To help reduce delays in the payment of invoices, the French authorities by Ordinance No. 2019-359 of 24 April 2019 have clarified their invoicing rules to include two new mandatory content requirements. These are in addition to those already in place.
The two new requirements stipulated in the France invoice mandate are:
1) To provide the billing address of the buyer and the seller if it is different from their office / home address and
2) To include the purchase order number if it has been previously established by the customer.
The addition of this extra information on the invoice should help businesses which have their head office in one location and the invoicing department located in another. It should ensure that invoices are sent directly to the billing address and speed up the payment process by adding a purchase order number where this has previously been created.
In addition, the Ordinance has also considered it necessary and aligned commercial legislation and tax legislation to provide a single date of issue of the invoice to ensure legal certainty for both trading parties. According to the Ordinance, the date of issue of the invoice is set to be the day the products or services are delivered.
The cost of non-compliance
Failure to include this mandatory information on the invoice, incurs an administrative penalty of up to €75,000 for an individual and up to €375,000 for a business.
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The Danish government has introduced new law creating a state-owned insurance scheme for compensation for losses arising from a terrorist attack using chemical, biological, nuclear and radioactive (CBNR) weapons. The scheme comes into effect on 1 July 2019. There had been concerns that CBNR terror coverage available in the market was limited and, as it is not a mandatory cover, many insurers were considering whether to continue to offer it at all.
In basic terms, under the new scheme, the financial risk of a CBNR attack in Denmark will initially be borne by the State, but those costs are subsequently recovered from policyholders. It is the way those amounts are recovered, however, which will be of interest to tax managers. Following a CBNR attack and the State paying claims, a 5% levy will be applied to policies covering fire risks in relation to buildings, land, moveable property, railway vehicles, motor vehicles and ships.
Insurers will be required to collect the additional amount from their policyholders along with the first premium of the next calendar year. This will then be remitted in to a fund on a quarterly basis until the cost of the claims are fully recovered by the State, at which point the contributions will cease and any excess amounts held by the fund will be refunded to policyholders proportionally.
This way of funding terrorism cover is a less common approach. Additional (re)insurance pools, such as Pool Re in the UK or ongoing charges including the Victim of Terrorism Contributions to the Fonds de Garantie in France, are more frequently used forms of funding.
This ‘after the event’ method of collection means that hopefully the levy will never need to be collected. However, insurers writing risks in Denmark should be aware of their potential obligations under the new law.
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Beyond the implications outlined in our last blog, Decree-Law 28/2019 (the Decree-Law) impacts areas beyond invoicing, introducing modifications to both archiving and the reporting of tax data.
A novelty of the Decree-Law is the explicit introduction of an obligation to archive electronic invoices in electronic format which in turn further promotes the adoption of electronic formats. Portugal has chosen a closed system in which by law the invoice must remain in the same format in which it was issued. This means that even those companies who are not engaged in e-invoicing, but who receive an electronic invoice from a supplier, will have to acquire and maintain an electronic archive. The alternative would be to reject the invoice and request a printed version. For archiving, the law does not allow for the invoice format to change.
The law also establishes archiving requirements:
It is mandatory for taxpayers to report to the tax authority the location of the electronic archive. All taxpayers must comply with the transition rules of the Decree-Law within 30 days from when it comes into force – i.e. by 17 March 2019.
As well as the e-archiving rules, changes have been introduced to the reporting of invoice data to the tax authority through SAF-T (PT) files by modifying provisions set in Decreto -Lei n.º 198/2012 regarding the time of filing the SAFT-T (PT) file. Until now, taxpayers could file the SAF-T file to fulfill reporting obligations until the 25th of the following month of issuing the invoice.
A reduced time to report comes into force according to the following schedule:
Taxpayers can still choose to report in real-time through webservice integration instead of uploading the SAF-T (PT) file. The Decree-Law enhanced this option as taxpayers who choose to report in this way are not obliged to print B2C issued invoices unless it is explicitly requested by the buyer and provided they comply with the requirement of inserting the unique invoice code to the invoice and use certified invoicing software.
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On 15 February 2019, Portugal published Decree-Law 28/2019 regarding the processing, archiving and dematerialisation of invoices and other tax related documents including:
The decree aims to consolidate rules and to promote the adoption of electronic means of dealing with tax documentation and archiving. It also aims to eliminate tax fraud by tightening controls through the identification of invoicing software, identifying where invoicing terminals are located, the mandatory obligation to include a unique document code (UUID) in the tax document and, finally, identifying the location of the transaction.
According to the Decree-Law, invoices (paper or electronic) must be processed using certified invoicing software, which must, amongst other things, complete the invoice’s content in line with the VAT law. Simplified invoices (issued for less than €100 Euro) can, however, be processed by “other electronic invoicing means” such as cash machines. The Decree-Law also regulates contingency situations where the invoice must be based on pre-printed documents.
Having to use invoicing software that has been certified by the tax authority is not new in Portugal. However, the changes in the new Decree-Law mean that more taxpayers must now comply with the obligation as the mandate threshold has reduced. Previously it only affected companies (with a permanent establishment in Portugal) with a revenue in the previous year of €100K. It now includes companies with a revenue of over €75K (applicable during 2019) and reduces to €50K from 2020.
The decree also mandates that from 1 January 2020, invoices must carry a unique invoice code (UUID) following the government’s requirements. The code will also be represented as a QR code on printed invoices. Both requirements are new and software providers will have to adapt their solutions in the future to meet these new legal requirements.
Another new requirement set by the Decree-Law is that taxpayers must communicate to the tax authority the invoice series used by each establishment before issuing any invoice. The tax authority will assign to each series a code that must be included in the new mandatory UUID. While not the same, a similar requirement applies in many other countries, more specifically, in countries that have introduced a clearance model. In fact, Latin American countries with a clearance system often require taxpayers to either request prior invoice ranges from the tax authority, or to have an invoice series authorised by the tax authority, or to have the numeration done directly by the tax authority in connection with the clearance process. A good example of the first scenario is in Chile or Colombia, where taxpayers must request prior authorisation of an invoice range by the Chilean tax authority. An example of the second process is Mexico, where the invoice is numbered by the state agent that intervenes in the clearance process. However, such a requirement is new in the EU context, demonstrating once more that Europe is drawing inspiration from Latin America’s success in closing their VAT gap.
When it comes to guaranteeing the integrity and authenticity of invoices, it is worth noting that the decree deviates from the Directive 2010/45/EU as the possibility to use business controls provides a reliable audit trail (hereinafter BCAT) as a method of guaranteeing integrity and authenticity is expressly limited to paper-based invoices only. Furthermore, such controls must be properly documented.
For electronic invoices (ie those that are issued and received electronically) integrity and authenticity are guaranteed when one of the following methods is used: qualified e-signature; qualified e-seal in accordance with e-IDAS Regulation; or electronic data interexchange (EDI) with secure and documented processes to ensure integrity and authenticity. Taxpayers have until 31 December 2020 to migrate to the new methods of guaranteeing integrity and authenticity for electronic invoices.
Portugal is implementing its own vision when it comes to guarantees of integrity and authenticity putting itself, once more, closer to Latin American clearance countries where such guarantees are only achieved by digitally signing e-invoices. The distinction between methods (BCAT for paper invoices vs. e-signatures and EDI for electronic invoices) is an explicit preference of e-signatures and EDI over BCAT methods as the most efficient way to guarantee e-invoice integrity and authenticity.
In addition to the new invoicing requirements, the Decree-Law imposes taxpayers with new obligations to notify the tax authority with additional information. This includes:
Taxpayers who have already carried out activities subject to VAT must present the above-mentioned information by 30 June 2019.
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The Common Reporting Standard (CRS) is fast becoming the global standard for tax information reporting outside the United States. As more countries adopt CRS, and as penalties for late, incorrect or missed CRS filings become more severe, financial institutions need to know what their compliance requirements are. The following are clarification and detail about what insurers need to know about CRS reporting obligations.
Under the CRS, the term “Financial Institution” means a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company. (CRS, Section VIII: Defined Terms, A.3).
A “Specified Insurance Company” is “any Entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, A Cash Value Insurance Contract or an Annuity Contract.” (Section VIII, A.8). Insurance companies that only provide general insurance or term life insurance will not be specified insurance companies, nor will reinsurance companies that only provide indemnity reinsurance contracts.
Typically, an insurance company meets the criteria of a Specified Insurance Company if:
Insurance companies that provide only general insurance or term life insurance are typically not classified as FIs; likewise, reinsurance companies which provide only indemnity reinsurance contracts and insurance brokers are typically not considered to be FIs.
Of the five types of financial accounts that must be reported under CRS, two relate to insurance companies: annuity contracts and cash value insurance contracts.
Reporting Requirements
Under the CRS, all reporting FIs have the obligation to report the following:
The CRS does note that in reporting account balances or values, that Cash Value Insurance Contracts and Annuity Contracts, FIs should report the Cash Value or surrender value of the contracts. (Section I, A.4).
In order to meet the requirement to report residence of the account owner, insurers who provide Cash Value Insurance Contracts may rely on the current residence address in its records until 1) there is a change of circumstances that causes the FI to know or have reason to know that the residence address is incorrect or unreliable, or 2) that the time of pay-out (whether full or partial) or maturity of the Cash Value Insurance Contract.
Insurance companies do not have to report, review, or identify a pre-existing individual account that is a Cash Value Insurance Contract or an Annuity Contract provided that the FI’s jurisdiction prevents FIs from selling contracts to residents of that jurisdiction.
The CRS establishes an alternative due diligence procedure for Cash Value Insurance Contracts and Annuity Contracts in Paragraph B of the Special Due Diligence Rules. The CRS advises that a reporting FI may presume that an individual beneficiary (other than the owner) of a Cash Value Insurance Contract or Annuity Contract receiving a death benefit is not a reportable person, and that FIs may treat such accounts as other than a reportable account unless the reporting FI has actual knowledge or reason to know that the beneficiary is a reportable person. If the beneficiary is a reportable person, the FI is required to follow the procedures established in paragraph B of Section III.
The Commentary to the CRS notes that an alternative procedure similar to the above may be necessary for certain employer-sponsored group insurance contracts or annuity contracts. In such cases, the Commentary suggests adding a provision to account for group insurance contracts. In cases where such group insurance plans exist, the Commentary advises a provision to state something similar to the following: “A Reporting Financial Institution may treat a Financial Account that is a member’s interest in a Group Cash Value Insurance Contract or Group Annuity Contract as a Financial Account that is not a Reportable Account until the date on which an amount is payable to the employee/certificate holder or beneficiary, if the Financial Account that is a member’s interest in a Group Cash Value Insurance Contract or Group Annuity Contract meets the following requirements:
(Commentary on Section VII, paragraph 13; pg. 153). The last provision is provided if the Financial Institution does not have a direct relationship with the employee/certificate holder at inception of the contract and thus may not be able to obtain documentation regarding their residence.
Insurers who fall under the definition of Financial Institution provided by the CRS are obligated to report on Cash Value Contracts and Annuity Contracts, so long as such contracts are allowed in the jurisdiction the FI is reporting from. These FIs have an obligation to comply with the due diligence requirements that the CRS imposes on them, and can make use of an alternate procedure to comply.
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