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.
Anyone predicting Italy’s clearance model e-invoicing system, FatturaPA, would undergo further reform would be right. Agenzia delle Entrate – AdE, the Italian tax authority, has issued new technical specifications and schemas for Italian B2B and B2G e-invoices. But – what do these changes really mean? And what impact do they have on business processes?
Over recent weeks, three updates have been introduced:
The inclusion of withholding taxes (especially social contributions) is one of the new content requirements for the B2B and B2G XML formats. There are also 12 new document types (including self-billed invoices and integration documents) and a further 17 new nature of transactions options (such as reasons for exemptions and reverse charges).
These content updates now require Italian companies to have a deeper understanding of the Italian tax system. The changes impact the moment taxpayers classify their supplies: under the current model, Italian companies don’t have to worry about this until the submission of their VAT returns but under the new schema this classification will be performed in real-time. These updates are likely to impact business processes. They are a necessary next step in paving the way ahead of the upcoming introduction of pre-completed VAT returns, an initiative largely considered to eliminate administrative burden and make life easier for most Italian businesses.
In parallel, further changes resulting from the new versions of the FatturaPA formats have a technical impact on businesses, demanding IT implementation readiness. Among the technical updates are the inclusion of additional fields, length of content, permitted characters, shifting from optional to mandatory field fulfillment and vice-versa, and how often a field can be repeated.
The new technical specifications also introduced new validations that will be performed by the Sistema di Interscambio – SDI, the Italian government-platform responsible for clearance of e-invoices. Most of the new validations check the content of the e-invoice against document types and the indicated nature of the transactions and require taxpayers to eventually be able to understand, process and react accordingly to new errors.
The SDI platform will start processing B2B invoices in the new FatturaPA format from 4 May 2020, but the AdE will enforce use of the new schema on 1 October 2020, triggering new validations and errors only after this date as per the Provvedimento from 28 February 2020. Different deadlines apply to B2G invoices, unless of course the AdE publishes new transition rules for these invoices before that date. The enforcement of the new schema for B2G invoices is set to begin on 1 May 2020.
In practice, the effect of these deadlines mean that while the schemas for B2B and B2G invoices are indeed the same from a technical perspective, taxpayers will must be ready for different deadlines and be prepared to work with two different invoice schemas from 1 May until 4 May.
To find out more about what we believe the future holds, download Trends in Continuous VAT Compliance.
In Turkey, the Revenue Administration (TRA) published the long-awaited e-Delivery Note Application Manual. The manual clarifies how the electronic delivery process will work in addition to answering frequently asked questions. It addresses the application as well as its scope and structure, outlines important scenarios and provides clarity for companies who are unclear about the adoption of e-delivery notes.
The e-delivery note is the electronic version of the “delivery note,” currently printed on paper. As a result, it allows the TRA to regularly monitor the movements of delivered merchandise in the electronic environment.
Electronic delivery has the same legal qualifications as the delivery note but is issued, forwarded, retained, and submitted digitally.
According to the circular published by the TRA at the end of February, taxpayers in scope of the e-delivery note application are;
Taxpayers engaged in fruit and vegetable trade as brokers or merchants completed their transitions of January 1, 2020. Other taxpayers covered by the mandate must be ready by July 1, 2020.
Taxpayers deemed to be risky or at low levels of tax compliance by the TRA must complete their transition to the e-delivery note application within three months after being notified.
Besides explaining the basic concepts, the manual also details the previously announced scenarios providing answers to many areas that were confusing for taxpayers.
The main scenarios are:
In addition, other topics covered include:
Full details on the Turkey E-Delivery Application Manual are available in Turkish from the TRA e-Document website.
Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
Is India postponing the mandatory implementation deadline for e-invoicing? For more than a year, India has been on the path to digitizing tax controls, with the first mandatory go-live for transmission of invoice data to a governmental portal scheduled for 1 April 2020. The very high pace of the roll-out of this reform made many taxpayers concerned that they might not realistically be able to meet the implementation deadline. As a result, leading many to hope that the Indian authorities might instead chose to postpone the go live date.
The latest news from India is that it looks as if these authorities may indeed consider a delay. Or at least discuss the possibility of – a delay to the go-live date. According to The Economic Times, the Indian government is going to discuss whether there is a need to defer the implementation deadline in the next meeting of GST Council, which is scheduled for the 14th of March. So far, a 3-month deferral is an option. This means that should the GST Council grant a delay, the first go-live would take place in July 2020.
Get in touch to find out how Sovos can help your business meet the e-invoicing deadline in India.
Certification of e-invoice service providers is an important first step and milestone ahead of the implementation of e-invoicing in Greece. The Greek Government has now defined the regulatory framework for e-invoice service providers, their obligations, and a set of requirements needed to certify their invoicing software. Find out what you need to know about the accreditation scheme for e-invoicing service providers in Greece.
E-invoice service providers are entities the taxpayer authorises to issue invoices on their behalf electronically for B2B in addition to B2C transactions. They’re responsible for issuing, the authenticity and integrity, and the transmission of transaction data to the tax authority in real-time. Other outsourced functions include e-invoice delivery to the buyer directly and archiving on behalf of the issuer.
The service provider’s software must meet a number of requirements. It must for example be able to guarantee integrity and authenticity of the invoice according to the SHA-1 algorithm, provide real-time connection with the customer’s software, and make the invoice available to the customer in electronic (or, upon request, in paper) form. Any software which meets these criteria recieves a “Suitability Permit”, which is valid for five years.
Service providers must be a Greek registered entity or permanently established in Greece. They must also meet certain technical, security and financial criteria and the invoice data must be stored within the EU. Other obligations also include making a user manual available to the customer; notifying the tax authority of each outsourcing contract they have entered into; and addressing privacy-related matters.
The transmission method to the myDATA will be the myDATA REST API and the format of the e-invoice exchanged between the parties is based on the EN norm, as defined by law just a few days ago. The myDATA website will publish any details and further legislation.
Through this Decision, the Greek Government is introducing the long-awaited secondary legislation, as mandated in the budget law 2020 earlier this year. Precisely how these provisions will work together with the myDATA scheme, scheduled to be fully operational on 1 April 2020, is still to be defined by the authorities. However, Greece requires further legislation, as well as a formal derogation decision from Brussels. This is if the Greek government wishes to mandate e-invoicing in the country. As such a reform would deviate from principles laid out in the EU VAT Directive.
Need more information on the accreditation scheme for e-invoicing in Greece? Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
Following India’s recent public consultation looking at the proposed introduction of an e-invoicing regime, the GST council has now released a white paper on the architecture of the new framework and also provided answers to a number of outstanding questions.
From 1 January 2020, taxpayers in India can start to use the new e-invoicing framework, which relies on connectivity to the GST system for reporting of all B2B invoice data. The first part of the roll-out starting from this date will be voluntary for businesses. It will only become mandatory at a later stage, the timing of which is still to be communicated by the relevant authorities.
The new e-invoicing system, considered to be not only a tax reform but also a business reform, has two key aims:
Under the e-invoicing system, taxpayers will be obliged to create the e-invoice in the structured JSON format and transmit it to the Invoice Registration Portal (IRP). The IRP will then check the e-invoice according to the requirements of the schema and determine if a duplicate record is already registered on the GST system.
After this check, the IRP will digitally sign the e-invoice, assign a unique number – the invoice registration number (IRN) – to the invoice and create a QR code, before submitting the invoice to the GST system. The QR code will help to authenticate the e-invoice by the seller and buyer and to confirm that the invoice is successfully registered in the GST system. Connection to the portal is needed to see all the e-invoice data and to view all the details online. A digital signature by the taxpayer is not mandatory, but it is permitted before submission to the IRP.
An IRN can also be generated by the seller with the required parameters, which would then be validated by the IRP and transmitted to the GST System if it meets the predefined criteria.
Once the e-invoice has been cleared by the IRP, it will be transmitted to both the seller and the buyer by email.
Taxpayers can use several methods to connect to the IRP including web, API, SMS, mobile app, offline tool or GSP based.
The IRP keeps the e-invoices for just 24 hours as its main function is to validate and assign the IRN. Invoices submitted to the GST system will be archived for the whole financial year by the GST system and taxpayers must keep the IRN for each invoice to ensure compliance.
The new system will simplify the preparation of Goods and Services Tax (GST) returns by auto-populating the returns with the data from the e-invoices. The GST System will update the ANX-1 of the seller (sales registers) and ANX-2 of the buyer (purchase register).
Data from the e-invoice will also be used as a basis to populate the current e-waybill (auto-generation of Part-A), where only the vehicle registration number will need to be added in Part-B of the e-waybill.
Whilst the white paper has provided some guidance for businesses ahead of the introduction of this e-invoicing framework, there are still some grey areas to be addressed in the coming months, including the timeline for submitting e-invoices.
Learn how Sovos helps companies handle e-invoicing and other mandates all over the world. To find out more about what we believe the future holds, download the Sovos eBook on trends in e-invoicing compliance.
Back in June this year, many heads were turned when the French Minister of Public Accounts and Action, Gérald Darmanin, went on record stating that the French Government has the intention of making e-invoicing mandatory also for B2B transactions. Now it seems that the Government – spearheaded on this topic by Minister Darmanin as well as by the Minister of Finance Bruno Le Maire – has moved from word to action. The French Finance Bill for 2020, formally presented after the meeting of the Council of Ministers on 27 September, codifies the plan to extend the B2G e-invoicing obligation in force today to cover also B2B e-invoices.
In just three short paragraphs, the draft finance law outlines the major principles for the budding reform. While much is left to be clarified by later decrees, art. 56 of the Finance Bill introduces the main rule that electronic form for invoices will be mandatory and that, as a result, paper invoices will no longer be permitted. It also introduces language that means that e-invoices most likely also will be cleared by the tax authority, or otherwise have the data transmitted to the tax authority to enable control of the VAT on the invoice. France will effectively, and not surprisingly, be joining the ranks of other countries such as Mexico, Turkey, Italy and Brazil, who have implemented measures to tackle its VAT gap through real-time VAT control mechanisms.
The timeline of the roll-out of the mandate will, just like the roll-out of the B2G mandate currently in force, be scheduled in stages; gradually becoming applicable for companies depending on the size of the business. The first stage of the mandate will begin on 1 January 2023, and according to the bill the entire economy should be up-and-running under the new e-invoicing system no later than 1 January 2025.
The Government also states that it, during the course of next year, will present a report to parliament, the Assemblée Nationale, presenting how the reform will be carried out as well as the underlying analysis of which method and what regulations constitute the most appropriate technical, legal and operational solution, particularly as regards the clearance/transmission of invoice data to the tax administration.
In addition to the analysis and drafting of both laws and reports that the Government announced, it’s also clear that one more critical element needs to be covered before the reform becomes a reality: Brussels.
Ever since Italy went down this same path and became the first EU country to introduce mandatory clearance B2B e-invoicing, many parallels have been drawn between the two countries. They share a similar situation in terms of VAT gap and IT infrastructures, which have made many experts (rightly) assume that France would follow down the path Italy set out. However, in order to lawfully do so, Italy had to seek and obtain permission from the EU Council to deviate from the provisions of the EU VAT Directive (2006/112/EC). The French Government has acknowledged that it will need to do the same.
Want to learn more? For a continued and in-depth analysis of the French e-invoicing reform and its challenges, please join a webinar hosted by Christiaan van der Valk, e-invoicing expert and VP of Strategy at Sovos, on this topic on 3 October.
Inscrivez-vous ici si vous désirez rejoindre le webinaire de Christiaan van der Valk le 3 Octobre.
Last month, we made some predictions on how the outcome of the recent elections would impact the agenda of the Independent Authority of Public Revenues (IAPR) on the envisaged e-invoicing and e-reporting reform. It looks as if the newly elected government is fully in-line with the IAPR agenda to implement e-reporting and bookkeeping (mandatory e-invoicing is still in the agenda but at a later stage) and its proposed model, as announced yesterday by the minister of Finance during parliamentary discussions.
The IAPR has made great progress towards the implementation of the e-reporting scheme (named “Epopis”) by publishing, just yesterday, the technical specifications and schemas for the transmission of data to the IAPR platform. The IAPR reporting platform now has a name, “myDATA,” meaning Digital Accounting and Tax Application. It is worth noting that no legal documentation has been made available yet.
Having made available enough information on the process and the technical details, the IAPR has launched a public consultation to receive inputs from businesses and interested stakeholders on the proposed e-reporting scheme that will be open until 6 September 2019.
As more and more countries across the world depend on VAT, GST or other indirect taxes as the single most significant source of public revenue, governments are increasingly asking themselves what technical means they can use to ensure that they maximise the collection of the taxes due under the new tax regimes. India is the most recent such example.
GST was introduced in India in July 2017, following many years of discussions and negotiations between different stakeholders in the country. The reform has entailed significant simplifications and streamlining of taxation in India. While the road to roll-out of the tax was bumpy, it was by international comparison very quick. Nearly two years down the road, the roll-out is widely viewed as a success, and it appears as if the government is ready to take the GST success story one step further by introducing real-time tax controls to the B2B e-invoicing process.
Earlier this spring, the Indian GST Council announced the formation of a special committee with the purpose of investigating a potential Indian implementation of a mandatory B2B e-invoicing system: the “Committee of Officers on generation of electronic invoice through GST Portal” (CoO).
More specifically, the CoO has been tasked with analysing and comparing the South Korean clearance system to similar systems in Latin America in order to understand global best practices and also to assess to what extent the existing Indian state-controlled platform – the GST Network – can serve as the central hub in a clearance-style e-invoicing process.
In late May, the CoO formed two sub-committees to continue working on parallel tracks: one on legal and policy matters and the other on the development of technical requirements. During the past few weeks, work has progressed in these working groups as well as in public-private consultations.
The committee is getting close to concluding the initial deliberations, but its closing recommendations have not yet been published in a final report. As a result, no draft laws, draft invoice schemas or draft process frameworks have yet been made public; however, results are expected to be published this summer.
While it’s still too early to describe what the Indian e-invoicing system will look like with any real certainty, speculation has naturally already begun. The CoO was specifically asked to investigate how the current eWaybill system could be recycled into a mandatory e-invoicing system, and it is therefore very likely that the new framework will bear strong similarities to the eWaybill process.
Such similarities include the principle of real-time or near-real-time generation of invoice number ranges by a central platform, which must then be included on the invoice document in order for it to constitute a fiscally valid invoice. In other words, this type of system would not entail issuance of the invoice on a clearance portal, such as in Italy, but constitute a somewhat softer version of a clearance e-invoicing system.
E-invoicing has been a legal possibility and practical reality in India for a number of years now, and as a result many companies are up and running with PDF-based e-invoicing in the country. Given the size of the Indian economy and the role it plays in global manufacturing, any major e-invoicing reform will have significant impact, not just on local businesses but on international commerce as a whole.
On 21 June, the GST Council is set to discuss the general topic of tax controls and how to increase tax collection through modernised compliance requirements. It remains to be seen if the GST Council is ready to formally decide on the introduction of mandatory e-invoicing in the country, or if it is ready to publish a high-level framework for basic considerations such as scope, dates for entry force and high-level technical principles.
If not, there’s still no reason to worry that a decision will be delayed; if anything, it would be wise to expect the opposite: the government has repeatedly displayed the ability to get things done with remarkable speed. Strengthened as the prime minister is after the recent elections not even a month ago, there’s every reason to believe that this project won’t be an exception.
Learn how Sovos helps companies handle e-invoicing and other mandates all over the world. To find out more about what we believe the future holds, download the Sovos eBook on trends: e-invoicing compliance.
Italy has been at the forefront of B2G e-invoicing in Europe ever since the central e-invoicing platform SDI (Sistema di Interscambio) was rolled out and made mandatory for all suppliers to the public sector in 2014.
While a number of its European neighbours are slowly catching up, Italy is continuing to improve the integration of new technologies with the public administration’s processes. Its latest move is to make e-orders mandatory in public procurement. By leveraging the successful use of the public administrations’ Purchase Orders Routing Node platform (Nodo di Smistamento degli Ordini, or NSO) in the Emilia-Romagna region, Italy is now extending the functionality throughout the country.
As of 1 October 2019, all purchase orders from the Italian National Health System (Servizio Sanitario Nazionale, or SSN) must be delivered to and received by suppliers through the NSO platform. The suppliers affected by the mandate will be required to receive e-orders from public entities; the public administration will not proceed with the liquidation and payment of invoices issued by non-compliant companies. It is noteworthy that the mandate covers all purchase orders made by entities associated with the SSN, including office supplies and electronics, and not just health-related products.
In addition to mandatory receipt of e-orders, suppliers will also be able to send messages to the public administration. In cases where suppliers and the public administration have previously agreed, the supplying company may send pre-filled e-orders to the public administration buyer, which will confirm or reject the proposed supply.
Moreover, foreign suppliers must also comply with this mandate. The NSO mandate will have some impact on e-invoicing for Italian public administrations seeing as certain e-order data must be included in the e-invoices that are transmitted through the SDI.
The NSO system is built upon the existing SDI infrastructure, and as a result, the communication with the NSO requires similar channel accreditation as the SDI. Suppliers and intermediaries already performing the transmission of messages through the SDI platform are required to comply with complementary accreditation requirements, which are yet to be published. Furthermore, the technical specifications show that PEPPOL intermediaries may interact with the NSO platform through an Access Point service accredited with the NSO.
Learn how Sovos helps companies handle e-invoicing and other mandates in Italy and all over the world. To find out more about what we believe the future holds, download the Sovos eBook on Trends: e-invoicing compliance.