In our last look at Romania SAF-T, we detailed the technical specifications released from Romania’s tax authority. Since then, additional guidance has been released including an official name for the SAF-T submission: D406.
To alleviate taxpayer concerns due to the complexity of the report and difficulties with extraction, the tax authorities are introducing a voluntary testing period which is due to begin in the coming weeks. During this period, taxpayers may submit what is known as D406T which will contain test data that the authorities will not use in the future for audit purposes.
The Romanian SAF-T, D406, is based on the OECD schema version 2.0 which contains five sections:
The submission deadlines are as follows:
Taxpayers must submit sections of D406 monthly or quarterly, following the applicable tax period for VAT return submission.
For the first report, tax authorities have announced a grace period for the first three months of submission. This is from the date when the deposit obligation becomes effective for that taxpayer, where non-filing or incorrect filing will not result in penalization if correct submissions are submitted once the grace period ends.
The D406 must be submitted electronically in PDF format, with an XML attachment and electronic signature. The size of the two files must not exceed 500 MB. If the file is larger than the maximum limit, the portal will not accept it and the file must be divided into segments according to details set out in the Romanian guidance.
The tax authorities have indicated that, should a taxpayer find errors in the original submission, a corrective statement may be submitted to rectify these errors. The taxpayer should submit a second full corrected file to replace the original file that contains errors. If a taxpayer submits a second D406 for the same period, it is automatically considered a corrective statement.
A tax authority audit can come in various forms, whether it be directly to the insurer itself or indirectly through a policyholder or broker.
It can be targeted, for example, where an insurer has been specifically identified to be investigated due toa discrepancy on a tax return, or it can be indiscriminate in its nature as part of a wider exercise being carried out by an authority.
Whatever form the audit takes, the key to responding is in the preparation beforehand.
First and foremost, insurers should ensure they are retaining copies of evidence that can be used to justify the tax amounts declared and settled. This may include the insurance contracts themselves, the invoices issued to policyholders and a record of their data that comprises the declarations that have been made.
It’s worth noting that in Italy there is a formal requirement to maintain IPT books which detail each of the premiums received during each annual period. Although this is not necessarily a specific requirement in other countries, applying this approach to all premiums received will put an insurer in a strong position if an audit is carried out.
Further documentation demonstrating compliance is also useful. If external advice has been sought, e.g., to determine the appropriate class of business for a policy and the consequent tax application, then retaining a record of this advice is advised in case this is required later.
There may be cases where a tax authority’s advice has specifically been sought and such correspondence will inevitably hold considerable weight if tax treatment is queried during a subsequent audit. Documentation of any processes in place to ensure compliance is also valuable.
As statutory limitation periods vary across jurisdictions, evidence should be kept as long as is practicable (subject to relevant data protection laws where applicable) so that it can be produced if an audit takes place.
In the digital age, this practice should hopefully not seem overly burdensome. It’s worth referring to the penalty regimes in place in some countries to put the potential repercussions of an unsatisfactory audit into context.
The UK is an example of where a behaviour-based approach to determining penalties is used, with the highest level of penalties reserved for cases of deliberate and concealed undeclared tax where the authority itself has prompted the declaration.
Lower penalties (or indeed no penalties at all) will be levied where reasonable care is taken, and reasonable care will be far more likely to be considered to have been taken where records are kept in the ways described.
Audits can happen at any time so it’s important insurers have taken the necessary steps to ensure information and data to demonstrate compliance is available to the tax authority when requested.
Ensuring the accurate and timely submission of tax returns is likely to reduce the possibility of a targeted audit. The IPT managed services team at Sovos has a huge amount of experience with tax filings in the UK and across Europe and has assisted many insurers with unexpected audits.
For anyone relatively new or unfamiliar with insurance premium tax (IPT), an understanding of each of the core components is key to ensuring compliance. They also sit in a logical sequence of five distinct areas.
1.Location of risk rules
This essentially is having a clear understanding of where the risk lies to determine in which jurisdiction the premium taxes should be declared. The rules can be complex and vary across different territories but having a clear process will help.
You’ll need to determine:
Next, check which rules apply. The EU’s four rules determine the correct jurisdiction depending on the nature of the risk:
Download our recent location of risk rules webinar to learn about the rules in more detail.
2.Class of business
A class of business is basically the category the risk falls under. Within the EU there are 18 classes of non-life business, ranging from accident and motor to miscellaneous financial loss and general liability.
The EU provides brief descriptions of each of these classes as well as some specific examples. The information is used by local tax authorities as guidance when implementing their own tax legislation.
Local rules vary so it’s important to understand your insurance policies to ensure the correct and relevant class of business is applied. Some policies may include more than one class of business which will affect the proportions of the premium that relate to each business class.
Our blog, Three Key Steps to Apply IPT on New Lines of Business is a useful resource.
Having determined the location of risk and the correct class of business the next step is to determine the taxes that apply and need settling.
Tax rates across the EU are fragmented and there are even more variations when you look at the varying tax rates within a jurisdiction. For example, in Spain you have an IPT rate applied at 6% yet you might also have some extraordinary risks surcharges calculated at 0.0003%.
Also consider who must carry the cost of these taxes. Is it the insured or the insurer? In most cases it’s the insurer’s responsibility, however it can fall to the policyholder.
Key to being able to determine which taxes and what rate to apply is having access to reliable software.
Register for our upcoming ‘Back to basics’ webinar, to learn more about how to calculate taxes.
4.Declaration and payment
Here again the rules vary country by country around the frequency for declaring and settling liabilities. They can be monthly, quarterly, bi-annually and annually. Failure to declare within the deadline will result in penalties and/or interest so knowing the deadlines for each return and when payment must be made are crucial.
Some tax authorities have strict rules and are quick to enforce them. Others are more lenient dealing with penalties on a case by case basis, and some (such as the UK) take a behaviour led approach where full disclosure and cooperation could lead to a far reduced penalty.
5.Additional reporting – will IPT follow where VAT leads?
Tax authorities across the world are taking a more granular approach to tax reporting to prevent fraud and reduce the tax gap. With VAT mandates in place across Latin America and more recently spreading into Europe and Asia, the VAT gap is reducing. So as governments transition to digital tax compliance wanting more data and faster, you can expect IPT will in time follow. The Spanish authorities, for example, have already started on this journey with the introduction last year of new digital reporting requirements for Extraordinary Risk Surcharges.
To stay ahead of the curve, the more prepared you are today the easier it will be to face the challenges that lie ahead as the pace of change in digitising tax compliance increases.
Keep up to date with ever changing rules by subscribing to our blogs and following us on LinkedIn and Twitter. We also host regular webinars with our in-house specialists who are on hand to help.
Progress has been made in the roll-out of the Polish CTC (continuous transaction control) system, Krajowy System of e-Faktur. Earlier this year, the Ministry of Finance published a draft act, which is still awaiting adoption by parliament to become law. Draft e-invoice specifications have been released and there has been a public consultation on the CTC system.
In June, the Ministry of Finance announced it had reviewed all comments submitted by the public and Polish ministers on the CTC system and decided to take the following actions:
In the announcement, the Minister outlined the benefits of adopting the CTC system for taxpayers. These include: quicker VAT refunds; security of the stored invoice in the tax authority’s database until the end of the mandatory storage period; certainty about the invoice delivery to the recipient through the CTC platform and therefore quicker invoice payments; automation of the invoice processing and exchange due to the adoption of a standardized e-invoice format.
In addition, as a result of the new e-invoicing rules upcoming changes in the SLIM VAT 2 package will trigger further relief measures, e.g. around the handling of duplicates and corrective invoices.
The Polish authorities are making good progress in the implementation of the Krajowy System e-Faktur. It is positive to see that the public consultation has proven useful in defining next steps and the authorities’ intent for transparency and timely documentation will hopefully continue throughout the entire CTC roll-out.
To find out more about what we believe the future holds, download Trends: Towards Continuous Transaction Controls.
Japan is in the middle of a multi-year process of updating its consumption tax system. This started with the introduction of its multiple tax rate system on 1 October 2019 and the next step is expected to be the implementation of the so-called Qualified Invoice System as a tax control measure on 1 October 2023.
Through this significant change, the Japanese government is attempting to solve a tax leakage problem that has existed for many years.
The Japanese indirect tax is referred to as Japanese Consumption Tax (JCT) and is levied on the supply of goods and services in Japan. The consumption tax rate increased from 8% to 10% on 1 October 2019. At the same time, Japan introduced multiple rates, with a reduced tax rate of 8% applied to certain transactions.
Currently, Japan doesn’t follow the common practice of including the applicable tax rate in the invoice to calculate consumption tax. Instead, the current system (called the ledger system) is based on transaction evidence and the company’s accounting books. The government believes this system causes systemic problems related to tax leakage.
A new system – the Qualified Invoice System – will be introduced from 1 October 2023 to counter this. The key difference when compared to an invoice issued today is that a qualified invoice must include a breakdown of applicable tax rates for that given transaction.
Under the new system, only registered JCT payers can issue qualified tax invoices, and on the buyer side of the transaction, taxpayers will only be eligible for input tax credit where a qualified invoice has been issued. In other words, the Qualified Invoice System will require both parties to adapt their invoicing templates and processes to specify new information as well as the need to register with the relevant tax authorities.
A transitional period for the implementation of the new e-invoicing system applies from 1 October 1 2019 until 1 October 2023.
In order to issue qualified invoices, JCT taxpayers must register with Japan’s National Tax Agency (“NTA”). It will be possible to apply for registration from 1 October 1 2021 at the earliest, and this application must be filed no later than 31 March 2023, which is six months in advance of the implementation date of the e-invoicing system. Non-registered taxpayers will not be able to issue qualified invoices.
The registered JCT payers may issue electronic invoices instead of paper-based invoices provided that certain conditions are met.
The introduction of the Qualified Invoice System will affect both Japanese and foreign companies that engage in JCT taxable transactions in Japan. To ensure proper tax calculations and input tax credit, taxpayers must make sure they understand the requirements, and update or adjust their accounting and bookkeeping systems to comply with the new requirements in advance of the implementation of the Qualified Invoice System in 2023.
Get in touch with our experts who can help you prepare for the Japanese Qualified Invoice System.
Turkey’s e-transformation journey, which started in 2010, became more systematic in 2012. This process first launched with the introduction of e-ledgers on 1 Jan 2012 and has since reached a much wider scope for e-documents. </p
The Turkish Revenue Administration (TRA), the leader of the e-transformation process, has played an important role in encouraging companies to embrace the digitalization of tax and created a successful model for following tax-related procedures.
You can read more about Turkey’s e-transformation in our e-book Navigating Turkey’s Evolving Tax Landscape.
The process was further accelerated with new requirements for e-documents.
The TRA continues to widen the scope of e-documents and the types of e-documents in use are:
Many taxpayers have voluntarily adopted the new system since the TRA launched this whole process and TRA’s latest updates for e-documents are critically important to monitor for tax-related procedures.
As e-documents become more popular, any income loss arising from tax procedures will reduce. E-documents offer additional advantages for public institutions and private businesses, such as saving time, minimising costs and improving productivity. It’s certain that the scope of e-documents in Turkey will keep expanding in the future, which will affect taxpayers and tax procedures.
Get in touch to find out how Sovos tax compliance software can help you meet your e-transformation and e-document requirements in Turkey.
Since 1993, supplies performed between Italy and San Marino have been accompanied by a set of customs obligations. These include the submission of paperwork to both countries’ tax authorities.
After the introduction of the Italian e-invoicing mandate in 2019, Italy and San Marino started negotiations to expand the use of e-invoices in cross-border transactions between the two countries. Those negotiations have finally bore fruit, and details are now available.
Italy and the enclaved country of San Marino will abandon paper-based customs flows.
The Italian and Sammarinese tax authorities have decided to implement a “four-corner” model, whereby the Italian clearance platform SDI will become the access point for Italian taxpayers, while a newly created HUB-SM will be the SDI counterpart for Sammarinese taxpayers.
Cross-border e-invoices between the countries will be exchanged between SDI and HUB-SM. The international exchange system will be enforced on 1 July 2022, and a transition period will be in place between 1 October 2021 and 30 June 2022.
HUB-SM’s technical specifications are now available for imports from Italy to San Marino, and exports from San Marino to Italy. The countries have also decided to choose FatturaPA as the e-invoice format, although content requirements for export invoices from San Marino will slightly differ from domestic Italian FatturaPA e-invoices.
The SDI and HUB-SM systems will process e-invoices to and from taxpayers connected to them, or under each country’s jurisdictions.
In other words, Italian taxpayers will send and receive cross-border invoices to or from San Marino via the SDI platform, while Sammarinese taxpayers will perform the same activities via HUB-SM.
Both platforms will deliver invoices to the corresponding taxpayers through the Destination Codes assigned by the respective tax authorities. This means HUB-SM will also assign Destination Codes for Sammarinese companies.
Inspired by the Italian methodology for fiscal controls in cross-border transactions, San Marino will require Sammarinese buyers to fill out an additional integration document (similar to a “self-billing” invoice created for tax evidence reasons) upon receipt of the FatturaPA. This document will be filled out in a new XML-RSM format created by the enclave and sent to HUB-SM.
After the larger rollout of the SDI for B2B transactions in 2019, the platform has proven capable of adapting to new workflows and functionalities.
Since last year, e-purchase orders from the Italian National Health System have been exchanged through the NSO, an add-on to the SDI platform. In January 2022, the FatturaPA replaces the Esterometro as a cross-border reporting mechanism.
SDI has already debuted in the international arena through the acceptance of the e-invoices following the European Norm, which are mapped into a FatturaPA before being delivered to Italian buyers. This integration between SDI and HUB-SM might also reveal the early steps of interoperability between both tax authorities’ platforms for cross-border trade.
Get in touch with our experts who can help you understand how SDI and HUB-SM will work together.
Download VAT Trends: Toward Continuous Transaction Controls to find out more about the future of tax systems around the world.
Norway announced its intentions to introduce a new digital VAT return in late 2020, with an intended launch date of 1 January 2022. Since then, businesses have wondered what this change would mean for them and how IT teams would need to prepare systems to meet this new requirement. Norway has since provided ample guidance so businesses can begin preparations sooner rather than later.
With this new VAT return, the Norwegian Tax Administration (Skatteetaten) seeks to provide simplification in reporting, better administration, and improved compliance.
This new VAT return provides for an additional 11 boxes, increasing the count from 19 to 30 boxes which are based on existing SAF-T codes to allow for more detailed reporting and flexibility. It’s important to note that the obligation to submit a SAF-T file will not change with the introduction of this new VAT return.
This change is for the VAT return only – with the SAF-T codes being re-used and re-purposed to provide additional information. Businesses must still comply with the Norwegian SAF-T mandate where applicable and must also submit this new digital VAT return.
Skatteetaten has created many web pages with detailed information for businesses to look through over the next few months including the following:
Norway is encouraging direct ERP submission of the VAT return where possible. However, the tax authorities have announced that manual upload via the Altinn portal will still be available. Login and authentication of the end user or system is carried out via ID-porten.
Additionally, Norway has provided a method for validation for the VAT return file, which should be tested before submission to increase the probability that the file is accepted by the tax authorities. The validator will validate the content of a tax return and should return a response with any errors, deviations, or warnings. This is done by checking the message format and the composition of the elements in the VAT return.
Businesses should begin preparations for the implementation of this new VAT return, as there will likely be challenges along the way.
In addition to the new VAT return, Norway has also announced plans to implement a sales and purchase report, which is currently in an early proposal stage in review with the Ministry of Finance. The next phase is mandatory public consultation which is when a desired launch date will be set. Skatteetaten notes that implementation time will be considered when determining an introduction date for the report.
Get in touch to find out how we can help your business prepare for Norway’s 2022 Digital VAT Return requirements. Follow us on LinkedIn and Twitter to keep up-to-date with the latest regulatory news and updates.
In Poland, the Ministry of Finance proposed several changes to the country’s mandatory JPK_V7M/V7K reports. These will take effect on 1 July 2021. The amendments offer administrative relief to taxpayers in some areas but create potential new hurdles elsewhere.
The JPK_V7M/V7K reports – Poland’s attempt to merge the summary reporting of a VAT Return with the detailed information of a SAF-T – have been in effect since October 2020. Taxpayers must submit these reports (V7M for monthly filers, V7K for quarterly filers) in place of the previously-used VAT Return and JPK_VAT files.
The JPK_V7M/V7K reports require taxpayers to designate within each file the invoices subject to special VAT treatment. For example, invoices representing transfers between related parties or invoices for transactions subject to Poland’s split payment regime.
Split payment designations are particularly complex for taxpayers to manage. Poland’s split payment regime is broadly applicable. In some cases can be exercised at the buyer’s option. This makes it difficult for sellers to predict which of their invoices should be marked.
As a result of these complexities, and in response to taxpayer feedback, the draft amendment for 1 July would abolish the split payment designation. This would significantly reduce the administrative burden on taxpayers.
The draft amendment does, however, give rise to an additional complexity in the reporting of bad debts. Under the amended rules, taxpayers need to indicate the original due date of the payment for an unpaid invoice. For which the taxpayer is seeking a VAT relief. This is intended to help the tax authority verify bad debt relief claims. This could potentially present difficulty for taxpayers who do not maintain such information or cannot easily access it in their accounting systems.
Finally, the draft amendment would modify reporting of cross-border business to consumer (B2C) supplies of goods. This is as well as similar supplies of electronic services. These supplies are at the heart of the European Union’s One-Stop Shop regime that takes effect 1 July 2021, and as such, the current invoice designations for these supplies in JPK_V7M/V7K would be consolidated into a single, new invoice designation under the amended rules.
Poland’s JPK_V7M/V7K filings are enormously ambitious in scope. It is clear from these latest proposals that the tax authority is willing to make substantial adjustments to the structure of these filings, at very short notice. In such a dynamic landscape, it is critical that businesses stay on top of regulatory developments in order to remain compliant.
Need to ensure compliance with the latest Polish VAT regulations? Get in touch with our tax experts.
The General Authority of Zakat and Tax’s (GAZT) previously published draft rules on ‘Controls, Requirements, Technical Specifications and Procedural Rules for Implementing the Provisions of the E-Invoicing Regulation’ aimed to define technical and procedural requirements and controls for the upcoming e-invoicing mandate. GAZT recently finalized and published the draft e-invoicing rules in Saudi Arabia.
Meanwhile, the name of the tax authority has changed due to the merger of the General Authority of Zakat and Tax (GAZT) and the General Authority of Customs to form the Zakat, Tax and Customs Authority (ZATCA).
The finalised rules include a change to the go live date of the second phase from 1 June 2022 to 1 January 2023. They revealed the time limit to report B2C (simplified) invoices to the tax authority´s platform for the second phase.
According to the final rules, the Saudi Arabia e-invoicing system will have two main phases.
The first phase begins on 4 December 2021 and requires all resident taxpayers to generate, amend and store e-invoices and electronic notes (credit and debit notes).
The final rules state businesses must generate e-invoices and their associated notes in a structured electronic format. Data in PDF or Word format are therefore not e-invoices. The first phase does not require a specific electronic format. However, such invoices and notes must contain all necessary information. The first phase requires B2C invoices to include a QR code.
There are a number of prohibited functionalities for e-invoicing solutions for the first phase:
The second phase will bring the additional requirement for taxpayers to transmit e-invoices in addition to electronic notes to the ZATCA.
The final rules state the second phase will begin 1 January 2023 and will be rolled-out in different stages. A clearance regime is prescribed for B2B invoices while B2C invoices must be reported to the tax authority platform within 24 hours of issuance.
As a result of the second phase requirements, the Saudi e-invoicing system will be classified as a CTC e-invoicing system from 1 January 2023. All e-invoices must be issued in UBL based XML format. Tax invoices can be distributed in XML or PDF/A-3 (with embedded XML) format. Taxpayers must distribute simplified invoices (i.e. B2C) in paper form.
In the second phase, a compliant e-invoicing solution must have the following features:
The second stage will furthermore bring additional prohibited functionalities for e-invoicing solutions on top of requirements mentioned in the first phase:
After publishing the final rules, the ZATCA is organising workshops to inform relevant stakeholders in the industry.
Some of the details remain unclear at this point, however the Saudi authorities have been very successful in communicating the long-term goals of the implementation of its e-invoicing system, as well as making clear documentation available and providing opportunities for feedback on the documentation published for each phase. We expect provision of the necessary guidance within the near future.
Contact us to discuss your Saudi Arabia VAT requirements. In addition, to find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls.
It’s been more than a few years since Romania first toyed with the idea of introducing a SAF-T obligation to combat its ever-growing VAT gap. Year after year, businesses wondered what the status of this new tax mandate was, with the ANAF continuously promising to give details soon. Well, the time is now.
The Organization for Economic Co-operation and Development (OECD) introduced the Standard Audit File for Tax (SAF-T) in 2005. The goal of the SAF-T digital VAT return is to provide auditors access to reliable accounting data in an easily readable format. Companies can export information from their accounting systems (invoices, payments, general ledger journals in addition to master files).
As a result, audits should be more efficient and effective based on the standarized format set by the OECD. As countries can require a different format for capturing data, no two country implementations of SAF-T are exactly the same.
From 1 January 2022, the new Romania SAF-T mandate comes into effect for large taxpayers. The digital VAT return submissions are via XML with over 800 fields.
It appears Romania is looking to follow the format prescribed by the OECD (SAF-T OECD Scheme version 2.0 – OECD standard format). The technical specifications have been released and can be found on the ANAF portal.
The documents which are available include:
Now that the specifications are available, Romania will soon move into the testing phase of implementation; where taxpayers can take advantage of submitting test data to the ANAF. This is in order to become familiar with the process, understand the requirements, and if necessary, adjust their ERP systems. As a result, this should ensure full compliance for January. Details on how to participate in the test phase are forthcoming and will be available on the portal once finalized.
Sources close to the Romania SAF-T implementation project indicated the hope is to eliminate certain declarations. To possibly provide pre-filled returns based on SAF-T information once the project is in full swing. This would align with the pre-population trend that is slowly making its way across the EU; with Italy, Spain, and Hungary paving the way for pre-populated VAT returns.
Get in touch to discuss your Romania SAF-T compliance requirements. To find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls
The Turkish Revenue Administration (TRA) has published updated guidelines on the cancellation and objection of e-fatura and e-arsiv invoice. Two different guidelines are updated: guidelines on the notification of cancellation and objection of e-fatura and guidelines on the notification of cancellation and objection of e-arsiv.
The updated guidelines inform taxable persons about the new procedures for objection against an issued e-fatura and e-arsiv invoice. And how this must be notified to the TRA. Due to changes in the objection procedure, the e-arsiv schema has also changed. There has not yet been a change in the e-fatura schema, however it could also change in the near future. The updated guidelines state that the TRA platform can be used to notify the TRA about objection requests made against an issued e-fatura and e-arsiv invoice.
From July 2021, electronically issued documents won’t be mentioned in the so called ‘BA and BS forms’. The BA and BS forms are generated to periodically report issued or received invoices when a total invoice amount is 5.000 TRY or more. All limited liability and joint stock companies are obliged to create and submit the forms to the TRA even if they don’t have any invoices to report.
The TRA recently published a new provision stating that electronically issued documents will not be shown in BA and BS forms and instead will be reported directly to the TRA in the clearance (e-fatura) and reporting(e-arsiv) process. Considering that the TRA receives the invoice data for electronically issued invoices in real-time, relieving taxpayers from reporting invoices through BA and BS forms creates a more efficient system in which the relevant data will be collected only once from taxpayers.
At its current stage, e-documents won’t be mentioned in these forms. However, in order for the TRA to have accurate invoice data about each taxpayer, it needs to be notified which are the final invoices and disregard any objected or cancelled documents when evaluating taxpayer data.
Although the cancellation process is already performed through the TRA platform for basic e-fatura and e-arsiv, objection requests are made externally (through a notary, registered letter or registered e-mail system), meaning the TRA does not have visibility of all objections. There could therefore be a risk that the TRA considers a cancelled document (due to objection) as issued which could result in discrepancies between the taxpayer records and the data that the TRA considers relevant for tax collection.
Therefore, taxpayers must now notify the TRA about objection requests to avoid any discrepancies between their records and BA and BS forms. The final goal of this application is that the BA and BS forms will be completely auto populated by the TRA in future.
According to the Turkish Commercial Code, any objections or cancellation requests must be made within eight days. Suppliers and buyers can raise an objection request which must be made externally (through a notary, registered letter or registered e-mail system) and registered in the TRA system.
For e-arsiv application, there are two ways for suppliers to notify the TRA about the objection request. They can either use the e-arsiv schema (automated) or register the request in the TRA portal. Buyers can see this request on the TRA platform and may respond, although they are not obliged to. Because e-self-employment receipts are also reported through e-arsiv application, the same objection rules apply.
For e-fatura, since there is no change in the schema, it is not possible for suppliers or buyers to notify the TRA using e-fatura schema. Currently, they can only notify the TRA about e-fatura objections through the TRA platform. Taxpayers can also respond to objection requests only through the platform.
The TRA has taken a step towards the digitalization of cancellation and objection requests. However, there is still not an automated way to perform these actions. Before the digitized objection process becomes reality in the country, the authorities must take a more sophisticated approach towards automating the process as well as introducing or amending applicable legislation.
Get in touch to find out how Sovos tax compliance software can help you meet your e-transformation and e-document requirements in Turkey.
There are a variety of different approaches to Insurance Premium Tax (IPT) treatment for marine insurance across Europe. Before looking at how individual countries treat marine insurance, it is worth noting the challenges in determining the country entitled to levy IPT and any associated charges.
The location of risk relating to marine vessels falls within article 13(13)(b) of the Solvency II Directive. This outlines that in the case of ‘vehicles of any type’ the risk location is the ‘Member State of registration’. There is no definition provided for ‘vehicles of any type’. So there is some uncertainty as to whether this is limited to land motor vehicles or whether it extends to marine vessels and aircraft. Most EU jurisdictions adopt the latter, broader approach, but Malta limits it to motor vehicles.
Additionally, the German tax authority has been known to rely on a 2017 decision made by the Cologne Fiscal Court to levy IPT in circumstances where a P&I club member had a registered office in Germany, but no ship was registered there. This raises the possibility of double taxation. This is with IPT potentially levied in both Germany and the country of the registration of the vessel. The Law on the Modernisation of Insurance Tax passed in December last year.
Once an insurer has navigated the choppy waters of the location of risk rules, regimes across Europe vary considerably. Marine insurance is a class of business that sees a number of IPT exemptions. Some countries like Bulgaria and Ireland offer fairly broad exemptions for damage and loss to marine vessels.
Other countries adopt a more nuanced approach in distinguishing between commercial vessels and pleasure craft. Belgium offers an exemption in the case of the former, whereas they levy IPT as normal in the case of the latter. A similar distinction exists in France between vessels conducting commercial activities and those operating for pleasure.
Germany has a reduced IPT rate of 3% in relation to marine hull. Where the ship exclusively serves commercial purposes and has insurance against perils of the sea.
Denmark has an exemption for its tax on non-life insurance, but it does impose a separate tax on pleasure boats. Denmark calculates on the sum insured of the vessels themselves.
One final point of note is the extension of the regime for the reduced rate, like that in the Portuguese territory of Madeira, in April. The extension lasts until the end of this year at least. The European Commission has extended the State aid initiative which gave rise to the reduction until 31 December 2023, so it may be that this will be reflected in Portuguese legislation in due course.
It’s essential for insurers to understand the tricky location of risk rules associated with marine insurance. In addition to the various approaches taken by different countries in Europe. This ensures companies pay the correct amount of Marine Insurance Tax to the correct administration.
The Colombian electronic invoicing system is reaching maturity level. Since its inception in 2018, Colombia has been steadily consolidating and expanding the mandate to make it more stable, reliable and comprehensive.
As a result of the enactment of the recent Resolution 000013/2021, the Colombian tax administration (DIAN), officially expanded the electronic invoicing mandate to also include payroll transactions. This expansion follows the pattern established by Mexico, Brazil and other countries that already expanded the electronic invoicing mandate to payroll transactions as well.
The Support Document for Electronic Payroll is known locally in Colombia as Documento Soporte de Nomina Electronica or also simply as Nomina Electronica. It is a new digital document intended to support and validate the payroll related costs and deductions of income tax and the VAT credits (if applicable) when businesses make payments resulting from labor, legal, and other similar types of relations (pensions).
In simple terms, labour cost transactions should be reported under this new digital system for them to be valid. This is whenever employers make payments for wages, salaries, reimbursements, pensions etc.
Employers paying wages under a labor relation, where payments are reported as expenses for income tax purposes or as deductible taxes for VAT, need to comply. However, there are important exceptions derived from that legal framework. For instance, public offices, non-for-profit entities or taxpayers under the simplified regime are not currently required to comply. Consequently, they do not need to use such payments for deductions of income tax or VAT.
The DIAN established an implementation schedule based on the number of employees the taxpayer has in the payroll. There are four stages or groups subject to the following deadlines:
|Group||Deadline to start the generation and remittance of the document||Number of employees|
|1||1 September 2021||More than 250 employees101|
|2||1 October 2021||101||250|
|3||1 November 2021||11||100|
|4||1 December 2021||1||10|
As the Nomina Electronica is required to be reported monthly, the payments for each month should be reported by the 10th day of the next month as a result. The adjustment notes should be reported within the same deadline, once they have been made by the employer.
There are two basic types of reports that are parts of this mandate: the Support Document of the electronic payroll, and – when necessary – the Adjustment Note.
This electronic document contains the information supporting the payments made to employees as wages and other compensations, deductions and the difference between them made by the employer, as reported in the payroll. The employer must then generate and transmit the document to the DIAN using the XML format established in the technical documentation included in the regulation 000037/2021.
In this mandate there are no credit notes as we know them in the electronic invoice system of Colombia. However, when an employer needs to make corrections to the Support Document of Electronic Payroll reported to the DIAN, it can issue what we know as Adjustment Notes (or Notas de Ajuste) where the employer will be allowed to correct any value previously reported to the DIAN via the Nomina Electronica.
Employers must submit reports to the DIAN individualised for each beneficiary receiving payments from the employers. As a result, the report requires the provision of some mandatory information for the DIAN to validate. This includes the proper identification of the report itself, the reporting party, in addition to the employees, wages or other payments employees, date, numbering, software etc.
Another mandatory information element that is worth mentioning is the CUNE or Unique Code of Electronic Payroll Support Document. This is a unique identifier for each Electronic Payroll Support Document. It will allow exact identification of each report or the Adjustment Notes issued after it. However, there is some additional optional information that can be provided depending on the needs or convenience of the employer making the report.
From a technical perspective, neither the Support Document of the Electronic Payroll nor the Adjustment Notes are based on the UBL 2.1 structure used in Colombia for the electronic invoice. This is because the UBL standard does not include modules for payroll transactions or reports. Therefore, the DIAN has based its architecture in a different XML standard. Each report requires a digital signature. For that, the taxpayer can use the same digital certificate used for signing electronic invoices.
The current regulations do not require that the Nomina Electronica or the Adjustment Notes should be generated by a particular software solution or by a software provider authorized by the DIAN. Taxpayers have the option to generate the report using their own solution. That is a market solution or a solution that the DIAN will provide for small taxpayers. However, all reports should strictly follow the technical documentation issued by the DIAN within the Resolution 000037/2021. The remittance of those documents is electronic, using the webservices specified by the DIAN.
After making the transmission, the DIAN then validates the document. They will then report back the corresponding application response to the taxpayer, indicating its acceptance and validation. Only then, will the amounts reported in the payroll document are valid expenses for the deduction.
Non-compliance with electronic payroll in Colombia will be subject to the same fines and penalties established for not complying with the electronic invoicing mandate, as defined in Art. 652-1 of the Tax Code of Colombia (Estatuto Tributario). But the most important implication of non-compliance is that any payment not reported by the employer, will not be allowed as expenses for income tax or VAT purposes when applicable.
Speak to our experts about your tax requirements in Colombia and keep up to date with the changing VAT compliance landscape by downloading VAT Trends: Toward Continuous Transaction Controls.
We hosted a webinar about Insurance Premium Tax (IPT) in Spain.
Topics covered included the Conscorcio reporting system, tips for effective and accurate compliance, the penalty regimes currently in place and the latest regulatory updates.
Although our expert team answered plenty of questions they didn’t have time for everyone. Here’s a helpful summary.
We understand that health and sickness insurance are exempt from IPT in Spain. For completeness, this doesn’t include Accident cover, which should be taxable at 8%. Article 5 of the IPT law provides for the exemption.
Article 5 of the IPT law provides an Exemption for: “insurance operations related to ships or aircraft that are destined for international transport, except for those that carry out navigation or private recreational aviation”. Two pieces of case law (1073-00 (09/05/2000) and V1233-03 (13/06/2008)) provide further details on the exemption.
Under Act 22 of Law 37/1992 (VAT Law): “international transport is considered to be that which takes place within the country and ends at a point located in a port, airport or border area for immediate dispatch outside the Spanish mainland and the Balearic Islands”. We therefore understand insurance, such as freight forwarder liability and marine cargo, gain the IPT exemption to the extent they relate to international transport.
We’re not aware of any Microsoft tools that can prepare the CCS file for monthly reporting. This file can be complex. For our customers we use our proprietary software to generate the relevant file from an Excel input template.
CLEA is the surcharge to fund the winding-up activity of insurance undertakings. It was included in the Modelo 50 CCS and is due for all insurance contracts signed on risks in Spain, other than life insurance and export credit insurance on behalf of or with the support of the State.
The type of surcharge destined to finance winding-up activity of insurance companies is made up by 0.15% of the aforementioned premiums.
We understand all insurers should register in the provinces where they have risks located. This is a compliant requirement because insurers need to declare premium taxes to the correct tax authorities according to the location of risk.
The postcode in addition to the correct address where the risk is based are very important. Spanish law states that businesses must declare the premium tax according to the location of the risk. Sometimes, non-domestic insurers provide the location of risk based in Spain using the address of the insured. For example, a German insurer who issues a policy insuring a house in Spain, should provide the address and postcode of the house in Spain.
If we don’t have this data for the monthly submission we will need, in the future, to declare the Fire Brigade charge report. The CCS system will reject a report with an incorrect postcode as a result.
Insurers can elect to declare only their share of the co-insurance agreement should that be the agreement amongst the insurers that are party to the contract.
Where Consorcio cannot recover an outstanding sum from a co-insurer, however, it’s likely that it will hold the lead insurer accountable for that amount. Alternatively, the lead insurer can pay the surcharges on behalf of all follow insurers. So there is to some extent an element of discretion by the relevant insurers.
We’re able to provide this to our customers upon request.
An amendment in the General Communiqué No. 509 has announced healthcare service providers and taxpayers providing medical supplies and medicines or active substances must use the e-invoice application from 1 July 2021.
Published in the Official Gazette the implementation will cover healthcare service providers who have signed contracts with the Social Security Institution (SSI) and all taxpayers providing medicines and active substances and medical supplies.
Within this scope, organisations must use the e-invoice application as of 1 July. Organisations signing contracts with SSI after this date must use e-invoice prior to their issue of invoices to SSI.
From 1 January 2020 all organisations included in the e-invoice application scope have to apply the e-arşiv invoice on the date of e-invoice application. Any healthcare organisations included in the amendment will then have to apply the e-arşiv invoice on 1 July.
The digitisation process will minimise physical contact, a significant benefit following the Covid-19 outbreak. Furthermore, organisations will no longer have to prepare or store physical documents as they are stored electronically.
For organisations that issue invoices to SSI, transactions such as payment terms will become faster and more efficient via the e-invoice and e-arşiv invoice applications. In addition to the transfer of all invoice-related processes to the digital environment.
Organisations that carry out the e-issuance process via the TRA Portal or via a third-party integrator will benefit from easy access to documents, improved efficiency, and business continuity as a result.
Get in touch to find out how Sovos tax compliance software can help you meet your e-transformation and e-document requirements in Turkey.
Italy postpones e-document legislation until 2022. In September 2020, Italy introduced major changes to the country’s rules on the creation and preservation of electronic documents. These new requirements were expected to be enforced on 7 June 2021 however the Agency for Digital Italy (AGID) has now decided to postpone the introduction of the new rules until 1 January 2022.
The new ‘Guidelines for the creation, management, and preservation of electronic documents’ (“Guidelines”) regulate different aspects of an electronic document. By following the Guidelines, businesses benefit from the presumption that their electronic documents will provide full evidence in court.
The postponement of the introduction of the Guidelines is a reaction from the AGID to claims of local organizations who have particularly expressed concern about the obligation to associate metadata with e-documents. The Guidelines set forth an extensive list of metadata fields for keeping alongside e-documents in a way that will enable interoperability.
In addition to delaying the introduction of the new e-document legislation, the AGID has also modified metadata requirements. They included new pieces of metadata and changing the description of some fields. The AGID has also corrected references – especially to standards – and rephrased statements to clarify some obligations.
The updated Guidelines and their corresponding Appendices are available on the AGID website.
It’s difficult to pinpoint exactly when new taxes or tax rate increases will happen. Covid-19 has impacted almost everything, including a massive deficit in the economy. Many banks have applied negative interest and governments have put funding in place to aid recovery. It’s highly likely that tax authorities will be looking at ways to bring in additional funding, including Insurance Premium Tax (IPT) rate increases.
Some of the steepest increases across Europe can be recognised not as an instant from one rate to another but a gradual incline.
The Dutch IPT regime is one of the highest rates across Europe, currently at 21%. Until 2008, the IPT rate was 7% and raised in various stages, finally settling at 21% in 2013. An increase of 14% in a five-year period!
Why the sudden rate increase? Was it because the Dutch tax authorities realised theirs was one of the lowest rates in Europe? Was it due to the economic climate at the time to gain extra revenue? Or was it because tax authorities were beginning to realise IPT was becoming a more recognised tax?
The Netherland’s isn’t the only country to have experienced a dramatic IPT rate increase over a short period of time.
HMRC, the UK tax authority, has also taken the opportunity to implement more rigorous increases, especially with their standard rate. In 2011, the rate increased to 6%, increasing at various intervals until stabilising at 12% in 2017. The rate doubled in a five-year period!
The similarity between the two territories and the way they have increased their rates is uncanny. The five-year structure of rate changes either by 1 or 2%, ultimately reaching much higher rates than initially expected in the market. Looking back at the economy during the time of the increase, Europe was beginning to recover from a recession that hit most territories hard with rising interest rates on loans and mortgages and increased unemployment.
There are changes in the market now that could influence IPT rates. Many insurance companies have increased the scope of insurances offered. Classes of business are more varied and premiums quoted are higher. Emphasis is on ensuring the invoicing is correct with the insurer versus carefully considering insured taxes.
Many territories now require more granular detail for submissions. Will this trigger more audits? Will it cause more tax authorities to analyse this information to enforce their penalty regimes? Or will there be a number of rate increases across the board? Increases could begin at 1 or 2% and follow the trend of five years as set out above. Either way, there is a financial gap which will need to be filled.
We’ll be keeping a close eye on the latest Insurance Premium Tax rate updates to see how tax authorities respond to this current economic climate.