Many businesses will now be involved in “cross border” transactions meaning that a business in one territory will sell and, often, deliver goods to a customer located within another territory. The existence of two or more tax territories in the transaction, and the possibility that there may be a customer in the EU and a supplier in a third country such as the UK, will inevitably lead to VAT challenges with varying degrees of complexity.
Different challenges will be faced by suppliers involved in B2B transactions compared to B2C transactions – although there will also be some common issues. This article will focus on B2B transactions.
Let’s consider a UK supplier with a contract to supply goods manufactured in the UK to customers within the EU.
The first point to recognise is that to deliver the goods to the EU customer the goods must pass through an EU customs border. And here is the first point for supply chain management.
Who will import the goods into the EU and what are the considerations?
The customer’s starting point is likely to be that they will want the supplier to import the goods and a salesperson, eager to please their customer, is likely to agree. Is this a problem for the supplier? OH YES!
A salesperson returns triumphant with an order with Incoterms of DDP (Deliver Duty Paid) – but is this a cause for celebration?
Deliver Duty Paid means that the supplier must deliver the goods to the territory of the customer from which, for VAT purposes, a local sale will be made. This will require the UK supplier to import the goods into the EU and this creates the first issue.
Under the Union Customs Code (UCC) the person presenting the goods to the customs authority (the declarant) must be established within the EU. An EU established business importing goods can be both the importer and the declarant. A business established outside the EU can be the importer but not the declarant. In this case the non-EU importer must appoint an EU established business to act as its “indirect customs agent”. This agent is jointly and severally liable for the import duties that are due and there are not too many businesses which provide such a service because of the risk. So the seller could find itself unable to satisfy a contractual obligation because it cannot find someone to act as its indirect customs agent in time to make the required delivery – or at all.
If a supplier successfully manages to overcome this hurdle then there is the issue of dealing with local VAT on the sale – must the supplier register for VAT and apply it to the sales invoice – or does the reverse charge apply? And will the customer pay the non-refundable duty costs incurred by the supplier at the border?
The takeaway here is that a contract concluded under DDP terms may be much easier for the sales team to achieve but it can create serious issues down the line. UK suppliers should seek to agree any Incoterm other than DDP wherever possible.
To reduce the possibility of delays some UK suppliers have set up warehouse facilities within the EU from which deliveries can be made. One issue which can affect both VAT and direct taxes is whether the warehouse creates a permanent or fixed establishment. For the purposes of this article we assume no – although creating a permanent establishment could avoid the need to appoint an indirect customs agent.
Once the UK supplier has successfully brought the goods into an EU warehouse it will make deliveries to customers. One big consideration here is how the import VAT is dealt with. Several Member States offer the possibility to postpone import VAT to the VAT return via a reverse charge. In such circumstances import VAT deduction is guaranteed so long as the formalities are followed and the business is able to fully recover VAT. Where goods are imported into a Member State where import VAT must be first paid and then deducted consideration as to how this will happen is important. Where there is a VAT registration in place, the VAT can normally be recovered via the VAT return. However, where the Member State of import has a reverse charge mechanism for domestic sales, a non-EU supplier will need to make 13th Directive claims to recover import VAT. One Member State where this will arise is Spain which has reciprocity rules in place so not all businesses are able to make 13th Directive claims.
Therefore if a supplier is considering utilizing an EU warehouse or making sales on a DDP basis, they should first map out all of the likely flows and then determine the VAT treatment to understand if any negative VAT issues will arise. The planning opportunities and potential pitfalls that arise from such a warehouse will be considered in a later article.
Get in touch with our tax experts to discuss your supply chain VAT requirements or download our e-book Protecting Global Supply Chains.
Unlike many other country initiatives that we have seen in the e-invoicing space recently, Australia does not seem to have any immediate plans to introduce continuous transaction controls (CTC) or government-portal involvement in their B2B invoicing.
Judging from the recent public consultation, current efforts are focused on ways to accelerate business adoption of electronic invoicing. This consultation builds on the government’s previous outreach undertaken in November 2020 on “Options for the mandatory adoption of e-invoicing by businesses”, which led to a serious government effort to enhance the value of e-invoicing for businesses and increase business awareness and adoption.
In addition to a decision to make it mandatory for all commonwealth government agencies to receive PEPPOL e-invoices from 1 July 2022, the Australian government seeks to also boost e-invoicing in the B2B space, but without the traditional mandate for businesses to invoice electronically. Instead, the proposal is to implement the Business e-Invoicing Right (BER).
Under the government’s proposal, businesses would have the right to request that their trading parties send an e-invoice over the PEPPOL network instead of paper invoices.
To make and receive these requests, businesses need to set up their systems to receive PEPPOL e-invoices. Once a business has this capability, it would be able to exercise its ‘right’ and request other companies to send them PEPPOL e-invoices.
According to the current proposal, BER would be delivered in three phases, with the first phase to include large businesses, and the later stages to include small and medium-sized businesses. The possible rollout of BER would be as follows:
The objective of the Australian BER initiative to boost the adoption of B2B e-invoicing is complemented by a proposal for several other initiatives supporting businesses in this direction. One measure would be the enabling of PEPPOL-compatible EDI networks. As EDI networks represent a barrier to broader adoption of PEPPOL e-invoicing, particularly for small businesses that interact with large businesses that use multiple EDI systems, the proposal to enable PEPPOL-compatible EDI networks could ultimately reduce costs for businesses currently interacting with multiple EDI networks. Furthermore, the government is contemplating expanding e-invoicing into Procure-to-Pay. Businesses may realise more value from adopting e-invoicing if the focus grows to embrace an efficient and standardised P2P process that includes e-invoicing.
Finally, integrating e-invoicing with payments is another proposed means to boost e-invoicing. This would allow businesses to efficiently receive invoices from suppliers directly into their accounting software and then pay those invoices through their payment systems.
How efficient the proposed measures will be in accelerating adoption of e-invoicing, and whether the Australian government will feel it was the right decision not to introduce a proper e-invoicing mandate, as is becoming more and more common globally, remains to be seen.
Need help staying up to date with the latest VAT and compliance updates in Australia that may impact your business? Get in touch with Sovos’ team of experts today.
Annual reporting requirements vary from country to country, making it complex for cross-border insurers to collect the data required to ensure compliance.
Italy has many unique reporting standards and is known for its bureaucracy across the international business community. Italy’s annual reporting is different due to the level of detail required. The additional reporting in Italy requires an in-depth list of policies and details including inception and expiry dates, cash received dates, policyholders’ names, addresses, fiscal codes and premium values. This makes the annual reporting a significant undertaking. Refer to this blog about IPT in Italy for an overview.
The Italian legislation and regulations require insurance companies writing business in Italy to submit annual reports with the purpose of collecting information that facilitates the tax authorities’ control of activities on taxpayers.
These reports should list all the insurance contracts in place in the relevant year with a policyholder (individual or entity) subject to Italian taxes. Policies covering Liability, Assistance and any risks written as ancillary to an underlying Liability or Assistance policy don’t need to be included in the report.
If there were no contracts in place in the previous calendar year, there is no requirement to submit a Nil report.
Until 2023 reporting year, claim payments made during the previous year in favour of beneficiaries (individuals or entities) who possess an Italian fiscal code had to be reported to the Italian tax authorities by the end of April.
Details required in the report include:
If there are no claims to be reported for the previous year, Nil reports are not required.
Effective January 2025, a comprehensive new regulation (Prot. No. 450686/2024) came into force, repealing the provisions set forth by the Director of the Revenue Agency under No. 9649 dated January 19, 2007. These updated requirements apply starting with the 2024 reporting year.
The key changes are summarized as follows:
As an integral part of the annual Insurance Premium Tax (IPT) return due by the end of May, insurance companies writing compulsory motor third-party liability must report the amount of IPT paid in the previous year to each of the Italian provinces. Details required include province policy number, fiscal code, vehicle plate number, premium, IPT rate and IPT.
The additional reporting in Italy requires that certain elements are present before submission. To submit the Contracts and Premiums report an insurance company needs:
Many insurance companies work with third parties, and the policy information they collate might not always include all required details. Incomplete and incorrect data prevent the successful submission of the annual reports and can lead to costly fines and reputational damage.
Navigating annual reporting alongside regular monthly and quarterly reporting can feel overwhelming. The more that can be prepared in advance, the smoother the reporting process. Understanding Italy’s specific annual reporting requirements will ensure insurers remain compliant and avoid any unnecessary delays or corrections.
Need to ensure compliance with the latest regulations in Italy? Get in touch with our tax experts for more information.
Insurance is a dynamic sector in constant flux to accommodate with insured’s needs. An increase in holidays abroad following WWII saw the need for Assistance insurance for any unforeseen events that occurred away from the insured’s home country. Council Directive 84/641/EEC regulated Assistance insurance for the first time, and a new class of insurance was created. This was in addition to the 17 previously regulated classes outlined in Directive 73/239/EEC of non-life insurance and was called Assistance (Class insurance 18).
Initially, the insured was covered by a policy that provided aid for any event travelling abroad (loss of passport, assistance with any problem in the car etc). The insurer created a range of support with call centres, supplier networks and additional services to help solve difficulties when travelling abroad.
Subsequently, following the insured’s requirements, insurance companies and travel agents created travel insurance that includes a wide range of services. These consist of several protections within different classes of business. This is where the tax complexity of travel insurance policies begins. It’s an amalgamation of coverages, and the application of the correct fiscal treatment needs to be analysed in each territory.
When weighing the correct application of tax for travel insurance, businesses must consider the following: location of risk (LoR), class of businesses and the correct tax approach.
Location of risk: Directive 2009/138/EC Article 13 must be followed in the following circumstances:
Class of business affected: As mentioned previously, one of the complexities of travel insurance is determining the classes of business affected. It’s common to see, in these policy types, multiple coverages such as medical assistance cover, loss or damage to baggage, travel delays or cancellations, loss of documents or money, personal accident, repatriation etc. Insurers must adequately identify these coverage details to ensure the compliant tax treatment is used.
Taxability: This step is crucial. The correct treatment of the policies could vary the liabilities to be paid, the different taxes and/or levies and parafiscal charges to be included in the tax calculation. This means that the tax treatment can change by country. It’s necessary to identify the tax liability or exemption based on the class of business and the geographical location.
Insurers must understand the importance of the vital details associated with travel insurance. Determining LoR, class of business affected and taxability ensures the correct amount is paid and submitted to the proper jurisdictions.
Download our IPT Compliance Guide to find out more about how to stay compliant or get in touch with our IPT experts.
During the last decade, the Vietnamese government has been developing a feasible solution to reduce VAT fraud in the country by adopting an e-invoice requirement for companies carrying out economic activities in Vietnam. Finally, on 1 July 2022, a mandatory e-invoicing requirement is scheduled to enter into force nationwide.
Despite the postponement of the original starting date for the mandatory nationwide e-invoicing obligation, which was first intended to enter into force in July 2020, the Vietnamese government quickly established a new deadline.
Later that year, in October 2020, the new timeline was communicated through Decree 123, delaying the e-invoicing mandate until 1 July 2022. This new deadline is also in line with the implementation dates for the rules concerning the e-invoicing system envisaged in the Law on Tax Administration.
Vietnam’s General Taxation Department (GTD) announced its plan to work first with the local tax administrations of six provinces and cities: Ho Chi Minh City Hanoi, Binh Dinh, Quang Ninh, Hai Phong and Phu Tho to start implementing technical solutions for the new e-invoice requirements and the construction of an information technology system that allows the connection, data transmission, reception, and storage of data. According to the GTD’s action plan, by March 2022, these six cities and provinces should be ready for the e-invoice system’s activation.
The GTD announced that, from April 2022, the new e-invoicing system will continue to be deployed in the remaining provinces and cities.
Finally, under this local implementation plan, by July 2022, all cities and provinces in Vietnam must deploy the e-invoicing system based on the rules established in Decree 123 and the Circular that provides guidance and clarification to certain aspects of the new e-invoicing system.
Taxable persons operating in Vietnam will be required to issue e-invoices for their transactions from 1 July 2022 and must be ready to comply with the new legal framework. Enterprises, economic organisations, other organisations, business households and individuals must register with the local tax administration to start using e-invoices according to the rules established in the mentioned Decree 123.
Vietnam is finally moving forward to adopt mandatory e-invoicing. However, there is plenty of work related to the necessary technical documentation and local implementation of the new e-invoicing system. We will continue to monitor the latest developments to determine whether the GTD can meet all the requirements in time for the mandatory e-invoicing roll-out.
Need help staying up to date with the latest VAT and compliance updates that may impact your business? Get in touch with our team of experts today.
Identifying the Location of Risk in the case of health insurance can be a tricky subject, but it’s also crucial to get it right. A failure to do so could lead to under-declared tax liabilities in a particular territory and the potential for penalties to be applied once these deficits are identified and belatedly settled. We examine the situation from a European perspective.
The starting point in this area is the Solvency II Directive (Directive 138/2009/EC). Notably, Article 13(13) outlines the different categories of insurance risks that are used to determine risk locations. As health insurance doesn’t fall within the specific provisions for property, vehicles and travel risks, it is dealt with by the catch-all provision in Article 13(13)(d).
This Article refers to the ‘habitual residence of the policyholder’ or, where the policyholder is a legal person, ‘that policyholder’s establishment to which the contract relates’. We will consider these scenarios separately, given the distinction between individuals and legal persons.
For natural persons, the situation is generally straightforward. Based on the above, the key factor is the habitual residence of the policyholder. The permanent home of the policyholder tends to be relatively easy to confirm.
More challenging cases can arise where someone moves from one risk location to another. For example, when an individual purchases insurance in a particular country, having lived there for a significant period before moving to another country soon afterwards, the Location of Risk will be the original country. As EU legislation does not go into detail on the point, examples of no apparent habitual residence will be dealt with on a case-by-case basis.
In this scenario, we have to consider the ‘policyholder’s establishment to which the contract relates’ in the first instance. The establishment is treated quite broadly, as evidenced by the European Court of Justice case of Kvaerner plc v Staatssecretaris van Financiën (C-191/99), which pre-dates Solvency II.
Notwithstanding the above, the habitual residence of the insured should be used to identify the risk location even where the policyholder is a legal person in certain circumstances. This will occur when the insured is independently a party to an insurance contract, giving them a right to make a claim themselves rather than through the corporate policyholder.
This logic can also potentially be extended to dependents of the insured person added to the policy and who can also separately claim under the contract. They will also create a risk location, although this will often be in the same country as the insured person. Ultimately, the compliant approach will be dictated by the overall set-up of the policy.
If any insurers writing business in Europe have any questions on the location of risk rules, whether concerning health insurance or any other insurance, then Sovos is best placed to provide advice to ensure taxes are being correctly declared.
Contact us for help with complying with health insurance location of risk rules or download our Location of Risk Rules for IPT e-book for more information.
On 30 January 2022, the Zakat, Tax and Customs Authority (ZATCA) published an announcement on its official web page concerning penalties for violations of VAT rules, and it is currently only available in Arabic. As part of the announcement, the previous fines have been amended, ushering in a more cooperative and educational approach for penalizing taxpayers for their non-compliance with VAT rules than previously.
If ZATCA officials detect a violation during a field visit, the taxpayer will first be given a warning about the violation without any penalty. The ZATCA aims to raise awareness instead of penalizing taxpayers for their first violation. Taxpayers will be granted three months to comply and make necessary changes in their processes.
If non-compliance continues after the first inspection, the taxpayer will be fined 1.000 Riyals, roughly 267 USD. The penalty charge will gradually increase if the taxpayer fails to comply with the rules and doesn’t make necessary changes within three months after the notice.
The fine for each additional repetition time will be as follows: 5.000 Riyals for the third time, 10.000 Riyals for the fourth time and 40.000 Riyals for the fifth time. If the same violation is repeated 12 months after its discovery, it is considered a new violation, and the process will begin with a warning without a fine.
According to the announcement, the violations of e-invoicing rules will be penalized per the new procedure described above. The instances that require a notice/fine are slightly different than the initial violations described previously and highlighted as follows:
The ZATCA states that the new approach ensures proportionality between the violation and the penalty imposed on taxpayers while giving taxpayers a chance to comply within a specific time frame. Considering that the introduction of both VAT and mandatory e-invoicing is fairly recent in the country, there are certain aspects that are unclear for taxpayers. This approach will educate businesses and is expected to be welcomed by stakeholders.
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Towards the end of 2021, the tax authority in Turkey published a draft communique that expands the scope of e-documents in Turkey. After minor revisions, the draft communique was enacted and published in the Official Gazette on 22 January 2022.
Let’s take a closer look at the changes in the scope of Turkish e-documents.
Taxpayers meeting these thresholds and criteria must start using the e-fatura application from the start of the year’s seventh month following the relevant accounting period.
In terms of accommodation service providers, if they provide services as of the publication date of this communique, they must start using the e-fatura application from 1 July 2022.
For any business activities that start after the publication date of the communique e-fatura must be used from the beginning of the fourth month following the month in which their business activities began.
Taxpayers not in scope of e-arşiv invoices have been obliged to issue e-arşiv invoices if the total amount of the invoices to be issued exceeds TRY 30.000 including taxes (in terms of invoices issued to non-registered taxpayers, the total amount including taxes exceeds TRY 5.000) from 1 January 2020.
With the amended communique, the Turkish Revenue Administration (TRA) lowered the total amount of the invoice threshold to TRY 5.000, and thus more taxpayers will be required to use the e-arsiv application. The new e-arsiv invoice threshold applies from 1 March 2022.
Another change introduced by the communique was the expansion of the scope of e-delivery notes. The gross sales turnover threshold for mandatory e-delivery notes has been revised to TRY 10 million, effective from the 2021 accounting period. In addition, taxpayers who manufacture, import or export iron and steel (GTIP 72) and iron or steel goods (GTIP 73) are required to use the e-delivery note application. E-fatura application registration is not applicable to those taxpayers.
Get in touch with our team of tax experts to find out how Sovos’ tax compliance software can help meet your e-fatura and e-document requirements in Turkey.
With the most significant VAT gap in the EU (34.9% in 2019), Romania has been moving towards introducing a continuous transaction control (CTC) regime to improve and strengthen VAT collection while combating tax evasion.
The main features of this new e-invoicing system, e-Factura, have been described in an earlier blog post. Today, we’ll take a closer look at the roll-out for B2B transactions and the definition of high-fiscal risk products, as well as the new e-transport system that was introduced through the Government Emergency Ordinance (GEO) no. 130/2021, published in the Official Gazette on 18 December.
For more information about e-invoicing in Romania in general refer to this overview or VAT Compliance in Romania.
According to GEO no. 120/2021 (the legislative act introducing the legal framework of e-Factura), the supplier and the recipient must both be registered with the e-Factura system. The recently published GEO no. 130/2021 establishes an exception for high fiscal risk products and ensures that taxpayers will use the e-Factura system regardless of whether the recipients are registered.
In line with the GEO no. 130/2021, the National Agency for Fiscal Administration has issued an order to clarify which products are considered high fiscal risk products.
The five product categories are as follows:
High fiscal risk products are defined based on the nature of the products, marketing method, traceability of potential tax evasion and degree of taxation in those sectors. Detailed explanations, as well as product codes, can be found in the Annex of GEO no. 130/2021.
The enforcement timeline of this requirement means that businesses that supply these types of products must be ready to comply with the new Romanian e-Factura system as follows:
Another reform that shows the intention of the Romanian authorities to combat tax fraud and evasion is the introduction of an e-transport system.
Taxpayers will be required to declare the movement of goods from one location to another in advance. Once declared, the system will issue a unique number written on the transport documents. Authorities will then verify the declaration on the transport routes.
Moreover, it is stated in the justification letter that the e-transport system will interconnect with the Ministry of Finance’s current systems, Romanian e-invoice, and traffic control, much like similar initiatives in other countries, such as India, Turkey and Brazil.
The introduction of the e-transport system is still pending as the Ministry of Finance has not yet issued the order regarding the application procedure of the system. According to GEO 130/2021, the Ministry of Finance had 30 days to do so after GEO 130/2021 was published in the Official Gazette. However, the deadline expired on the 17 January, and no announcement has been made yet. Therefore, the details of the system are still unknown.
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We’re addressing Insurance Premium Tax (IPT) compliance in different countries. Written by our team of IPT and regulatory specialists, this guide is packed full of insight to navigate the ever-changing regulatory landscape. Let’s start with IPT in Slovakia. Effective on 1 January 2019, the default IPT tax rate is 8%.
As of 1 January 2026, the IPT tax rate will rise to 10% for insurance policies where the insurance period commences after 31 December 2025, where the payment is received after that date, and the tax point date (as opted by the insurer) is also on or after 1 January 2026.
You can read other blogs in this series by visiting our Denmark, Finland, and the UK entries or by downloading Sovos’ Guide on IPT Compliance.
There are three tax points for IPT in Slovakia:
Insurers are not required to separately notify or request permission to use one tax point over another but an insurer must notify on the quarterly tax return which tax point they’re using. It’s important to note the choice of tax point must be used for eight consecutive calendar quarters.
Interestingly, Slovakia’s approach to tax points provides flexibility for insurers when choosing to pay tax, giving the option to pay upfront or spread out IPT payments in instalments across multiple returns.
Slovakian IPT is due on a calendar quarterly basis (e.g. January to March return declared in April). This is the same for the payment due at the end of the month. It’s worth noting that all returns are filed electronically so there are no paper returns.
An issuance of a premium is treated according to the relevant class of business and is placed in the corresponding section on the return. A renewal would be treated in the same manner.
For treatment of mid-term adjustments, in the case whereby a premium or part thereof, is increased, reduced or cancelled, there is a separate box on the return used for submission (Box 19). This is unusual in comparison to other countries, predominantly because an increase in premium results in a different treatment.
A correction error can be categorised in two ways.
Mistakes can happen and typos can occur in the supply chain. Maybe there was a multi global risk covering multiple countries and apportionment was incorrectly allocated in the first instance.
In the case of a correction of an error, a supplementary declaration must be submitted for the appropriate period affected.
For example, if in the first quarter EUR 1,000 was declared for a particular risk based on apportionment produced. Later down the line in Q3, on further review it should have been EUR 1,200. In this case, the additional EUR 200 cannot be submitted on the Q3 declaration. An amended return would need to be considered for Q1 and submitted separately – this is true for both increases and decreases.
Overall, negatives are allowed and the Slovakian tax authority should refund the money back to the insurer. Therefore, the credit cannot be carried over to the next reporting period. There are no limits regarding how much the insurer can regularise but a degree of caution is advised.
Whilst there’s no official guidance, it would be wise to keep any documentation as evidence if a large amount needs to be reclaimed.
Historicals need to be submitted as a supplementary return (i.e. outside the current return). The Slovakian tax authority can impose penalties between EUR 30.00 and EUR 32,000.00.
A temporary Tax Amnesty measure was introduced. According to the tax amnesty rules, a taxpayer can settle its outstanding tax liabilities (via corrective returns) or submit historical returns (missed declarations) without incurring penalties or interest for late payment or failure to declare.
This temporary measure applies to tax returns with filing deadlines on or before 30 September 2025. For insurance premium tax (IPT) purposes, it means tax returns submitted for Q2 2025 (due by 31 July 2025) or earlier.
To benefit from the amnesty, the relevant returns must be submitted and the associated tax paid between 1 January 2026 and 30 June 2026.
Download our IPT Compliance Guide for help navigating the changing regulatory landscape across the globe.
In a blog post earlier this year, we wrote about how several Eastern European countries have started implementing continuous transaction controls (CTC) to combat tax fraud and reduce the VAT gap. However, it’s been an eventful year with many new developments in the region, so let’s take a closer look at some of the changes on the horizon.
Latvia has recently revealed its new CTC regime plans. The Latvian government approved a report prepared by the Ministry of Finance to implement an electronic invoicing system in the country. The concept described in the report envisages the introduction of electronic invoicing as mandatory for B2B and B2G transactions from 2025 under the PEPPOL framework. The details about the system, including the legislation and technical documentation, are expected in due course.
Serbia is another country moving rapidly towards a CTC framework, and apparently, various stakeholders find this movement rather quick. The Ministry of Finance recently announced that upon the request for a transition period to adapt to the new system of e-invoices, they have decided to postpone the date for entry into force of CTC clearance for B2G transactions until the end of April 2022. It must be noted that there has been no delay concerning B2B transactions.
According to the revised calendar:
Slovenia is also looking to introduce CTCs. In June 2021, the Ministry of Finance submitted a draft law to the Slovenian parliament, aimed at introducing mandatory B2B e-invoicing in the country. According to the draft regulation, all business entities would be obliged to exchange e-invoices exclusively in their mutual transactions (B2B). In the case of B2C transactions, consumers could opt to receive their invoices in electronic or paper form. However, the Ministry of Finance withdrew the draft law due to disagreement with various stakeholders but intends to review it by simplifying the process and reducing the administrative burden on businesses.
Discussions around the introduction of CTCs in the country continue among various stakeholders, e.g., the local Chamber of Commerce. However, seeing as national elections are expected in Slovenia in April 2022, the CTC reform is not expected to gain much traction until summer 2022 at the earliest.
Earlier this year, we reported that the Slovakian Ministry of Finance had prepared draft legislation to introduce a CTC scheme. The aim was to lower Slovakia’s VAT gap to the EU average and obtain real-time information about underlying business transactions. Public consultation for the draft law was completed in March 2021. However, no roll-out timeline was published at the time.
Over the past months, the Slovakian government has launched the CTC system and published new documentation. The CTC system is called Electronic Invoice Information Systems (IS EFA, Informačný systém elektronickej fakturácie) and is a unified process of electronic circulation of invoices and sending structured data from invoices to the financial administration. The timeline for the gradual roll-out of entry into force looks as follows:
There have been serious developments regarding Poland’s CTC framework and system, the Krajowy System e-Faktur (KSeF). The CTC legislation was finally adopted and published in the Official Gazette on 18 November 2021. Starting from January 2022, KSeF goes live as a voluntary system, meaning there is no obligation to use this e-invoicing system in B2B transactions. It is expected that the system will be mandatory in 2023, but no date has been set yet for the mandate.
For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.
With the largest VAT gap in the EU (34.9% in 2019), Romania has also been moving towards introducing a CTC regime to streamline the collection of taxes to improve and strengthen VAT collection while combating tax evasion. In October 2021, Government Emergency Ordinance (GEO) no. 120/2021 introduced the legal framework for implementing e-Factura, regulating the structure of the Romanian e-invoice process and creating the framework for basic technical specifications of the CTC e-invoicing system. While the Romanian e-Factura went live as a voluntary system on 6 November 2021, no timeline has yet been published for a mandate. Suppliers in both B2B and B2G transactions may opt to use this new e-invoicing system and issue their e-invoices in the Romanian structured format through the new system.
For more information see this overview about e-invoicing in Romania or VAT Compliance in Romania.
Contact us or download VAT Trends: Toward Continuous Transaction Controls to keep up with the changing regulatory landscape.
In our previous blog, we completed the compliance cycle with tax authority audits. However, that’s not the end of the challenges businesses face in remaining compliant in the countries where they have VAT obligations. VAT rules and regulations change as do a business’s supply chains – these need to be carefully reviewed and appropriate action taken so that the business remains complaint.
Supply chains develop over time for a variety of reasons: changes are made to improve efficiency, provide a better customer experience in delivery times or because of entry into new markets. Sometimes, these changes are instigated by the business seeking optimisation, whereas others are forced by external changes such as Brexit forcing businesses trading between the UK and EU to alter supply chains following the UK’s exit from the EU.
Whatever the reason for the change, it’s essential to review the impact on the VAT position of the business. This involves determining the VAT obligations that arise from the new transactions – which we covered in our previous blog. An early warning system of impending supply chain changes is required so they can be reviewed before the new transactions commence. Key to this is awareness of the importance of VAT within the business; the supply chain changes cannot be reviewed if the finance team is not aware of them.
Also, it’s not possible to undo a transaction once it’s taken place so the business must deal with the consequences even if they are adverse. Proactive action can ensure that the business goes into the new supply chain prepared and aware of all the consequences.
There are different ways to structure a supply chain to achieve the same commercial aim; they can have differing VAT implications so consideration of the consequences should form part of the evaluation process to determine the appropriate strategy.
Whilst businesses can control some element of when their supply chains change, responding to changes in legislation is much more difficult.
The first step is to be aware of what has changed. Changes can happen on a pan-EU basis or in an individual Member State so a mechanism needs to be in place to identify changes as soon as they are announced. Often this will require external support, especially if there are obligations in multiple territories.
Once the change has been identified, the next step is to determine the impact on the business. Some changes will have minimal impact whereas others will require proactive action to be compliant with the new rules. Significant changes may require a redesign of the supply chain. An action plan with clear responsibilities and timescales should be put in place to manage the necessary changes.
The EU has seen the introduction of numerous new mandates over recent years, often in respect of continuous transaction controls (CTCs), and this is set to continue as Member States seek to reduce the VAT gap.
The latest information published by the European Commission is for 2019 where the VAT gap was €134 billion. Whilst this showed a reduction from the previous year, it still represents 10.3% expressed as a share of the VAT Total Tax Liability.
Governments need to generate revenue in a post-pandemic world and addressing the VAT gap provides one solution without imposing additional tax burdens as it involves collecting tax that should already have been charged. Based on current trends, it will take 13 years to eradicate the gap so new initiatives are needed, hence the increase in CTCs.
Managing these new mandates will be a critical challenge for business in the coming years as they are introduced in more Member States. A clear strategy is essential to avoid becoming overwhelmed by disparate local requirements.
Over this series of blogs, we’ve looked at the key aspects of ensuring ongoing VAT compliance. Once the necessary processes and controls are in place, businesses can focus on trade knowing that VAT compliance is assured. However, maintaining VAT compliance is a continuous process which should be constantly reviewed to maximise efficiency and minimise risk.
Get in touch about the benefits a managed service provider can offer to ease your VAT compliance burden.
Update: 12 January 2024 by Edit Buliczka
The Polish Financial Ombudsman Office (Rzecznik Finansowy), like other regulatory bodies such as the Italian IVASS, requires insurance companies to submit various reports about their activities. One of these is the Claims Report.
According to the Act on the Consideration of Complaints by Financial Market Entities and on the Financial Ombudsman (Act of 5 August 2015) a report titled “Handling of complaints and the number of cases” is due within 45 days of the reporting period ending.
Subsequently, the deadline for the 2023 reporting year is 15 February 2024. This report must be submitted through the Polish Financial Ombudsman Office’s website.
The regulation determines the scope of the financial market entities, including domestic insurance companies, branch offices and foreign insurance companies.
The form and instructions for producing this report are published on the ombudsman’s website during the first week of January.
The following information should be reported:
1) Number of complaints
2) Accepted and unacknowledged claims resulting from submitted complaints
3) Information on the value of claims submitted in lawsuits and amounts awarded by final court judgments to clients during the reporting period
For in-depth information on Insurance Premium Tax, read our guide.
Update: 16 October 2023 by Edit Buliczka
Withholding tax (“WHT”) is an income tax, not an insurance premium tax, and is governed by the Polish Corporate Income Tax Law (CIT Law). However, in the case of foreign insurers that are operating business in Poland on a Freedom of Services (FoS) basis, it could be an important element of the taxable base calculation for the Financial Ombudsman Charge (“FOC”).
In this blog, we will explain why the judgement of the Polish Administrative Supreme Court on the application of withholding tax is relevant from the perspective of IPT and FOC.
The Financial Ombudsman confirmed to Sovos that FOC is owed on the full premium amount as stated in the policy documents, with no deductions. This implies that even if the foreign insurer receives a reduced premium after deducting WHT, FOC will still be due on the whole amount of the premium.
The WHT was applied to insurance services because the Polish Tax Office considered insurance contracts to be “performance of a similar nature” to a guarantee under CIT Article 21(1)(2a) and so wanted to deduct WHT from the premium amount paid to a foreign insurer.
The Provincial Administrative Court in Wrocław in its decision on 24 August 2023 concluded that a contract whose content corresponds to the essentialia negotii (“essential elements”) of an insurance contract is not a “performance of a similar nature”. Therefore, Polish policyholders are not obliged to withhold income tax at source on insurance premium income.
This decision also determines that payments made by the Polish policyholder for intermediate insurance services, generally referred to as brokerage services, do not constitute payment for “performance of a similar nature.” As a result, the policyholder company is not required to deduct withholding tax on brokerage fees.
Looking for further information on the decision? Our Insurance Premium Tax specialists can help.
Update: 12 June 2023 by Edit Buliczka
The first annual FOC return is complete, and the first payment for the newly imposed Polish Financial Ombudsman Charge (FOC) has been made. The Ombudsman Office implemented the new charge in 2023, with an effective date of 1 January 2023. The first settlement was due on 31 March 2023.
Sovos obtained knowledge during the settlement process on how to proceed with the settlement of this new charge and what the transitional procedures are for transitioning from IOC to FOC. In this blog update, we summarise what we learnt during this process.
Speak with our Insurance Premium Tax experts to learn more or read more about Insurance Premium Tax in our guide.
Update: 14 March 2023 by Edit Buliczka
Although Poland still lacks an Insurance Premium Tax (IPT) system, there are various other taxes and fees in the country. The Insurance Ombudsman Charge (IOC) implemented in 2014 is one of the most well-known parafiscal charges. As of January 2023, the Financial Ombudsman Charge (FOC) replaces the Insurer Ombudsman Charge regulation.
There are differences and similarities between the new Financial Ombudsman Charge (FOC) and the previous Insurer Ombudsman Charge (IOC). We have also noticed some anomalies which we will discuss.
Both IOC and FOC are parafiscal charges that should be paid to the Ombudsman Office. Payment is still in PLN with a payment threshold of PLN 16.00.
As in the case of IOC, the FOC is declared online and with NIL report submission requirement.
Similarly to the IOC, the FOC is applicable to Domestic (DOM insurers) and foreign insurers writing business in Poland on a freedom of services (FOS) basis (FOS insurers). FOC rates for DOM and FOS insurers are different as was the case with the IOC regime.
The tax point date is the same for the IOC and the FOC and it is the date when the cash is received.
Sovos contacted the Ombudsman office to clarify some questions raised around anomalies with the Financial Ombudsman Charge. We have received responses so please get in touch if you would like to learn more.
Do you still have questions about the new ombudsman charge? Speak with our IPT experts.
Update 15 December 2021 by Kateryna Binkowska
Currently, Poland doesn’t have an IPT. Instead, there is a parafiscal tax called Insurance Ombudsman Contribution (IOC). It is currently charged at a rate of 0.02% and was effective from 1 January 2020 for all insurance companies operating under Freedom of Services (FOS) in Poland.
IOC applies to all 18 classes of non-life insurance. It is applicable to all insurance companies either selling insurance in Poland or collecting premiums from Polish persons. Prior to its origination date of 1 February 2014, it only applied to domestic insurers or foreign insurers with Polish branches.
The basis for IOC is the premium that must be paid to the insurer to obtain the insurance cover.
Reporting for IOC can be tricky because of the different name and numbering system for quarterly declarations. For Example: Quarter I (Quarter 1) of the current year covers October, November and December of the previous year. The quarterly submission is due 90 days from the reporting period. In this example, Q1’s declaration must be filed by 31 March of the current year.
All the payments made throughout the year are considered prepayments or advance payments. For instance, the liabilities that arose in Q1 2021 are declared in the Q2 2021 tax period as an advanced payment for Q2 2021.
The Annual Report is due by 30 June of the following year. This report is submitted to the Insurance Ombudsman summarising the actual premiums received in the previous year (i.e., for 2020, a report is submitted by 30 June 2021 summarising the total amount of premiums received by the insurer in 2020).
The Insurance Ombudsman then determines its funding requirements, and an adjustment is made based on the difference between the insurer’s share of the market percentage multiplied by the funding requirements and the previously made payments for the reporting year.
The Ombudsman’s adjustment may result in the tax authorities requiring additional funds or providing a refund. Either result is communicated by the authorities through Annual Settlement Letters that usually arrive by the end of October.
Insurers are obligated to keep records of insurance contracts and the documents required for tax declaration for five years from the contract’s expiry date.
If the taxpayer doesn’t declare and remit the tax in accordance with the regulations, the relevant authority may demand delayed interest and require an assessment of the tax. In such cases, the court can award a penalty fee and/or imprisonment of the company’s management for up to three years, as per the fiscal penalty code from 10 September 1999.
For any insurance company operating under FOS in Poland, understanding the details of the Insurance Ombudsman Contribution and the reporting requirements are key to ensuring compliance.
Need help to ensure your business stays compliant with current and upcoming changes to IOC? Contact the Sovos team today. For more information see this overview about e-invoicing in Poland, Poland SAF-T or VAT Compliance in Poland.
In our previous blog, we looked at the challenges that businesses face in submitting VAT and other declarations on an ongoing basis. However, the compliance cycle doesn’t end there as tax authorities will carry out audits for a variety of reasons to validate declarations.
When VAT returns consisted of only numbers, audits were carried out to obtain more information about the business activities taking place behind those numbers. The increased amounts of transaction data provided to tax authorities via SAF-T, local listings and continuous transaction controls (CTCs) means this is changing. Audits are still carried out even with the additional VAT information, mainly to determine that VAT declarations accurately reflect the activities of the business.
Whilst the frequency of audits varies considerably between Member States, it is common across the EU for an audit to be carried out if the business requests a repayment of VAT. In some countries, this will happen whenever a repayment is requested, whereas others will take a more risk-based approach and only audit if the repayment is higher than expected from a business that regularly receives repayments.
Speed is of the essence for audits as cashflow is impacted until the repayment is made. This needs to be at the forefront of whoever is managing the audit but careful consideration of the questions being asked by the tax authority and responses being made by the business remains essential.
Audits can either be done in-person or via correspondence although In-person audits are currently less common due to Covid-19. The audit is normally carried out via correspondence if the taxpayer is not established in the country of registration, which in some countries requires a local advisor.
This leads to a key question: whether to handle the audit in-house or bring in external expertise. Whilst managing an audit in-house will save fees, it is essential to consider the consequences of the audit. An external advisor could be brought in at a later stage but they may be hampered by responses provided to the tax authority at the outset of the audit. Proper consideration should be given to utilising specialist external advisors, especially if there is a significant amount of VAT or complex issues are involved.
The priority for any audit is to successfully resolve it as quickly as possible with no detrimental impact to the business. This will minimise the amount of management time, fees and exposure to penalties or interest.
Many audits will start with the tax authority asking some specific questions – this could be about the business generally or about specific transactions. The questions are asked for a reason so businesses need to consider why they’re being asked to determine how to respond and minimise the risk of problems later in the audit.
Managing deadlines is important as failure to do so can have detrimental effects. Some tax authorities impose very short deadlines so prompt attention is required. It may be possible to agree an extension, but this is not always the case. Providing clear unambiguous answers and supporting documentation is essential to obtain the desired outcome.
Once the audit has been concluded, any corrective action needs to be taken. In the ideal situation, nothing must be done and the business can continue to trade successfully. If an adverse decision or payment request has been issued by the tax authority, consideration needs to be given as to whether to appeal the decision; again, strict deadlines must be met.
Even without such a decision, the audit may have highlighted areas where work is required to avoid problems arising in the future. An action plan should be created with clear responsibilities and deadlines.
Once all work has been done, the business can return to the normal compliance cycle of submitting VAT returns and other declarations. An ongoing challenge is making sure the business successfully manages changes in their VAT position, and we will be looking at this in our final blog in this series.
Get in touch about the benefits a managed service provider can offer to ease your VAT compliance burden.
As we inch closer to the implementation date of 1 January 2022 for Norway’s new digitized VAT return, let’s take a second look at the details.
Norway announced its intentions to introduce a new digital VAT return in late 2020, with an intended launch date of 1 January 2022. With this update comes the removal of box numbers, which will be replaced by a dynamic list of specifications. The report will also repurpose the Norwegian Standard Tax Codes from the SAF-T financial file to provide 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. With the new VAT return, the Norwegian Tax Administration (Skatteetaten) seeks to simplify reporting, better administration, and improved compliance.
Skatteetaten has created many different 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 population via the portal will still be available.
Login and authentication of the end user or system is carried out via the ID porten system. Originally, Norway didn’t allow for XML upload; however, the tax authorities have recently updated their guidance to ensure that XML upload will be accepted. Changing numbers or notes in the uploaded XML file will not be possible, but it will be possible to upload attachments.
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.
Please note that Norway is not allowing for any grace period for the submission of this newly designed return.
In addition to the new VAT return, Norway has also announced plans to implement a sales and purchase report by 2024. The proposal is currently in the mandatory public consultation phase, which ends on 26 November 2021.
To find out more about what we believe the future holds, download Trends: Toward Continuous Transaction Controls and follow us on LinkedIn and Twitter to keep up-to-date with the latest regulatory news and updates.
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Update: 3 January 2024 by Inês Carvalho
After the implementation of Romania’s new B2B e-invoicing regulations, effective January 2024, the country introduced Government Emergency Order No. 115/2023 with last-minute amendments.
We can summarise the key amendments from the new legislation in three categories:
The e-reporting mandate explicitly excludes the following transactions:
From July 2024 onwards, the requirement to issue e-invoices for transactions between established entities persists. The amendment states that in the event of a taxpayer’s failure to generate an electronic invoice, they are obligated to submit it to the RO e-Factura platform within five calendar days.
From July 2024, established entities that fail to comply with the issuance and receipt of e-invoices will receive a fine equal to 15% of the total invoice amount.
Additionally, those who fail to report the invoice which was not issued and automatically transmitted to the RO e-Factura within the additional five calendar days will be fined:
Read our dedicated Romania e-invoicing page for more information on the mandate or VAT Compliance in Romania.
Update: 20 September 2023 by Inês Carvalho
The Romanian Ministry of Finance has published draft legislation proposing new budgetary measures, among which is the implementation of the highly anticipated electronic invoicing mandate.
Even though the draft legislation maintains the January 2024 roll-out date previously approved by the EU Council, it proposes an invoice reporting system to operate in the first six months with the electronic invoicing system (RO e-factura) being fully implemented in July 2024.
Additionally, a three-month grace period – from January 2024 to March 2024 – is foreseen where penalties are not imposed.
For more information see this overview about e-invoicing in Romania.
The first phase of implementation where taxpayers report invoices to the RO e-factura system – instead of issuing the invoices directly through that system – is an addition of the draft law.
This reporting obligation is a transitional measure to help businesses prepare and adapt their systems to the new e-invoicing requirements. Between January and June 2024, the draft legislation also foresees an obligation for the supplier to send the cleared invoice out-of-band to the buyer whenever the latter is not registered with the RO e-factura system.
The scope of the new B2B draft mandate applies to all B2B transactions carried out by established or VAT-registered suppliers deemed to take place in Romania.
Looking to better understand e-invoicing regulations ahead of Romania’s mandate? Our guide can help.
Update: 28 July 2023 by Enis Gencer
The EU Council has approved the proposal from the EU Commission to authorise Romania to introduce mandatory e-invoicing starting from January 2024. The decision was adopted on 25 July and published in the Official Journal of the EU on 27 July.
Romania has been progressing towards implementing a continuous transaction controls (CTC) e-invoicing regime for some time now. The country introduced the e-invoicing requirement for B2B transactions of high-fiscal risk products in December 2021 and B2G transactions in May 2022, both implemented as of July 2022.
In addition to these requirements, Romania aims to make e-invoicing mandatory for all B2B transactions. To this end, the country applied to the European Commission on 14 January 2022, requesting authorisation for a special measure to derogate from articles 218 and 232 of Directive 2006/112/EC, which was granted on 25 July. This measure would allow for the introduction of mandatory electronic invoicing for all transactions carried out between taxable persons established in Romania.
The Romanian authorities will need to make the necessary amendments to local legislation to implement mandatory e-invoicing, following the derogation decision received by the EU Council.
The Romanian tax authority, ANAF, is expected to issue an order within 30 days from the date of the derogation which will define the scope and timeline for the implementation of the mandate. The order will provide more specific details about the upcoming mandate.
Considering the mandate could come into effect as early as January 2024, it’s crucial that taxpayers start preparing their systems for mandatory e-invoicing from now.
Looking for guidance to comply with Romania’s upcoming e-invoicing mandate? Our expert team can help.
Update: 28 July 2023 by Enis Gencer
The EU Council has approved the proposal from the EU Commission to authorise Romania to introduce mandatory e-invoicing starting from January 2024. The decision was adopted on 25 July and published in the Official Journal of the EU on 27 July.
Romania has been progressing towards implementing a continuous transaction controls (CTC) e-invoicing regime for some time now. The country introduced the e-invoicing requirement for B2B transactions of high-fiscal risk products in December 2021 and B2G transactions in May 2022, both implemented as of July 2022.
In addition to these requirements, Romania aims to make e-invoicing mandatory for all B2B transactions. To this end, the country applied to the European Commission on 14 January 2022, requesting authorisation for a special measure to derogate from articles 218 and 232 of Directive 2006/112/EC, which was granted on 25 July. This measure would allow for the introduction of mandatory electronic invoicing for all transactions carried out between taxable persons established in Romania.
The Romanian authorities will need to make the necessary amendments to local legislation to implement mandatory e-invoicing, following the derogation decision received by the EU Council.
The Romanian tax authority, ANAF, is expected to issue an order within 30 days from the date of the derogation which will define the scope and timeline for the implementation of the mandate. The order will provide more specific details about the upcoming mandate.
Considering the mandate could come into effect as early as January 2024, it’s crucial that taxpayers start preparing their systems for mandatory e-invoicing from now.
Looking for guidance to comply with Romania’s upcoming e-invoicing mandate? Our expert team can help.
Update: 24 January 2022 by Enis Gencer
With the most significant VAT gap in the EU (34.9% in 2019), Romania has been moving towards a CTC regime to improve and strengthen VAT collection while combating tax evasion.
The main features of this new e-invoicing system, e-Factura, are described further down in this blog. Here, we’ll take a closer look at the roll-out for B2B transactions and the definition of high-fiscal risk products, as well as the new e-transport system that was introduced through the Government Emergency Ordinance (GEO) no. 130/2021, published in the Official Gazette on 18 December.
According to GEO no. 120/2021 (the legislative act introducing the legal framework of e-Factura), the supplier and the recipient must both be registered with the e-Factura system. The recently published GEO no. 130/2021 establishes an exception for high fiscal risk products and ensures that taxpayers will use the e-Factura system regardless of whether the recipients are registered.
In line with the GEO no. 130/2021, the National Agency for Fiscal Administration has issued an order to clarify which products are considered high fiscal risk products.
The five product categories are as follows:
High fiscal risk products are defined based on the nature of the products, marketing method, traceability of potential tax evasion and degree of taxation in those sectors. Detailed explanations, as well as product codes, can be found in the Annex of GEO no. 130/2021.
The enforcement timeline of this requirement means that businesses that supply these types of products must be ready to comply with the new Romanian e-Factura system as follows:
Another reform that shows the intention of the Romanian authorities to combat tax fraud and evasion is the introduction of an e-transport system.
Taxpayers will be required to declare the movement of goods from one location to another in advance. Once declared, the system will issue a unique number written on the transport documents. Authorities will then verify the declaration on the transport routes.
Moreover, it is stated in the justification letter that the e-transport system will interconnect with the Ministry of Finance’s current systems, Romanian e-invoice, and traffic control, much like similar initiatives in other countries, such as India, Turkey and Brazil.
The introduction of the e-transport system is still pending as the Ministry of Finance has not yet issued the order regarding the application procedure of the system. According to GEO 130/2021, the Ministry of Finance had 30 days to do so after GEO 130/2021 was published in the Official Gazette. However, the deadline expired on the 17 January, and no announcement has been made yet. Therefore, the details of the system are still unknown.
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Update: 16 November 2021 by Joanna Hysi
In March 2020, Romania launched an e-invoicing pilot program, e-Factura, to streamline the collection of taxes to improve and strengthen the collection of VAT whilst combating tax evasion.
The decision to launch e-Factura was taken after closely monitoring the Italian e-invoicing model and analysing the economic impact and efficiencies that electronic invoicing has had for both B2G and B2B transactions in Italy.
E-Factura is to implement a new e-invoicing system for B2G transactions but also lays the foundation for the extension of the platform for further developments and provides the necessary know-how to develop an e-invoicing system in B2B.
In October, Government Emergency Ordinance (GEO) no. 120/2021 introduced the legal framework for implementing e-Factura, regulating the structure of the Romanian e-invoice process and creating the framework for achieving basic technical specifications of the e-invoice system.
Further documentation regulating the use and operation of e-Factura and technical documentation such as API specifications and draft e-invoice schemas have also been published.
According to published documentation, the B2B e-invoicing process is not expected to differ from the B2G e-invoicing process, whose framework and relevant requirements are defined to a clearer standard.
Taxpayers can expect the same requirements to apply to B2G and B2B e-invoicing. However, certain aspects for B2B e-invoicing must still be clarified, such as the authentication process and requirements for accessing and using the e-invoicing system through the API for taxpayers and their service providers.
The Romanian e-Factura went live as a voluntary system on 6 November 2021, just six months from the announcement of the Ministry of Finance of the roll-out of a new e-invoicing system and only one month after publication of enacting legislation. Suppliers in both B2B and B2G transactions may opt to use this new e-invoicing system and issue their e-invoices in the Romanian structured format through the new system.
The Romanian e-Factura is a clearance system where e-invoices are sent, cleared, and received through the central platform. The structured invoice is issued in XML format and sent to the central platform for validation. The validation checks relate to the compliance of the structured invoice with the schema requirements, the authenticity of the origin regarding the identity of the issuer who is authenticated in the system and the integrity of the invoice content after transmission. An XML invoice that passes validation and is signed by the Ministry of Finance is considered the legal invoice.
The initial implementation timeline must be – by international comparison – considered short for the roll-out of an extensive new CTC system. This could be explained by the fact that the roll-out of the voluntary system is not as disruptive as that of a mandatory system.
If, or when, a mandate is announced or relevant e-invoicing incentives are introduced, a longer implementation timeline is likely to follow to facilitate for taxpayers to comply with the new requirements in time.
Need to ensure compliance with the latest Romania e-Factura requirements? Speak to our team.
The Zakat, Tax and Customs Authority (ZATCA) announced the finalised rules for the Saudi Arabia e-invoicing system earlier this year, announcing plans for two main phases for the new e-invoicing system.
The first phase of the Saudi Arabia e-invoicing system is set to go live from 4 December 2021.
With the mandate just around the corner, we’ve highlighted the latest news on a reform that is still evolving.
The latest documentation communicated on the requirements was the Detailed Guidelines, published in August 2021. The Detailed Guidelines provided clarity on the following topics:
The first phase requirements are not as complex as the second phase requirements that will be enforced from 1 January 2023.
The ZATCA has been successful in providing taxpayers with the necessary information. The go live date is set to go ahead as planned and a delay is not currently expected.
Find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.
The widespread adoption of electronic invoicing regimes has given tax authorities access to enormous quantities of taxpayer data.
In many jurisdictions, this data enables tax authorities to summarise a taxpayer’s transactional information for a given filing period. It also enables them to present the taxpayer with a draft VAT Return, filled in ahead of time by the authorities themselves.
This is known as a ‘pre-filled’ VAT Return. This module has now been adopted by several countries, with others planning to implement soon.
Chile was the first country to introduce a pre-filled VAT Return, in 2017. Soon after its introduction, more than 92% of taxpayers used the model prepared by the authorities to declare their VAT.
Chile was able to achieve this in part due to the high quality of its IT infrastructure, by which the tax administration was able to process a large volume of purchase and sales records. In addition, Chile provided taxpayers with ‘calculation assistants’ that facilitated compliance.
European countries already using e-invoicing or e-reporting regimes have been quick to follow.
Here are some key processes and implementation dates for different countries:
It’s likely that other countries with e-invoicing or e-reporting regimes, such as Greece (MyData regime, under development) and France (proposed e-invoicing regime for 2023) will follow suit.
It’s worth noting that European Union countries cannot mandate electronic invoicing for business-to-business transactions without applying for a derogation from the EU VAT Directive.
Italy has been granted such a derogation, but other countries may be reluctant to enter such an uncertain process. This could potentially limit the scope of pre-filled VAT Return offerings. In Spain, for example, the pre303 was initially available only for certain taxpayers making use of SII and submitting relevant data (though this has since been expanded).
Technical infrastructure can also be a limiting factor in countries’ ability to offer pre-filled VAT Returns.
Nevertheless, the rapid adoption of pre-filled VAT Returns in the past five years indicates the concept’s staying power.
Tax authorities clearly see efficiency benefits in having a pre-filled VAT Return that are fileable with a simple approval from the taxpayer.
From the taxpayer standpoint, it’s imperative to maintain accurate and complete electronic records that can be reconciled with pre-filled VAT Returns, and accounting software can be a useful tool to achieve this.
Pre-filled VAT returns are just another example of the complex regulatory tax landscape that organisations must navigate to remain compliant.
As the world moves forward with initiatives like digital transformation and real-time reporting, and new or updated regulations can vary widely across countries, Sovos is on a mission to help you Solve Tax for Good. To find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls.
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