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.
For more information see this overview about e-invoicing in Poland, Poland SAF-T or VAT Compliance in Poland.
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 standardized 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 or see this overview on VAT Compliance in Romania.
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.
Get in touch to discuss your marine insurance requirements with our IPT experts.
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 | |
| From | Up to | ||
| 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.
Update: 9 March 2023 by Hector Fernandez
IPT in Spain is complex. Navigating the country’s requirements and ensuring compliance can feel a difficult task.
Sovos has developed this guide to answer prominent and pressing questions to help your understanding of Insurance Premium Tax in the country. Originally created following a Spain IPT webinar we hosted, the guide contains questions asked by industry insiders and answered by legislative experts.
The current IPT rate in Spain is 8%, as of 2022 and is applied to all classes of insurance, with some exemptions. Classes exempt from IPT include life, health, reinsurance, group pensions, export credit, suretyship, goods and passengers in international transit, agricultural risks, aviation and marine hull insurance.
The most challenging aspect is correctly submitting to the five different tax authorities: Alava, Guipuzkoa, Navarra, Statal and Vizcaya.
The basis of the IPT calculation is the total amount of the premium payable by the insured, excluding funds for the insurance of extraordinary risks and fire brigade tax. Companies must show the tax in addition to the premium.
The insurer is liable for calculating and paying the tax. EEA insurers operating under the Freedom of Service regime must appoint a fiscal representative in Spain.
Health and sickness insurance is exempt from IPT in Spain, under Article 5 of the IPT law. However, this doesn’t include Accident cover which should be taxable at 8%.
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”.
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”.
Therefore, we understand insurance, such as freight forwarder liability and marine cargo, gain the IPT exemption, to the extent they relate to international transport.
We’re unaware of any Microsoft tools to prepare the CCS file for monthly reporting. This file can be complex.
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. This excludes life insurance and export credit insurance on behalf of or with the support of the State.
The type of surcharge destined to finance the winding-up activity of insurance companies is made up of 0.15% of the premiums above.
All insurers should register in the provinces where the location of risk is. It is a compliant requirement because insurers must declare premium taxes to the correct tax authorities according to the location of risk.
The postcode is compulsory data that must be sent to the Consorcio monthly, as the CCS needs to know the Location of the risk for each policy subscribed in Spain.
The Fire Brigade Charge (FBC) annual reports are also submitted through the CCS portal. The postcode is a compulsory field that helps the different Councils identify the policies that were subscribed in their territories and collect their portion of FBC accordingly.
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, it will likely hold the lead insurer accountable for that amount. Alternatively, the lead insurer can pay the surcharges for all fellow 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. Get in touch with our IPT experts for support.
Watch our webinar, IPT: Spotlight on Spain for a deep dive into Spain’s CCS
Learn how to navigate the complex region with our ebook, Is IPT simplicity in Spain possible?
Read our blog to understand the more challenging aspects of IPT reporting in Spain
Our team of tax experts are ready to help. Get in touch today. For more information about IPT read our free guide to Insurance Premium Tax. For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
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.
This includes:
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.
Get in touch to discuss e-invoicing requirements in Italy.
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.
Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.
Find out why it makes sense to invest in tech and automation to streamline tax processes and alleviate the burdens finance teams face.
The shift towards digitisation necessitates a radical adaption and shift in existing tech for industries across the board. As this occurs, tensions and anxieties rise around automation and job losses. With Oxford Economics predicting that 12.5 million manufacturing jobs will be automated in China by 2030, a partially automated workforce is indeed on the horizon.
But human expertise and technology can go hand in hand, with tech supporting teams and boosting productivity tenfold. As a result, for businesses, the only way to thrive in an increasingly digital world is to invest in the right technology.
For organisations operating globally, this is of particular importance as an extensive knowledge of governmental financial legislation in many countries is needed. Financial frameworks are complex to navigate and are constantly changing. Real-time VAT reporting is increasingly prevalent worldwide, with continuous transaction controls (CTCs) tightly constricting many different jurisdictions. Without automation, the hours required to manually keep pace with new rules would far exceed realistic human capacity.
For global companies, manually submitting the paperwork for audits and reports is neither sustainable nor sensible. But an additional problem for those operating in multiple jurisdictions is how to keep pace with ever changing rules and government regulations required for business transactions.
Global governments are reviewing how they measure and collect tax returns. The aim is to improve economic standards in their countries. Digitising return processes gives way for a much more forensic and accurate view of a nation’s economic health. So it’s unsurprising that automated invoicing and reporting has pushed its way to the top of the agenda in recent years.
How the approach is taken to upgrading many transactions and interactions is contingent on specific country viewpoints – certain jurisdictions enforce varying levels of CTCs, real-time invoicing, archiving and reporting of trade documentation. Therefore those operating internationally will feel the additional pressure to accurately track and comply with multiple and complex laws with threatening hefty non-compliance fines. Trading and operating within the law now requires intelligent technology and infrastructure.
Approaches across the globe differ; Latin America pioneered mandatory B2B clearance of e-invoices, and Brazil requires full clearance through a government platform. In Europe, the EU-VAT directive prohibits countries from introducing full e-invoicing – though Italy bucked this trend in 2019, following a lengthy derogation process. As economies shift to a data-driven business model, the move towards a digital tax regime is inevitable.
The VAT gap continues to confound governments across the globe. Therefore to combat it, many nations have created their own systems. In turn, this makes a patchwork of mechanisms unable to communicate with each other. To add to this, the slow adoption of e-invoices in many countries has caused a completely fractured picture – VAT information is still being reported periodically in many countries, with each jurisdiction setting its own standard. We’re a long way from consistency in global digitisation.
As more countries develop their own specific take on digitising invoicing, things look increasingly complex. New regulatory legislation continues to surface and keeping track can cause headaches and accidental noncompliance. Global firms must maintain a keen eye on developments as they happen in all the countries where they operate and its essential they apply systems which can track and update new legislation as it happens.
But tech also needs to give an accurate reflection of an entire business’ finances. It needs to link together all the different systems to accurately report tax. This is why flexible APIs are the first order of priority. Programmes with sophisticated APIs enable tax systems to ‘plug in’ to a business and gather vital information. In turn allowing firms to showcase the necessary data, display accurate results and avoid government penalties. It’s essential that technology can integrate with a number of billing systems, ERPs, and procure-to-pay platforms when approaching sensitive government interactions. The volumes of data created and handled are enormous, and increasingly out of the realms of human possibility.
Likewise, tech can assist in formatting information as per the requests of each country, which is essential for digital reporting. Technology exists to monitor and adjust invoice formats. For example, to suit the country a business is operating in and avoid non-compliance penalties. With time usually of the essence and in short supply, tools that automate admin and free up time for strategic elements of business finance pay for themselves in dividends. Effectively, as machines are increasingly ingrained in operations, manual analytics become more challenging. Both governments and businesses are leaning on automation and advanced technology to ease the resulting administrative burdens.
A truly digital future is in the grasp of many economies, but it comes at a price. To capitalise on the rapid wave of digital transformation, businesses must arm themselves with technology. It’s time to manage the increasing realm of complex and data-driven regulations. It makes sense to invest in tech and automation to handle labour-intensive analysis and research, streamline processes, and alleviate the burdens faced by finance teams. That is without the need for costly expert staff or outsourced support. On the verge of a fully digital way of working, manually submitting the paperwork for audits and reports is no longer practical.
It is important to carefully select technology to synchronise and communicate vital information across a business’ IT infrastructure. In the current recession driven context, the pressure on finance teams is intense. The pressure to perform at their best, safeguard against any financial leaks and strictly monitor expenses and outgoings. In the face of adversity, tech can guide and support us – and could become business critical.
Investing in automation and tech doesn’t have to cost finance jobs. It can instead go hand in hand with human expertise. It can manage arduous and complex tasks. While also freeing up time and energy so businesses can concentrate on what they do best.
Find out how Sovos can help you central, standardize and automate your VAT and fiscal reporting obligations.
France is introducing continuous transaction controls (CTC). From 2023, France will implement a mandatory B2B e-invoicing clearance and e-reporting obligation. With these comprehensive requirements, alongside the B2G e-invoicing obligation that is already mandatory, the government aims to increase efficiency, cut costs, and fight fraud. Find out more.
France shows a solid understanding of this complex CTC subject, but some questions remain.
France announces VAT changes spurred on by international reforms for continuous controls of VAT transactions (“Continuous Transaction Controls” or “CTCs”). The French government aims to increase efficiency, cut costs and fight fraud through the roll-out of mandatory B2B e-invoice clearance. This coupled with an e-reporting obligation gives the tax administration all relevant data for B2B and B2C transactions. This will start with large companies.
In the report ‘VAT in the Digital Age in France’ ( La TVA à l’ère du digital en France), la Direction General des Finances Publiques – or DG-FIP – describes its aim to implement this mixed solution. Whereby mandatory clearance of e-invoices (ideally for all invoices, without exceptions such as threshold amounts etc) will lay the foundation.
This will provide the tax authority with data relating to any domestic B2B transaction. However, in order to effectively be able to combat fraud, including the carousel type, this is not enough; they need access to all transaction data. Therefore, data that the tax authority will not receive as part of the e-invoice clearance process – notably B2C invoices and invoices issued by foreign suppliers that will not be subject to a domestic French mandate, as well as certain payment data – will be subject to a complementary e-reporting obligation. (The requirement to report this latter data electronically does not mean that the underlying invoices must be e-invoices; parties can still transmit in paper between themselves.)
The report describes how the DG-FIP has considered two potential models for the e-invoice clearance process. This is via the central Chorus Pro portal (currently the clearance point for all B2G invoices). These are the V and the Y model.
In the V model there is one public platform that serves as the clearance point; the central Chorus Pro platform is the only authorized platform via which the invoice can be transmitted to the buyer, or where applicable, the buyer’s service provider.
The Y model includes in addition to the central platform certified third-party service providers, which are authorized to clear and transmit invoices between the transacting parties. This alternative is the preferred option by the service provider community. For that reason – and as this model is more resilient because it is not exposed to a single point of failure – the report appears to favour the Y model.
As to the timeline, starting in January 2023, all companies must be able to receive electronic invoices via the centralized system. When it comes to issuance, a similar roll out as for the B2G e-invoice mandate is envisaged, starting with large companies.
The report lays a good foundation for the deployment of this mixed CTC system. However many issues will need to be clarified to allow for smooth implementation. Some of which quite fundamental.
The report proposes a progressive and pedagogical deployment. This will ensure that businesses will manage this -for some radical – shift to electronic invoicing and reporting. The ICC’s practice principles on CTC are referenced, specifically noting the importance of early notice and ICC’s advice to give businesses at least 12-18 months to prepare. The first deadline comes up in just over two years’ time. It leaves only 6-12 months for the French tax administration to work out all details and get the relevant laws, decrees and guidelines adopted. This is if business should have what ICC believes is a reasonable time to adapt.
Since 31 January 2020, the UK is officially no longer part of the EU but is considered a third country to the union although EU legislation will still apply to the country until the end of 2020. Although Northern Ireland is part of the UK, the region will remain under EU VAT legislation when it comes to the supply of goods also after 1 January 2021. The EU Commission has proposed an amendment to the VAT Directive creating a new country code for Northern Ireland to be used in tax identification numbers of Northern Irish companies.
An overall obligation for EU taxpayers to use and perform supplies under an EU-approved tax ID number exists. Thus, applying EU law to supplies performed to/from Northern Ireland demands an EU-compatible VAT identification number. Currently, EU Member States use a prefix country code following the ISO 3166-1 standard that assigns the country code “GB” to the UK and Northern Ireland.
From 1 January 2021, the indiscriminate use of the “GB” prefix in VAT numbers may pose a problem for supplies of goods to/from Northern Ireland. From that date, intra-community supplies and acquisitions of goods to/from Northern Ireland will remain in the scope of the EU VAT law. Consequently, Northern Irish taxpayers must hold a specific EU VAT number to be identified as such under the European rules. Provided that the country code “GB” will be used by the UK and assigned according to British legislation, the EU Commission has proposed a new country code “XI” to be attributed as a prefix of Northern Irish tax ID numbers.
A valid EU tax identification performs many roles, such as ensuring (or facilitating) the correct tax and customs treatment for intra-community supplies. The VIES platform, that runs the EU VAT Information Exchange System, is an example of the importance the EU gives to valid tax ID numbers. To ensure parties to a transaction can check each other’s tax ID numbers and are eligible to exemptions on intra-community supplies, the EU has established the VIES system, which will likely be the first EU mechanism directly affected by the creation of the new Northern Irish country code.
Such a proposal from the EU Commission may impact Member States’ systems. Upon adoption, the new Directive will require Member States to quickly adjust their apparatus to process “XI” invoices from January 2021. Countries operating some degree of continuous transaction controls, such as Italy, Hungary, and Spain, may be expected to update their platforms to comply with the amendment.
If passed, the proposal will impact taxpayers’ accounting and ERP systems which will need to process and recognize the “XI” country code in issued and received invoices as a Northern Irish indicator. Moreover, many systems allow the use of user-assigned country codes in customized transaction flows. User-assigned country codes are ISO codes that are freely assigned by users and used at their discretion, for example flows between supported and non-supported countries within an ERP system. So far, “XI” has been a user-assigned country code. Consequently, the proposal may force many IT departments to change internal policies regulating the use of user-assigned country codes.
Tax departments must also be aware of the tax treatment of “XI” invoices, given that EU VAT law won’t apply to supplies of services performed to/from Northern Ireland, but only to supplies of goods. Consequently, companies must create internal flows to deter the use or validation of the “XI” country code in supplies of services if unaccompanied by a valid “GB” country code.
The Council of the European Union is expected to deliberate about the proposal next on 9 September.
Talk to our tax experts for immediate help or keep up to date with the changing VAT compliance landscape, download Trends: Continuous Global VAT Compliance and follow us on LinkedIn and Twitter to stay ahead of regulatory news and other updates.
The United Kingdom’s HMRC has issued new guidance on the VAT treatment of cross-border sales of goods and online marketplaces beginning 1 January 2021, following the end of the transition period.
Cross-Border Sales under £135
New rules will apply when a business sells goods for £135 or less to a UK customer and the goods are located outside the UK at the time of the sale. For business to consumer supplies, the seller must collect supply (output) VAT. This means that overseas vendors will be required to register for VAT and will also be required to issue VAT invoices on such supplies. No import VAT will be owed on the sale, but customs declarations will still be required. Please note that for sales from the EU, the HMRC has indicated that it plans to continue to require submission of Intrastat declarations.
The £135 threshold is determined per consignment, and not on individual goods within a consignment. A consignment’s value is based on the VAT exclusive price of the goods in the consignment and does not include separately stated freight charges. The threshold is intended to align with the threshold for customs duty liability.
The £135 threshold rules also apply to business to business supplies. In the case of a supply to a UK business, however, the UK business is liable for the output VAT under the reverse charge mechanism. Import VAT will still be avoided by both parties. For the reverse charge to apply the purchasing business must provide the seller with a UK VAT registration number.
Online Marketplaces
Online marketplaces will also have additional VAT obligations come January 1. For sales of goods, under the £135 threshold, from outside the UK to UK customers, the online marketplace will be required to collect supply (output) VAT in place of the seller, regardless of whether the seller is registered or established in the UK. This means that marketplace sellers are relieved of many of the new obligations described above. Please note that for business to business supplies the reverse charge measure still applies so long as the purchaser provides the marketplace with its VAT registration number.
Online marketplaces will also be liable to collect VAT on a second class of supplies: specifically, the sale of goods, which are located in the UK at the time of sale but which are owned by a seller based outside the UK, through an online marketplace to UK customers.
Other Changes
In addition to the above changes, HMRC has also announced that:
– Importers will be able to utilize postponed VAT accounting for imports over the threshold, to account for import VAT on their VAT returns instead of paying import VAT to Customs at the time of import.
– Low Value Consignment Relief, which exempted imports of £15 or less from import VAT, has been eliminated.
With less than six months until the new rules come into effect it’s important for businesses to continue to prepare for a post-Transition world.
To keep up to date with the changing VAT compliance landscape, download Trends: Continuous Global VAT Compliance and follow us on LinkedIn and Twitter to stay ahead of regulatory news and other updates.
CLASS – short for Classification Information System – is the new single point access search facility from the European Commission. It provides access to tariff classification data of goods entering or leaving the EU and is the latest step in developing an integrated approach to managing customs information and procedures. When goods are declared at an EU entry point, they must be classified and declared on customs transit documents either according to the Combined Nomenclature (“CN”), or a Member State’s domestic classification. CLASS provides easy access to the correct rate of customs duty and details of any non-tariff measures that apply. It also provides:
Using CLASS should save businesses significant time in obtaining the required customs information without having to rely on multiple resources across different locations, formats, and languages. Time saving means reduced administration and cost as well as swifter supply chain decision making and ultimately a more efficient goods shipping process.
By coincidence, the UK government almost simultaneously to the launch of CLASS announced the blueprint for the UK Global Tariff (“UKGT”). UKGT is the UK’s replacement for the EU’s Common External Tariff once the Brexit transition period has ended (currently expected to be 31 December 2020). UKGT, which applies duty values in UK pounds instead of Euros, should make it simpler and cheaper for businesses to import goods into the UK from overseas. It features a reduction and simplification of over 6,000 tariff categories and rates (e.g. rounding rates to whole percentages), and a lower tariff regime than the EU’s Common External Tariff, including total elimination of tariffs on a wide range of goods. The goal is to ease customs administration for business, expand consumer choice, and enhance competitiveness for UK businesses trading globally. A controversial measure is the abandonment of the EU Measuring table, which removes over 13,000 tariff variations on food products that the government views as unnecessary. Remaining tariffs will be targeted to support specific strategic industries such as agriculture, automotive and fishing, where the UK is considered competitive, and are also intended to enhance competitiveness and the uptake of “green” energies and associated products.
The simplifications heralded by UKGT may offset the anticipated increase in customs administration costs to UK businesses post-Brexit. What is less clear is whether the strategic amendments undertaken to import tariffs will harm UK businesses as their products may not be subject to commensurate low rates on entry to EU countries, especially if there is a “No Deal” outcome to ongoing UK-EU trade negotiations. What is clear, however, is that all these changes should prompt any businesses seeking to import/export goods to/from the UK from next year to review their supply chains and re-examine the impact on their sales prices and profit margins. Since import VAT is calculated on duty-inclusive prices, there may also be consequences in import VAT accounting and cash flow.
To learn more about what we believe the future holds, download Trends: Continuous Global VAT Compliance and follow us on LinkedIn and Twitter to keep up to date with regulatory news and other updates.
Update: 20 November 2023 by Dilara İnal
E-invoicing systems in the Middle East and North Africa are undergoing significant transformations, aiming to modernise the financial landscape and improve fiscal transparency. Recent updates have seen numerous countries implementing electronic invoicing solutions designed to streamline tax collection and reduce VAT fraud.
Saudi Arabia has made significant strides in e-invoicing, leading the way in the Middle East. The country has advanced to the second phase of its e-invoicing mandate where B2B invoices require clearance from the tax authority. As of November 2023, the Zakat, Tax and Customs Authority has announced eight waves of its Phase 2 integration – targeting taxpayers with varying annual turnover thresholds.
While Israel is not adopting a mandatory e-invoicing regime, the country is moving towards requiring taxpayers to submit their invoice data electronically. This move aims to tackle the issue of fictitious invoices. The Israeli invoicing model, a continuous transaction control (CTC) clearance system, is slated for a phased implementation starting in 2024.
The United Arab Emirates has also joined the movement, announcing its ‘e-billing system’ to implement mandatory e-invoicing for B2B transactions in phases.
In other jurisdictions in the region, Oman is poised to implement mandatory e-invoicing in 2024 and Bahrain has invited technology vendors to construct its central platform for an upcoming e-invoicing system. Lastly, Jordan is reported to be exploring the adoption of a mandatory e-invoicing regime.
Egypt introduced a mandatory e-invoicing system for B2B transactions in 2020 with a phased roll-out schedule but, as of April 2023, all companies in Egypt are covered by this mandate. In addition to e-invoicing, there is an e-receipt system in Egypt for B2C transactions.
Tunisia’s mandatory e-invoicing system, which rolled out in 2016, covers B2G and some B2B transactions. Also, Morocco is expected to join the ranks of countries where mandatory e-invoicing applies.
With the VAT landscape in the Middle East and North Africa rapidly evolving, tax digitization regulations necessitate close and continuous monitoring.
Read our E-invoicing Guide for more in-depth information about electronic invoicing’s development and adoption, globally.
Update: 24 June 2020 by Selin Adler Ring
The concept of e-invoicing as a vehicle for increased tax control and cost reduction, continues to spread into new areas of the world. The number of countries adopting e-invoicing regimes are rising in the Middle East and North Africa as both governments and businesses by now are well-aware of the benefits. While some countries in these regions have already embraced e-invoicing, others are on their way to adopt Continuous Transaction Controls (CTC) systems. Even though the countries in these regions follow different approaches, the initial goal is the same: digital transformation of tax controls.
In the Middle East there are many moving pieces. The United Arab Emirates, Saudi Arabia, Oman and Qatar have already permitted e-invoicing. Following the introduction of VAT in January 2018, Saudi Arabia also started promoting a national electronic invoicing platform called ESAL. Oman and Qatar have yet to implement VAT but once they have, e-invoicing will be even more significant for these countries and they’ll take inspiration from other countries in the region that are moving towards CTC regimes.
In Jordan, the tax authority is conducting research to analyze CTC regimes in different countries, which is a strong signal that they too may very soon announce their intention to introduce a new CTC e-invoicing system.
Israel has recently revealed its new CTC regime plans and advised accounting software vendors to prepare for the upcoming CTC regime. After Israel’s adoption of a CTC regime, developments in the region will accelerate in a domino effect.
Tunisia is a pioneer for e-invoicing. Since 2016, electronic issuing of invoices has been regulated in the Finance Law and e-invoicing is mandatory for larger taxpayers. The Tunisian e-invoicing regime requires e-invoices to be registered by a government appointed authority and therefore falls within the CTC framework.
Another country quickly moving towards a CTC framework is Egypt. The Egyptian Government has for some time been assessing best practices for CTC regimes. Finally, in April 2020, a decree mandating e-invoicing for all registered businesses was published in the country. However, the details of the e-invoicing system are yet to be disclosed. The technical controls and conditions to be adhered to and the stages of implementing the e-invoice system will be defined by the Egyptian Tax Authority.
Morocco has also been watching different e-invoicing systems. After Egypt’s e-invoicing initiatives, the Moroccan Government is a likely candidate to make a similar move towards mandating e-invoicing for taxpayers registered in the country.
It’s clear that e-invoicing, in all its shapes and versions, is a trend that is becoming increasingly popular across the Middle East and North Africa where the introduction of CTC regimes is expected in the coming years. Although there are likely to be similarities in the measures taken, each country has its own unique characteristics when it comes to taxation, tax control challenges and legal culture, and as a result diversity in each regime should be expected.
To find out more about what we believe the future holds, contact us and follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and other updates.
For companies operating in Turkey, 2019 was an eventful year for tax regulatory change and in particular, e-invoicing reform. Since it was first introduced in 2012, the e-invoicing mandate has grown, and companies are having to adapt in order to comply with requirements in 2020 and beyond. Turkey’s digital transformation and e-invoicing landscape continues to evolve.
According to the General Communique on the Tax Procedure Law (General Communique), more taxpayers now need to comply with the mandatory e-invoicing framework. The General Communique published on 19 October 2019 covers other e-documents such as e-arşiv, e-delivery note, e-self-employment receipts, e-producer receipts, e-tickets, e-note of expenses, e-Insurance Commission Expense Documents, e-Insurance Policies, eDocument of Currency Exchange, and e-Bank Receipts.
From 1 July 2020, taxpayers with a gross sales revenue of TL 5 million or above in fiscal years 2018 or 2019 must switch to the e-invoice system. Taxpayers who meet these requirements in 2020 or later, should switch to the e-invoice system at the beginning of the seventh month of the following accounting year.
Turkey’s tax authority has set some sector-based parameters for businesses operating in Turkey. Companies licensed by the Turkish Energy Market Regulatory Authority, middlemen or fruits or vegetable traders, online service providers facilitating online trade, importers and dealers are some of the taxpayers also required to switch to e-invoices, irrespective of their turnover.
E-arsiv fatura documents B2C transactions. But also in case the transacting counterparty is not registered with the TRA for e-invoicing. Similar to e-invoice, the e-arşiv invoice, became mandatory for intermediary service providers; online advertisers; and intermediary online advertisers who switched to the system from 1 January 2020.
Taxpayers not in scope for e-invoice and e-arşiv must issue e-arşiv invoices through the Turkish Revenue Administration´s portal. That is if the total amount of an invoice issued, including taxes, exceeds:
Turkey’s Government continues to tackle its VAT gap through digital transformation. By taking greater control of reporting and requiring more granular tax detail. So, businesses operating in Turkey need powerful e-invoicing strategies to comply with the growing demands for digital tax transformation.
Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.