillary Fiscal Obligations, it has been welcomed this year by the House of Representatives. Its primary purpose is to introduce a significant reform within digital tax reporting obligations by creating a unified e-invoicing system.

By establishing national fiscal cooperation, the proposal intends to reduce costs with compliance, allow information sharing among tax authorities, and create an incentive for taxpayers’ conformity across all federal, state and municipal levels.

The principal agenda of the draft law proposal is to introduce:

What this means for businesses

The most significant change is the introduction of the NFB-e (Nota Fiscal Brasil Eletronica), a national standard for e-invoicing. It entails the unification of the NF-e (Nota Fiscal Eletronica), NFS-e (Nota Fiscal de Servicos Eletronica) and NF-C (Nota Fiscal do Consumidor Eletronica) in one single document. This will cover Brazil’s VAT-like taxes, in this case, ICMS (VAT on products and certain services) and ISS (services VAT).

In practice, this means that instead of complying with numerous e-invoicing formats and mandates, according to the state and municipality of the transaction, one national digital standard will provide uniform country-wide compliance for e-invoicing. The NFB-e will cover invoicing of goods and services on state and municipal levels for B2G, B2B and B2C transactions.

The reform will drastically reduce the burden on taxpayers and expand the scope of e-invoicing to municipalities where such a mandate hasn’t been adopted yet.

It’s essential to add clearance requirements for e-invoicing in Brazil will be maintained, meaning that businesses will still need to comply with rules for real-time clearance of invoices with the tax authority.

What’s next?

The draft law proposal is still in early discussions and will follow to the Justice and Citizenship Constitutional Commission (CCJC) for approval and possible amendments before voting by Congress. Until then, compliance with e-invoicing rules across Brazil remains at its current challenging status.

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