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?

Technical and content updates

Over recent weeks, three updates have been introduced:

  1. A new version 1.6 of the FatturaPA B2B XML format
  2. A new version 1.3 of the FatturaPA B2G XML format; and
  3. A new version 1.8 of the technical specifications for the SDI platform.

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.

Implementation deadlines

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.

Important update

On 12 March (after this blog was posted), AdE has republished version 1.3 of the FatturaPA B2G technical specifications. Although the version number remains the same, the republished version states a new effective date for the new B2G schema: 4 May. With enforcement of the B2G schema on 4 May, the SDI platform will be able to process both B2G and B2B schemas simultaneously, and not on different dates, as informed previously.

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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.

What is the e-delivery note application?

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.

Who does the e-delivery note mandate affect?

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.

Other topics included in the e-delivery note application manual

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.

Take Action

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.

Take Action

Get in touch to find out how Sovos can help your business meet the e-invoicing deadline in India.

A keystone of HMRC’s Making Tax Digital for VAT (MTD) regime is that the transfer and exchange of data between what HMRC define as “functional compatible software” must be digital whenever that data remains a component of the business’s digital records.  This is to maintain a wholly digitally linked audit trail between systems.

Soft landing

When the MTD legislation was introduced, HMRC offered businesses a soft landing period of up to one year to incorporate digital links from the date they became obliged to adopt MTD.  During this period, businesses wouldn’t be liable for non-compliance penalties.  In practice, this meant:

A further lifeline

Due to feedback on the difficulty in applying the new rules, HMRC recently announced it would consider written requests for an extension on a discretionary case-by-case basis where there are genuine reasons for non-compliance (for example, those operating large corporate groups with disparate legacy systems). However, it’s clear an extension will only be granted in exceptional circumstances and businesses will need to have:

After review, HMRC will either reject the request or grant a written Direction extending that “soft landing” period by up to 12 months.

What might constitute a genuine reason:

What wouldn’t be considered a genuine reason:

Key action points

  1. Know when the soft landing period for digital links comes to an end. It could be as early as 1 April 2020
  2. If digital links haven’t yet been set up to HMRC’s requirements, businesses should re-evaluate program requirements and timelines. Digital links do not include programs or processes that involve ‘cutting and pasting’ of data
  3. If you don’t think the “soft landing” deadline will be met, then gather evidence to support an extension. Contact HMRC before the deadline. (HMRC recommend they contact their Customer Contact Manager initially if one has been assigned, or the MTD Specific Directions Team).
  4. There’s no penalty for requesting an extension. The request can be withdrawn at any time. It’s important to continue working towards the digital link requirements in the meantime
  5. Finally, ensure any commercial solutions that might be able to resolve system gaps have been explored.

 

Take Action

Sovos provides VAT reporting technology that is fully compliant with Making Tax Digital (MTD), including digital link. Talk to an expert.

The upcoming tax reform in Greece is expected to manifest itself in three continuous transaction control (CTC) initiatives.

  1. The myDATA e-books initiative, which entails the real-time reporting of transaction and accounting data to the myDATA platform which will in turn populate a set of online ledgers maintained on the government portal;
  2. Invoice clearance, which is clearly beneficial for the Greek Tax Authority although no roll-out date has been published yet; and
  3. Online cash registers which will transmit sales data to the tax authority in real-time.

Earlier this month, new technical specifications were published for the online connection of cash registers with the government portal. From June 2020, all cash registers currently used in Greece must be updated to meet the new technical specifications (available in Greek) to be able to connect and transmit their transaction data to the government portal.

The technical specifications regulate two aspects:

  1. The frequency of data transmission. The data will be reported in real-time and up to once per day in batch.
  2. A QR code must be included in the receipts issued. Through a URL in the QR code, whose format and content are defined in the technical documentation, the tax authority can validate the receipts issued. The actual control process hasn’t been defined yet, but it’s understood that based on this QR code the tax authority will be able to compare the retail data from the cash register to the data registered on the myDATA platform.

These specifications are complementary to those published in late 2018, which mainly regulated the security and certification requirements of the new generation cash registers. This latest development is further proof that the Greek government is committed to moving forward with the CTC plans it initially outlined two years ago.

Take Action

Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.

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.

Key details and parameters

Scope

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.

Software requirements

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 provider requirements

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.

Transmission method and e-invoice format

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.

Take Action

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.

For those following the ongoing tax control reform in India, 2019 has been a very eventful year for Indian e-invoicing. Starting last spring, a group of government and public administration bodies have convened regularly with the mission of proposing a new way of controlling GST compliance through the introduction of mandatory e-invoicing. Given the vast impact such a reform would have on not just the Indian but the global economy, these discussions, often carried out behind closed doors, have triggered a large number of rumours, sometimes leading to misinformation on the market.

Navigating the information deficit

So far, not much information of a formal or binding nature has been published or made available to the public. After the public consultation held earlier this autumn, a high-level whitepaper describing the envisaged e-invoicing process was published; however, since then nothing formal or binding has been released. A recent media note made available by the relevant authorities to the press indicated that the timeline envisaged by the government for the roll-out would be:

1 January 2020: voluntary for businesses with a turnover of Rs.500 Crore or more;

1 February 2020: voluntary for businesses with turnover of Rs.100 Crore or more;

1 April 2020: mandatory for both of the above categories and voluntary for businesses with a turnover of less than Rs. 100 Crore.

While the clarity was welcomed, this timeline was not yet binding, and as a result, taxpayers were left with little information on how to meet the requirements of the tax control reform, and no binding indication of when they need to comply. However, this situation is now currently being remedied, and we are seeing the first codification into law.

The first pieces of legislation make an entrance

On December 13, 2019, a set of Notifications (No. 67-72/2019) introducing amendments to the existing GST legislation framework were released and are currently awaiting publication in the Gazette of India. In a nutshell, these Notifications:

These Notifications issued on December 13 will be the first of many pieces of documentation that are needed to formally clarify the details of the upcoming e-invoicing reform. More important still, they serve as a clear indication that the relevant Indian authorities are nearing the end of what has been an analytical and consultative design period, and that they now instead are transitioning into a period of preparation for the first roll-out.

Take Action

Learn more about Sovos e-invoicing solutions.

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.

Take Action

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.

What’s new?

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.

What’s next?

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.

Take Action

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.

India on the road to real-time tax enforcement

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.

What would the system look like?

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.

What’s next?

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.

Take Action

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.

E-ordering for purchases beyond healthcare products

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.

Foreign suppliers and the new e-ordering mandate

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.

Take Action

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.

Anyone who has been closely following SAF-T announcements over the past few years may be forgiven for thinking that it all seems rather like Groundhog Day.  Commencement dates and reporting requirements have been announced and subsequently amended and re-announced as the respective countries re-evaluate their needs and the readiness of companies to provide the data in the prescribed formats.

Earlier this month Poland announced that the changes planned for 1 July 2019, requiring mandatory filing of SAF-T information and the corresponding withdrawal of the requirement to submit a periodic VAT return, have now been deferred to January 2020. 

Also this month, Romania announced plans to become the eighth country to introduce SAF-T by introducing requirements for transactional reporting by the end of 2020.   

So, what is SAF-T, what is the latest position for countries which have introduced legislation and what lies ahead?

SAF-T – The Standard Audit File for Tax

The Standard Audit File for Tax (SAF-T) was developed by the Organisation for Economic Co-operation and Development (OECD) with the aim of producing a standardised format for electronic exchange of accounting data from organisations to their national tax authority and external auditors.

The two key principles behind SAF-T are that;

  1. Organisations should be able to export information from their accounting systems (invoices, payments, general ledger journals and master files) into a standardised format and
  2. Tax authorities and external auditors should be able to make their tax inspections and audits more efficient and effective as a result of data being made available to them in that standardised format.

In 2005 the OECD released the first version of the SAF-T schema which provides details of what should be included in a SAF-T xml reporting file and how that data should be formatted and structured.  The original schema was based on the general ledger and details of invoices and payments, together with customer and supplier master files.  A second version of the SAF-T schema was released in 2010 to incorporate information about Inventory and Fixed Assets.

What the OECD have not defined, and what remains the responsibility for the tax administration in each country to decide, is the exact format in which the data is to be captured and when and how it is required to be sent to the tax administration.

Different approaches

What has emerged from those countries which have adopted SAF-T are three broad approaches;

In some cases, the mandate starts with a requirement to produce data on request and evolves through to periodic submissions.

Where are we now?

There are currently seven countries which have introduced legislation enforcing SAF-T requirements.

Portugal

Portugal was one of the first adopters and Portuguese entities have been required to extract data into the SAF-T file format (based on version 1 of the OECD SAF-T schema) since 2008 on an annual basis.  Further extensions to collect sales invoice data and other documents on a monthly basis followed in 2013.

Luxembourg

Luxembourg introduced the requirement to extract data in the relevant format in 2011.  It only applies to Luxembourg resident companies subject to the local chart of accounts and is only required to be submitted when requested by the tax authority.

France

France introduced a SAF-T requirement in 2014, using a proprietary format rather than the OECD standard SAF-T schema, requiring files to be submitted in txt format.  It is currently only required to be filed on demand when requested by the French tax authority.

Austria

Austria introduced SAF-T in 2009 and is currently only required on demand when requested by the tax authority.

Poland

Possibly the most significant implementor of SAF-T to date, with large companies having had to file monthly JPK (Jednolity Plik Kontrolny) returns since 2016.

Lithuania

Lithuania introduced the requirement to file the SAF-T based i.MAS on a phased basis, starting with the largest organisations in 2016 and working towards mandating SAF-T for all businesses by 2020.  The i.MAS comprises three parts, i.SAF reporting of sales and purchase invoices on a monthly basis, i.VAZ reporting of transport/consignment documents and the i.SAF-T accounting transaction report,  which is only required when requested by the tax authority.

Norway

SAF-T has been in place on a voluntary basis since 2017 and there are proposals to mandate it, on an ‘on-demand’ basis from January 2020.

What lies ahead for the future of SAF-T?

Countries which are receiving regular, transactional level details under SAF-T may look to reduce the periodic VAT return requirements.  This is because the need to prepare a VAT return summarising the details which the tax authority already receives on a transactional basis can be seen as unnecessary duplication. 

Poland is proposing that SAF-T data submissions will displace the need for filing a VAT return from January 2020.

Romania is proposing a phased transition to filing of transactional data from 2020, starting with large organisations, with a reduction in the VAT returns which are required to be filed.

 

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Split payments is one of the methods that European countries with a considerable VAT gap use to tackle it.  Across the EU, the VAT gap in the EU in 2016 was reported to be €147.1bn.

Poland introduced voluntary VAT split payments in July 2018. Since then around 25% of taxpayers have adopted this payment method.  This equates to 400,000 out of 1.6 million taxpayers currently active on the Polish market. However, only 9% of the total amount of VAT has been paid using this mechanism since last year.

The VAT split payment mechanism means that the amount of commodities or supplies for consideration is being paid to the taxable person into one account, while the VAT amount charged in the underline transaction is deposited in a different bank account designated for this purpose.

On May 16, 2019 the Ministry of Finance published draft legislation which intends to introduce mandatory split payments from September 1, 2019. Poland received temporary approval, valid until 2022, from the European Commission on February 18, 2019, subject to introducing some limitations to the mandate. Consequently, split payments will apply to (and substitute) reverse charge transactions and those with purchaser tax liability; it will also apply to 150 selected goods and services, such as car parts, coal, fuel, waste and some electronic equipment.  In addition, to comply with the mandate, the value of the transaction must exceed the threshold of PLN 15,000 (approximately €3,500). The Ministry of Finance reported that the selected industries are those where state tax administration observes the highest tax avoidance.

Since July 2018, taxpayers complained that the way in which split payment is regulated influences their financial liquidity. The bank account to which VAT is paid belongs to the taxpayer, however, its freedom to spend this money is currently limited to paying VAT. With the planned amendments, taxpayers will be able to pay other state charges from the VAT accounts, such as social security charges and other tax liabilities including income tax, excise and customs duties.

Split payments will also apply to non-resident companies subject to VAT in Poland, who are settling transactions by means of bank transfers, and are otherwise in scope of the mandate as per the general rules. Based on the Ministry of Finance estimates, there are around 550 such companies, 150 of which do not even have a local bank account. Complying with the local split payment regime will be more of a challenge for these companies.

Sanctions for non-compliance may affect both the supplier and buyer. Suppliers may be charged with 100% of the VAT due for not including a mandatory statement on the invoice which is subject to split payment (in Polish: “mechanizm podzielonej płatności”). Buyers may be penalised in the same way for not paying VAT to the VAT account, alternatively they may be deprived of the right for tax deduction.

Split payment was either introduced or is being considered in three other European countries. Italy and Romania both introduced a split payment mandate for certain businesses from 2015 and 2018 respectively. In the UK, public consultations were held throughout 2018 with a view to introducing split payments.  From April 2019 Romania withdrew mandatory split payments, following the November 2018 order of the European Commission which concluded that the mandate is disproportionate. It will now maintain a voluntary split payment regime.

 

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For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.

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.

What’s new?

Scope extended for mandatory use of certified invoicing software

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.

Unique invoice code

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.

Prior authorisation of invoice series

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.

Guaranteeing integrity and authenticity in paper and electronic invoices

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.

New obligations

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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More than six months ago the Greek authorities announced their intention to introduce mandatory e-invoicing and e-bookkeeping rules, and enough information is now available to assess what the proposed rules will mean for Greece.

Although formal legislation has yet to be published, it’s expected the new e-invoicing measures by the Independent Public Revenue Authority, the Greek authority responsible for all tax matters (AADE; in Greek, “ΑΑΔΕ”), will be mandated by January 2020.

The Director of AADE recently stated that e-invoicing is incomplete without e-reporting, so the proposed rules must encompass both areas of tax compliance. By January 2020 the goal is for reporting to occur in real-time at the same time as the invoice is issued. The new rules would make e-invoicing and e-reporting mandatory, with a real-time connection from the invoicing system (by transmission of all relevant invoice data) to the electronic system (TaxisNet) of the Greek tax authorities.

Scope of reform

e-invoicing

So far, no real action has been taken regarding the implementation of the new e-invoicing system, e.g. the e-invoicing process, e-invoice format requirements and the software systems to connect to the tax authority have not yet been defined. However, the Ministry of Finance recently published a Decision establishing certification requirements and describing the certification process and responsibilities for e-invoicing service providers, who would be able to perform services of issuance, delivery and archiving on behalf of the taxable person.

Real-time reporting

By comparison, more progress has been made for implementing real-time reporting. AADE has published the technical specifications for transmission of invoice data – however, the scope of the reporting framework covers other tax as well as invoice data – e.g. income tax – to the government portal (TaxisNet) and invoice data will need to be reported on a daily basis (instead of periodically as currently). These technical specifications apply to the connection from the so-called Greek “electronic fiscal devices” – which is the most commonly used compliant method for issuing (and ensuring integrity and authenticity of) B2C invoices in Greece – to TaxisNet, as well as the data transmission software operated by e-invoicing service providers.

For B2B invoices, whose integrity and authenticity can be guaranteed by any method of the EU Directive, no technical specifications have been published yet. Further clarification and legislative action by the tax administration is required. Details about service providers’ software systems and the government infrastructure are expected to be finalised by mid-2019.

Until the implementation of the new reporting framework whereby invoice data will be reported in real-time at the same time as the invoice is issued, AADE is working on the alternative that invoice data will be reported on a regular basis by the issuer only, and not the buyer, which should minimise the overall reporting workload and ensure uniqueness of data. The buyer will be able to amend the relevant reporting field on TaxisNet where there is insufficient invoice data from the supplier.

B2G transactions

On 29 October 2018 the Government published a Bill to transpose the Directive 2014/55/EU on e-invoicing in public procurement; it however still needs to be approved. The Bill makes e-invoicing mandatory for both the supplier and the buyer/government in public procurement scenarios as of 1 April 2019.

Opportunity for structural change

AADE has clearly stated that mandatory e-invoicing would be incomplete without some type of combined transactional reporting; data should be created once and not several times as is currently the case. Therefore, we expect a type of “clearance” e-invoicing model in Greece, however at this stage it’s still too early to categorise the reform as being similar to Italy (“real” clearance e-invoicing) or more like Hungary (real-time reporting as soon as the invoice has been issued). Clearly, Greece is in line with the EU paradigm shift towards increased governmental control over transactional data and recognises the benefits of tighter tax compliance and in taking steps to close its tax gap.

Even if the new measures aren’t particularly welcomed by many individuals in Greece – much in the spirit of a well-held opposition against EU austerity measures which have led to riots and social unrest in the past – these new measures are well positioned to provide the Greek tax administration and government with an opportunity for structural change. The use of technology will enable more effective tax controls and enforcement as well as a more efficient tax environment for business, leading to a positive knock-on effect for future restructuring and rebuilding of the Greek economy.

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Companies struggling to meet Italy’s electronic invoicing deadline of January 1 will get some relief from financial penalties if they can’t immediately issue invoices at the moment of supply, but it seems the Italian Tax Authority will not delay rolling out the system.

The government had stated that invoices that did not comply with the new mandate after January 1 would be subject to penalties ranging from 90 to 180 percent of the applicable tax. The tax authority will consider invoices not correctly formatted or not issued through the new SDI reporting system to be non-compliant.

But many businesses, especially smaller firms, have had trouble transitioning from their existing processes to the new e-invoicing framework that requires real-time e-invoice clearance through the state-operated Sistema di Interscambio, or SDI, platform.

In response to business concerns, the government is opening up to a grace period of sorts: Instead of postponing the e-invoicing roll-out as such, Italy will waive penalties for delayed clearance transmission. Furthermore, as of July 2019, Italy will loosen the main rule for when an invoice must be issued, which effectively will allow businesses more flexibility in the e-invoicing process.

Businesses get a grace period for Italian electronic invoicing penalties

The new rules on penalties allow for a short grace period. The tax authority will not apply penalties for e-invoices that are issued and cleared by the SDI within the VAT liquidation period to which the invoice belongs – in other words, by the 15th of the following month in which the invoice should be issued and consequently cleared (according to  Decree n. 100 from 1998, updated in 2018). For e-invoices that the SDI issues and clears by the end of the following VAT liquidation period (usually the end of the following month), the tax authority will reduce the penalty by 80 percent.

For example, if a business can’t transmit invoices in compliance on January 1, it can delay the clearance transmission of an invoice that should have been issued to February 15 without any penalties for the delay. If the business still needs more time, it can delay the clearance transmission of invoices through the SDI until March 15 and pay an 80 percent reduction of the regular penalty.

Italy eases timing of electronic invoicing issuance

Italy is also loosening its requirement for the timing of issuing an invoice. Since 1972, Italian VAT law has stated that suppliers must issue invoices to the government at the point of supply. However, beginning in July, suppliers will be able to issue invoices through the SDI platform within 10 days of supply. Invoices not cleared by SDI are not valid for fiscal purposes, so taking 10 days to issue an invoice could cause delays in receiving payment.

For companies doing business in Italy, the relief is welcome, but it is also a sign that Italian e-invoicing is moving forward on schedule. That means companies with Italian operations need to get their systems ready to comply with the new mandate or face penalties by mid-February.

Takeaways: What this means for doing business in Italy

What is also clear from the latest developments is that e-invoicing regulations in Italy can change at any time. The problem becomes exponentially more difficult to solve when businesses figure in similar changes happening all over the world. Adopting a system that automates e-invoicing and provides a single source of truth for data in both accounts payable and accounts receivable is essential.

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Sovos has been keeping companies in compliance in Italy for more than a decade. Find out how Sovos saves clients from penalties, cancelled shipments and other potentially expensive e-invoicing pitfalls.