Update: 31 January 2023 by Lorenza Barone
Norway’s Ministry of Finance has updated legislation involving remotely deliverable services by foreign suppliers. This is effective from 1 January 2023.
In 2022, the Ministry proposed to amend the Norwegian VAT Act regarding cross-border business-to-consumer (B2C) sales of non-digital services.
The proposal concerns purchases of remotely deliverable services from non-resident suppliers to Norwegian consumers.
Foreign providers of traditional services would need to register for VAT in Norway and account for Norwegian VAT for the following services for resident consumers:
VAT would still be charged and collected when the customer is a business or a public authority or when the transaction is considered a B2B sale. The customer would do this in Norway via the reverse charge mechanism. Suppliers not established in Norway could still use the existing VAT On E-Commerce (VOEC) scheme.
The motivation behind the proposal was to eliminate a competitive advantage for non-resident suppliers.
In fact, until the recent change, no VAT was charged when a business provided such services to Norwegian consumers.
Effective 1 January 2023, non-resident suppliers of remote non-digital services who make supplies to consumers in Norway are required to collect and remit Norwegian VAT.
In light of this, the VOEC scheme – the simplified scheme for online sales of goods and services to Norwegian consumers – has been expanded. Previously it only applied to low value goods and electronic services, but now it also includes all services capable of delivery from a remote location.
Subsequently, all foreign companies that sell such services to Norwegian consumers must register through the VOEC scheme – or register ordinarily for Norwegian VAT when they reach the NOK 50,000 threshold in sales over 12 months.
The VAT treatment for providing such services to a business in Norway remains unchanged, with the local company collecting and remitting the VAT under the reverse charge mechanism.
Still have questions about VAT in Norway? Speak to one of our experts.
Update: 25 April 2022 by Sam Wichman
The Norwegian Ministry of Finance has proposed to amend the Norwegian Value Added Tax (VAT) Act regarding cross-border business to consumer sales of non-digital services. The proposal would require purchases of remotely deliverable services from suppliers established outside of Norway to consumers located in Norway to be subject to VAT.
Since 2011, Norway has operated a simplified VAT compliance regime for foreign suppliers of digital services to consumers. Non-resident suppliers who sell e-books, streaming media, software, or other digital services to Norwegian consumers and meet the NOK 50,000 VAT registration threshold must register and collect VAT on these sales, the same as resident businesses.
Non-resident suppliers not established in Norway may use the simplified VAT On E-Commerce (VOEC) scheme for registration and reporting. Additionally, suppliers in Norway must pay VAT on all purchases of remotely deliverable services from businesses located abroad. Currently, however, foreign suppliers of remotely deliverable services, which are not digital, are not required to register and pay VAT on their sales of such services.
The Norwegian tax authority is concerned about the competitive advantage of non-resident suppliers over resident suppliers when providing deliverable services to Norwegian consumers. The Norwegian Ministry of Finance has presented a proposal to amend the Norwegian VAT Act to require non-resident suppliers to collect and report VAT on remotely deliverable services to consumers.
Under the proposal, foreign providers of traditional services would have to charge VAT for consulting services, accounting services, and other cross-border services provided to consumers located in Norway. When the customer is a business or a public authority, or when the transaction is considered a B2B sale, the VAT would still be charged and collected by the customer via the reverse charge mechanism. Suppliers that are not established in Norway would be able to use the existing VOEC scheme.
The Norwegian Ministry of Finance has submitted the proposal for amendments to the Norwegian VAT Act regarding selling remotely deliverable services from abroad to recipients in Norway for consultation. The deadline for submitting comments on the proposal is 8 July 2022. Please stay tuned for updates on if the proposed amendments are adopted in Norway and when the amendments will take effect should they be adopted.
VAT in Norway is constantly changing. Speak to one of our Norway VAT experts for answers to all your questions.
The global trend in the e-invoicing sphere for the past decade has shown that legislators and local tax authorities worldwide are rethinking the invoice creation process. By introducing technologically sophisticated continuous transaction control (CTC) platforms tax authorities get immediate and detailed control over VAT, which has proven a very efficient way to reduce the VAT gap.
However, many common law countries, that don’t have a VAT system, including the United States, Australia and New Zealand, haven’t followed the same path. They have stood out in international comparisons by providing little regulation in the field of e-invoicing. The reason why there is no need to have control over the invoices is the lack of a VAT tax regime. Recent developments, however, indicate that also common law countries try to spur e-invoicing, driven by the business process efficiencies rather than the need for tax control. Accordingly, the upcoming developments will be addressed in this blog, focusing on the Unites States e-invoicing pilot program and the Australian and New Zealand initiatives to promote e-invoicing.
E-invoicing has been permitted for a very long time in the United States but is still not widespread business practice. According to some sources, e-invoicing currently only amounts to 25% of all invoices exchanged in the country. With the introduction of the Business Payments Coalition (BPC) e-invoicing pilot program in cooperation with the Federal Reserve, this may be about to change.
The BPC’s e-Invoice Exchange Market Pilot aims to promote faster B2B communication and provide an opportunity for all kinds of businesses to exchange e-invoices in the US.
The pilot program is a standardised e-invoicing network across which structured e-invoices can be exchanged between counterparties using various interoperable invoicing systems to connect and exchange documents. It’s intended to drive efficiency and productivity while reducing data errors. A federated registry services model enables authorised administrators or registrars to register and onboard participants into the e-invoice exchange framework.
The e-invoice exchange framework operates similarly to the email ecosystem. Users can sign up with an email provider to send and receive emails. The provider serves as an access point to email exchanges for their users and delivers emails between them over the internet. It allows multiple registrars to register participants within the e-invoice exchange framework. This is reminiscent of the globally established PEPPOL model, which standardizes the structure of an invoice as well as provides a framework for interoperability.
The US is following the European e-invoicing model based on open interoperability functionality. It enables parties using various invoicing systems to connect and exchange documents through the e-invoicing network easily. The digitization process in the e-invoicing sphere will enable large and small organisations in the US to save resources, promote sustainability and provide business efficiency.
Similarly, to the US, the move towards e-invoicing in Australia and New Zealand is not primarily driven by tax issues but process efficiency. Neither country has any plans concerning a traditional B2B e-invoicing mandate. However, the New Zealand and Australian governments have committed to a joint approach to e-invoicing, and the first steps are ensuring that all government entities can receive e-invoices.
In Australia, all commonwealth government agencies must be able to receive PEPPOL e-invoices from 1 July 2022. Moreover, the government also seeks to boost e-invoicing in the B2B space without the traditional mandate for businesses to invoice electronically. Instead, the proposal is to implement what is referred to as Business e-Invoicing Right (BER).
Under the government’s proposal, businesses would have the right to request that their trading parties send an e-invoice over the PEPPOL network instead of traditional paper invoices. Businesses need to set up their systems to be able to receive PEPPOL e-invoices. Once a business has this capability, it would be able to exercise its ‘right’ and request other companies to send them PEPPOL e-invoices.
This reform is expected to be introduced in July 2023, by which businesses will be able to request to receive PEPPOL e-invoices only from large businesses, followed by a staged roll-out to eventually cover all businesses by 1 July 2025.
Following the Australian e-invoicing reform from July 2022 for the B2G sector, the New Zealand Government is encouraging businesses and government agencies to adopt e-invoicing. One step in this direction is the possibility for all central government agencies to be able to receive e-invoices based on PEPPOL BIS Billing 3.0 since 31 March 2022.
Outside of these B2G requirements, there are currently no published plans to move the full economy to mandatory e-invoicing.
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The Italian government has taken important steps to broaden the scope of its e-invoicing mandate, more specifically by widening the scope of taxpayers subject to electronic invoice issuance and clearance obligations, starting 1 July 2022.
On 13 April 2022, the draft Law-Decree, known as the second part of the National Recovery and Resilience Plan (Decreto Legge PNRR 2 – Piano Nazionale di Ripresa e Resilienza), was approved by the Italian Council of Ministers (Consiglio dei ministri).
The Italian government-approved National Recovery Plan is part of the European Union’s Recovery and Resilience Facility (RRF), an instrument created to assist Member States financially in recovering from the economic and social challenges raised by the Covid-19 pandemic.
The expansion of Italy’s e-invoicing mandate is one element of the government’s anti-tax evasion package and addresses, in particular, the advancement of digital transformation, one of the six pillars of the RRF.
The draft Law-Decree PNRR 2 expands the obligation to issue and clear electronic invoices through the Italian clearance platform Sistema di Intercambio (SDI) to certain VAT taxpayers exempt from the mandate thus far. This means that from 1 July 2022, the following additional taxpayers are obliged to comply with the Italian e-invoicing mandate:
The regime forfettario is available to taxpayers who fulfil specific requirements, allowing them to adopt a reduced flat-rate VAT regime of 15%, decreased to 5% for new businesses during the first five years. These taxpayers have, up until now, been exempt from the obligation to issue e-invoices and clear them through the SDI, according to Legislative Decree 127 of 5 August 2015.
Additionally, amateur sports associations and third sector entities with revenue up to EUR 65,000 who have also been exempt from the e-invoicing mandate, are included as new subjects. Starting 1 July 2022, e-invoicing will also become mandatory for them.
The mandate still excludes microenterprises with revenues or fees up to EUR 25,000 per year, which instead will be required to issue and clear e-invoices with the SDI starting in 2024.
The draft decree also established a short transitional grace period from 1 July 2022 until 30 September 2022. During this time taxpayers subject to the new mandate are allowed to issue e-invoices within the following month when the transaction was carried out, without being subject to any penalties. This gives the new subjects time to conform to the general rule stating electronic invoices must be issued within 12 days from the transaction date.
The definitive text of the decree has not yet been published in the Italian Official Gazette; only once this final step is taken will the decree formally become law, and the extended scope become binding. The start of the second semester of this year brings additional significant changes in Italy concerning the mandatory reporting of cross-border invoices through FatturaPA, also set to begin on 1 July 2022.
Need help ensuring your business stays compliant with evolving e-invoicing obligations in Italy? Contact our team of experts to learn how Sovos’ solutions for changing e-invoicing obligations can help you stay compliant.
It’s been just over nine months since the introduction of one of the biggest changes in EU VAT rules for e-commerce retailers, the E-Commerce VAT Package extending the One Stop Shop (OSS) and introducing the Import One Stop Shop (IOSS).
The goal of the EU E-commerce VAT Package is to simplify cross-border B2C trade in the EU, easing the burden on businesses, reducing the administrative costs of VAT compliance and ensuring that VAT is correctly charged on such sales.
Under the new rules, the country specific distance selling thresholds for goods were removed and replaced with an EU wide threshold of €10,000 for EU established businesses and non-EU established businesses now have no threshold. For many businesses this means VAT is due in all countries they sell to, requiring them to be VAT registered in many more countries than pre-July 2021. However, the introduction of the Union OSS allowed them to simplify their VAT obligations by allowing them to report VAT on all EU sales under the one OSS return.
Whilst for many businesses the thought of having to charge VAT in all countries they sell to may have been overwhelming to begin with, they are now seeing the many benefits that the introduction of OSS was meant to achieve. The biggest benefit for businesses is the simplification of VAT compliance requirements with one quarterly VAT return as opposed to meeting many filing and payment deadlines in different EU Member States.
Businesses who outsource their VAT compliance have been able to reduce their costs significantly by deregistering from the VAT regime in many Member States where they were previously VAT registered. Although some additional registrations may be required depending on specific supply chains and location of stock around the EU. Businesses also receive a cash flow benefit under the OSS regime as VAT is due on a quarterly basis as opposed to a monthly or bi-monthly basis as was the case previously in many Member States. As part of the implementation of the EU E-Commerce VAT Package we also saw the removal of low value consignment relief, which meant import VAT was due on all goods coming into the EU. This has brought many non-EU suppliers into the EU’s VAT regime with the European Commission (EC) announcing that there are currently over 8,000 registered traders.
We have seen some early hiccups with EU Member States not recognizing IOSS numbers upon import, leading to double taxation for some sellers. But for the majority of businesses IOSS has enabled them to streamline the sale of goods to EU customers for orders below €150. The EC has also recently hailed the initial success of this scheme by releasing preliminary figures which show that €1.9 billion in VAT revenues has been collected to date.
The EC is currently undergoing a consultation, gathering feedback from stakeholders on how the new schemes have performed with a view to making potential changes. Some of the changes being discussed include making the IOSS scheme mandatory for all businesses, which would significantly widen its use as it brings significantly more traders into scope. There has also been talk of increasing the current €150 threshold which would allow more consignments to be eligible for IOSS, although with the current customs duties threshold also being €150 it would be interesting to see how they align these rules. The EC will also be publishing proposals later in the year on the possible extension of the OSS to include B2B goods transactions, with a view to implementing this by 2024.
Get in touch with our team to find out how we can help your business understand the new OSS requirements.
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E-commerce continues to grow, and tax authorities globally have struggled to keep pace. Tax authorities developed many VAT systems before the advent of e-commerce in its current format and the evolution of the internet. Around the world this has resulted in changes to ensure that taxation occurs in the way that the government wants, removing distortions of competition between local and non-resident businesses.
The European Commission made changes on 1 July 2021 with the E-commerce VAT Package, which modernised how VAT applies to e-commerce sales and also how the VAT is collected. As the previous system had been in place since 1 July 1993, change was well overdue.
The principle of the taxation of e-commerce in the European Union (EU) is that it should occur in the place of consumption – this normally means where the final consumer makes use of the goods and services. For goods, this means where the goods are delivered to and for services, where the consumer is resident – although there are some exceptions.
Where the VAT is due in a different Member State than where the supplier is established, this requires the supplier to account for VAT in a different country. Micro-businesses are relieved of the requirement to account for VAT in the place of consumption. Though, most e-commerce businesses selling across the EU will have to account for VAT in many other Member States which would be administratively burdensome.
To overcome this problem, the European Commission decided to significantly expand the Mini One Stop Shop (MOSS), which was previously in place for B2C supplies of telecoms, broadcasting and electronically supplied services. Three new schemes allow businesses to register for VAT in a single Member State and use that OSS registration to account for VAT in all other Member States where VAT is due.
Union OSS allows both EU and non-EU businesses to account for VAT on intra-EU distance sales of goods. It also allows EU businesses to account for VAT on intra-EU supplies of B2C services.
Non-Union OSS allows non-EU businesses to account for VAT on all supplies of B2C services where EU VAT is due.
Import OSS allows both EU and non-EU businesses to account for VAT on imports of goods in packages with an intrinsic value of less than €150.
Currently, none of the OSS schemes are compulsory, and businesses can choose to be registered for VAT in the Member State where the VAT is due. The European Commission is currently consulting on the success of the OSS schemes, and one of the proposals is that the use of Import OSS would become compulsory. There are also questions about whether the threshold should be increased, although that would require consideration of how to deal with customs duty as the €150 threshold is the point at which customs duty can become chargeable.
The use of the Union and non-Union OSS schemes can provide a valuable alternative to registering for VAT in multiple Member States. However, there can be other reasons why a business will need to maintain VAT registrations in other countries. Businesses should carry out a full supply chain review to identify the VAT obligations.
There are also many benefits to using the Import OSS, including the ability to recover VAT on returned goods and a simplified delivery process for both the supplier and customer.
Any businesses using any OSS schemes should fully understand the scheme’s requirements. Non-compliance can result in exclusion with the requirement to register for VAT in those countries where it is due. This will remove the benefit of the OSS schemes, increasing costs and administrative burden for the business.
Get in touch with our team to find out how we can help your business understand the new OSS requirements.
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The Philippines continues in constant advance towards implementing its continuous transaction controls (CTC) system, which consists of near real-time reporting of electronically issued invoices and receipts. On 4 April, testing began in the Electronic Invoicing System (EIS), the government’s platform, with six companies selected as pilots for this project.
The initial move toward a CTC system in the Philippines started in 2018 with the introduction of the Tax Reform for Acceleration and Inclusion Act, known as TRAIN law, which has the primary objective of simplifying the country’s tax system by making it more progressive, fair, and efficient. The project for implementing a mandatory nationwide electronic invoicing and reporting system has been developed in close collaboration with the South Korean government, considered a successful model with its comprehensive and seasoned CTC system.
Electronic invoicing and reporting are among many components set forth by the TRAIN law as part of the country’s DX Vision 2030 Digital Transformation Program. With this, the Philippines is making headway toward modernising its tax system.
The Philippines CTC system requires the issuance of invoices (B2B) and receipts (B2C) in electronic form and their near real-time reporting to the Bureau of Internal Revenue (BIR), the national tax authority. The EIS offers different possibilities in terms of submission, meaning that transmission can be done in real-time or near real-time. Documents that must be electronically issued and reported include sales invoices, receipts, and credit/debit notes.
According to the Philippines Tax Code, the following taxpayers are covered by the upcoming mandate:
However, taxpayers not covered by the obligation may opt to enroll with the EIS for e-invoice/e-receipt reporting purposes
E-invoices must be issued in JSON (JavaScript Object Notation) format and contain an electronic signature. After issuance, taxpayers can present their invoices and receipts to their customers. The tax authority´s approval is not needed to proceed. However, electronic documents must be transmitted to the EIS platform in real-time or near real-time.
The Philippines introduced somewhat unusual requirements in this period of digitization, when it comes to e-invoice archiving. The preservation period is ten years and consists of a system in which taxpayers are obliged to retain hard copies for the first five years. After this first period, hard copies are no longer required, and exclusive storage of electronic copies in an e-archive is permitted for the remaining five years.
With tests officially underway, the next phase should begin on 1 July 2022, with the go-live for 100 pilot taxpayers selected by the government, including the six initial ones. After that, the government plans to advance a phased roll-out in 2023 for all taxpayers under the system’s scope. Meanwhile, taxpayers can take advantage of this interim period to conform with the Philippines CTC reporting requirements.
Need to ensure compliance with the latest e-invoice requirements in the Philippines? Speak to our team.
In our earlier article, Optimising Supply Chain Management: Key B2B Import Considerations, we looked at the possibility of UK suppliers establishing an EU warehouse to facilitate easier deliveries to customers. In this article, we look at this one solution in more depth – again from the perspective of B2B transactions.
When looking to set up a warehouse facility in the EU, the first consideration should be whether the warehouse will create a permanent establishment (PE) or not. Permanent establishment is a direct tax concept, but creating one can have VAT consequences if that permanent establishment is also considered a fixed establishment.
The OECD defines a permanent establishment as a fixed place of business through which the business of an enterprise is wholly or partly carried on.
The EU defines a fixed establishment as the permanent presence of the human and technical resources necessary to facilitate a supply.
However, the trend towards local warehousing, ‘just in time deliveries’, the gig economy with local contractors and other developments are causing tax authorities to adapt these definitions.
For example, with regards to warehousing, the traditional view is that a taxpayer would need to own or lease a warehouse and employ the staff for it to be considered a fixed establishment for VAT purposes. However, one tax authority has ruled that a fixed establishment can also be created where a warehouse keeper makes a defined area within a warehouse exclusively available to a taxpayer and also provides the warehouse staff.
Creating such a permanent establishment that is also considered to be a fixed establishment will have both advantages and disadvantages. On the plus side, the supplier will be required to charge VAT on local sales involving the fixed establishment, and VAT registration can be used to deduct import VAT paid. Additionally, the supplier may not be required to appoint an indirect customs agent to act as the declarant for imports. On the negative side, the business will incur local VAT on some supplies that would otherwise attract a reverse charge in the UK and may be a liability to direct tax.
As this is a blog on VAT, we will not dwell on the above, but clearly the possible use of a warehouse is one consideration in the supply chain setup.
In deciding whether and where to establish an EU warehouse there are several considerations. For the purposes of this blog, we will first consider a UK supplier looking to set up a warehouse to service customers in Spain.
Spain considers that a third-party warehouse can constitute a permanent establishment where the supplier has exclusive access to a defined area of the warehouse. Therefore it will be important to carefully review the warehouse contract for VAT consequences before signing it.
Spain has a reverse charge for domestic B2B sales. Therefore, a UK supplier importing goods into Spain and making only domestic B2B sales will not be required to charge local VAT. There will also be no requirement to submit a local VAT return, and therefore import VAT will be recovered via the 13th Directive. This will potentially be a significant negative cash flow.
To avoid this, the UK supplier could change where the goods are imported as follows:
When sending the goods to Spain, the import occurs in France. The UK supplier will declare the goods for import into France and then report a transfer of own goods from France to Spain when the goods arrive in the Spanish warehouse. Where the goods are moving by lorry, this should not be too much of an issue.
Since 1 January 2022, France has a compulsory reverse charge for import VAT, and therefore there is no issue with recovering the import VAT paid so long as the conditions are met. The supplier will need a French VAT number to report a dispatch from France and report an acquisition in Spain. The supplier will also require a Spanish VAT number to report acquisitions, but will not be required to submit a VAT declaration since all sales from the Spanish warehouse are under the extended reverse charge.
Alternatively, the goods could be imported into a French warehouse from which the UK supplier can make intra-EU deliveries to its Spanish customers, thereby avoiding the need for a Spanish VAT number and the need for SII reporting should the threshold be breached.
VAT is a transactional tax, and once a transaction has happened, it cannot be undone. Therefore, it is important to fully understand the VAT consequences of a proposed transaction before a contract is signed. Once a contract is signed, the parties are committed to the VAT consequences unless the contract can be renegotiated before the goods are shipped. Once the goods are shipped, the VAT consequence is crystallised and cannot be changed.
Get in touch with our tax experts to discuss your supply chain VAT requirements or download our e-book Protecting Global Supply Chains.
In the European Union, the VAT rules around supplies of goods, as well as ’traditional’ two-party supplies of services, are well-defined and established. Peer-to-peer services facilitated by a platform, however, do not always fit neatly into the categories set out under the EU VAT Directive (Council Directive 2006/112/EC). There are ambiguities around both the nature of the service provided by the platform operator, and the status, for tax purposes, of the individual service provider (i.e., a driver for a ride-sharing service, or an individual offering their property for rent on an online marketplace). This creates a unique challenge for VAT policymakers.
The EU Commission has recently opened a public consultation on VAT and the platform economy to address these issues. We have previously discussed other initiatives proposed by the Commission including a single EU VAT registration and VAT reporting and e-invoicing. This blog will discuss the underlying challenges policymakers face and the specific proposals set out in the consultation, which could significantly impact digital platform operators and users.
A threshold question for the VAT treatment of digital platforms is whether the platform merely connects individual sellers with individual customers – i.e., acts as an intermediary – or whether it actively provides a separate service to the customer. This question is significant because services rendered to a non-taxable person by an intermediary, under Article 46 of the VAT Directive, are sourced to the location of the underlying transaction.
In contrast, services provided to a non-taxable person under a taxpayer’s name are sourced either to the supplier’s location or, in certain circumstances, to the customer’s location. Whether a particular platform is acting as an intermediary can be very fact-specific and can depend, for example, on the level of control exercised by the platform over pricing or user conduct.
To further muddy the waters, there are potential ambiguities for VAT involving:
A final source of ambiguity is whether an individual service provider qualifies as a taxable person when making only occasional supplies; this could raise the question of whether said supplies would attract VAT.
These ambiguities present an obvious challenge to the consistent VAT treatment of platforms across the Member States.
As part of its public consultation on “VAT in the Digital Age”, the EU Commission has proposed several solutions to the challenges listed above. Of these, three proposals directly address the ambiguous nature of services provided via platforms:
These proposals aim to provide clear guidelines to Member States on how platform services should be categorised, and, therefore, which VAT rules should apply under the Directive. Perhaps the most direct is the “deemed supplier” proposal, which would attach VAT liability to platform operators under defined circumstances.
A “deemed supplier regime” already exists for platforms that facilitate sales of low-value goods in the EU, so it is likely the Commission will seriously consider this option. Notably, the public consultation solicited comments on three different permutations of the deemed supplier regime, differing only in the scope of services covered.
Whichever direction the EU ultimately goes in, it is clear that a significant change is on the horizon for digital platforms. Platform operators and platform users should pay close attention to these ongoing consultations in the coming months.
Get in touch about the benefits a managed service provider can offer to help ease your business’s VAT compliance burden.
Update: 05 January 2023 by Andres Landerretche
Since Paraguay started implementing its National Integrated System of Electronic Invoicing (SIFEN) plan in 2017, the Undersecretary of State for Taxation of Paraguay (SET) has carried out the process.
The different phases are:
Due to the arrival of SET resolution 105/21, numerous companies have been voluntarily incorporated into the system. This is to prepare for mandatory electronic invoicing in 2023. SET resolution 105/21 provides measures for the issuance of electronic tax documents and an implementation calendar for 10 groups of taxpayers.
More than 80 million electronic documents have been issued since the system started operating. With resolution 105/2021 coming into force, it is expected that over 5,000 taxpayers must issue their receipts electronically by 2023.
The SIFEN is oriented towards large and medium-sized invoice issuers, whether they join voluntarily or are mandatorily designated by the Sub-Secretary of State for Taxation (SET).
The system contemplates two moments in its operation flow:
In the first moment, because of the commercial operation, the obliged taxpayer issues the digitally signed electronic document and sends it to the buyer or receiver in XML format. The issuer must make available a graphic representation of the document (KuDE) that supports the transaction in a physical or digital format if the buyer or recipient is not operating under the SIFEN.
The second moment comprises taxpayers’ transmission of the digitally signed XML document to the SET for its approval process.
SIFEN’s operating model is deferred, meaning that the issuer of an electronic invoice must transmit the electronic documents in an XML file for their respective validation. This needs completing within 72 hours of the electronic document’s signature – any later and it will be considered as extemporaneous transmission and subject to penalties.
Electronic documents acquire the nature of Electronic Tax Documents (DTE) with legal validity and tax incidence once signed and authorised by the Tax Administration by means of an approval transaction number.
Resolution 105/2021 expands the list of those required to advance with the mass use of electronic invoicing, establishing the dates from which 10 groups of taxpayers must electronically issue all tax documents.
In accordance with the calendar established by the resolution, the companies participating in the pilot phase and voluntary adhesion became mandatory for electronic invoicing as of 1 July 2022.
The other taxpayers made up of groups 3 to 10 must implement electronic invoicing according to the schedule that begins with group 3 on January 2 January 2023, and ends with Group 10 on 1 October 2024.
More information on the taxpayer groups is available on the SIFEN web portal.
Voluntary adoption is possible for all taxpayers who wish to issue invoices electronically via the SIFEN. The minimum requirements are for companies to use software that integrates with the SIFEN and holds a valid Digital Signature certification.
Still have questions about Paraguay e-invoicing? Speak to our team of experts.
Update: 25 March 2022 by Victor Duarte
The electronic invoicing system in Paraguay has been in development since 2017 according to the plan carried out by the Undersecretary of State for Taxation (SET) to modernise and improve tax collection and minimise the incidence of tax fraud.
The introduction of the Integrated National Electronic Invoicing System (Es. Sistema Integrado de Facturación Electrónica Nacional -SIFEN –) meant the introduction of a new e-invoicing regime in the country. The adoption of this new system is currently in its voluntary adhesion phase, which began in 2019, and has allowed entrepreneurs, merchants, and companies to issue e-invoices optionally. However, from July 2022, the use of the system will gradually become mandatory for certain taxable persons.
Taxpayers in Paraguay can use the SIFEN to issue Electronic Tax Documents (Es. Documento Tributario Electrónico – DTE). The DTE is a digital version of the invoice and other traditional documents, which has tax and legal validity. The DTE has become a modern, effective, secure and transparent form to issue and manage e-invoices for distinct types of business operations.
The DTEs are validated upon issuance by the SAT to support the VAT deductions and transactions related to income tax. Among the distinct types of DTE in Paraguay, we find:
The e-invoices issued by the taxable persons that have adhered to the SIFEN are generated in XML format. The authenticity and integrity of each document are guaranteed through the digital signature and the control code that DTEs include. Each document must be sent electronically to the tax administration for its clearance.
The SIFEN is responsible for verifying and validating each document. Once it is established that the DTE meets all the requirements, it becomes a legal e-invoice. The taxable persons issuing the e-invoice then receive the verification results through the web service system.
After the e-invoice is cleared, suppliers can send the DTE to their buyers via email, data messaging or other means.
The Paraguayan Undersecretary of State for Taxation recently published a General Resolution providing administrative measures for the issuance of DTEs. This resolution also established a phased schedule of implementation, in which certain taxable persons will be required to issue e-invoices and other DTEs using the SIFEN.
The implementation schedule consists of ten stages starting on 1 July 2022 with all taxpayers who joined the pilot program to adopt the SIFEN. From January 2023, the mandate will include more taxpayers. However, it is not yet defined which companies will start in that stage. The SET aims to cover all taxpayers carrying out economic activities in the country by October 2024.
Companies in Paraguay must get ready to issue e-invoices under the requirements of the SIFEN. From 1 July 2022, all companies in the country will be able to use this system voluntarily. The list of taxpayers required to comply with the mandate will be available on the SIFEN website and on the SET website (www.set.gov.py). The SET will notify affected taxpayers via the Paraguayan Tax Mailbox known as “Marandu.”
Get in touch with our team of experts today to ensure compliance with the latest Paraguayan e-invoicing regulations.
Governments throughout the world are introducing continuous transaction control (CTC) systems to improve and strengthen VAT collection while combating tax evasion. Romania, with the largest VAT gap in the EU (34.9% in 2019), is one of the countries moving the fastest when it comes to introducing CTCs. In December 2021 the country announced mandatory usage of the RO e-Factura system for high-fiscal risk products in B2B transactions starting from 1 July 2022, and already now they are taking the next step.
For more information in general see this overview about e-invoicing in Romania or see this overview on VAT Compliance in Romania.
The Ministry of Finance recently published a draft Emergency Ordinance (Ordinance) introducing a mandatory e-transport system for monitoring certain goods on the national territory starting from 1 July 2022. The RO e-Transport system will be interconnected with existing IT systems at the level of the Ministry of Finance, the National Agency for Fiscal Administration (ANAF) or the Romanian Customs Authority.
According to the draft Ordinance, the transportation of high-fiscal risk products will be declared in the e-transport system a maximum of three calendar days before the start of the transport, in advance of the movement of goods from one location to another.
The declaration will include the following:
The system will generate a unique code (ITU code) following the declaration. This code must accompany the goods that are being transported, in physical or electronic format with the transport document. Competent authorities will verify the declaration and the goods on the transport routes.
The first question that comes to mind is what the definition of high-fiscal risk products is. The Romanian Ministry of Finance had already established a list of high-fiscal risk products for mandatory usage of the RO e-Factura system. However, it is still unknown if the high-fiscal risk product list will be the same. The Ministry of Finance will establish a subsequent order defining the high-fiscal risk products in the coming days.
If the transportation includes both goods with high-fiscal risk and other goods that are not in the category of high-fiscal risk, the whole transportation must be declared in the RO e-Transport system.
The RO e-Transport system is established to monitor the transportation of high-risk goods on the national territory.
This includes the following:
The carriage of goods intended for diplomatic missions, consular posts, international organisations, the armed forces of foreign NATO Member States or as a result of the execution of contracts, are not in the scope of the RO e-Transport system.
The draft Ordinance is expected to be published in the official gazette in the coming days. Following the publication, the Ministry of Finance will establish subsequent orders to define the categories of road vehicles and the list of high-fiscal risk products for the RO e-Transport system. Moreover, as of 1 July 2022, using the RO e-Transport system will become mandatory for transporting high-fiscal risk products.
Noncompliance with the rules relating to the e-Transport system will result in a fine reaching LEI 50,000 (approx. EUR 10,000) for individuals and LEI 100,000 (approx. EUR 20,000) for legal persons. In addition, the value of undeclared goods will be confiscated.
Need to ensure compliance with the latest regulations in Romania? Get in touch with our tax experts. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.
The European Commission’s “VAT in the Digital Age” initiative reflects on how tax authorities can use technology to fight tax fraud and, at the same time, modernise processes to the benefit of businesses.
A public consultation was launched earlier this year, in which the Commission welcomes feedback on policy options for VAT rules and processes in a digitized economic EU. In an earlier blog post, Sovos explored the aspects of a single EU VAT registration. It’s one of the main initiatives proposed by the Commission to adapt the EU VAT framework to the digital age. Another critical issue is VAT reporting obligations and e-invoicing, discussed in this blog.
The Commission sees a need for modernising VAT reporting obligations and is considering the possibility of further extending e-invoicing. The term Digital Reporting Requirements was introduced by the Commission for any obligation to report transactional data other than the obligation to submit a VAT return, i.e. reporting transaction by transaction. This means that Digital Reporting Requirements include various types of transactional reporting requirements (e.g. VAT listing, Standard Audit File/SAF-T, real-time reporting) and mandatory e-invoicing requirements.
These measures have been implemented in various fashions in different EU Member States over the past couple of years resulting in diverse rules and requirements for VAT reporting and e-invoicing across the EU. The current Commission initiative is an opportunity for the EU to obtain harmonisation in this area. Its public consultation is asking for input as to which road to take.
The public consultation contains several policy options to consider. One would be to leave things as they currently stand with no harmonisation and the continued need for Member States to request a derogation if they wanted to introduce mandatory e-invoicing. At the other end of the scale, a further option would be to introduce full harmonisation of transactional reporting for VAT for both intra-EU and all domestic transactions.
And sitting between these extremes, are several other routes. Instead of making a harmonised solution mandatory such a solution could be simply recommended and voluntary, coupled with the removal of the need to request a derogation ahead of introducing B2B e-invoicing mandates. Another way is to have taxpayers keep all transactional data and make it available on request by the authorities. And one final option could be to adopt partial harmonisation where the VAT reporting for all intra-EU supplies is aligned and mandatory but where domestically it remains optional.
While these policy options formally remain open to public consultation until 5 May here, they must now be viewed in the light of the European Parliament resolution of 10 March 2022 with recommendations to the Commission on fair and simple taxation supporting the recovery strategy.
In its resolution, the European Parliament calls upon the Commission to take actions regarding e-invoicing and reporting, to reduce the tax gap and compliance costs. Among the measures recommended are to set up a harmonised common standard for e-invoicing across the EU without delay and establish the role of e-invoicing in real-time reporting. Furthermore, the European Parliament proposes that the Commission explore the possibility of a gradual introduction of obligatory e-invoicing by 2023, where state-operated or certified systems should administrate the invoice issuance. In both cases focus should be on a significant reduction of costs of compliance, especially for SMEs.
It remains to be seen how the Commission will manage to align the European Parliament’s recommendations with their policy options and Member States where in several cases solutions have already been implemented.
Need more information? Sovos’ VAT Managed Services can help ease your business’s VAT compliance burden. Contact our team to learn more.
Making Tax Digital for VAT – Expansion
Beginning in April 2022, the requirements for Making Tax Digital (MTD) for VAT will be expanded to all VAT registered businesses. MTD for VAT has been mandatory for all companies with annual turnover above the VAT registration threshold of £85,000 since April 2019. As a result, this year’s expansion is expected to impact smaller businesses whose turnover is below the threshold but who are nonetheless registered for UK VAT.
What is MTD for VAT – A refresher
Under MTD, businesses must digitally file VAT returns using “functional compatible software” which can connect to HMRC’s API. Companies must also use software to keep digital records of specified VAT-related documents. Stored records must include “designatory data,” such as the business name and VAT number, details on sales and purchases, and summary VAT data for the period. The use of multiple pieces of software is permitted. For example, companies can use accounting software to store digital records. Additionally, “bridging software” can be used to establish the connection with HMRC’s API and to submit the VAT returns.
Since April 2021, businesses must also comply with the digital links requirement. Under this requirement, a digital link is required whenever a business uses multiple pieces of software to store and transmit its VAT records and returns under MTD requirements. A digital link occurs when a transfer or exchange of data can be made electronically between software programs, products, or applications without the need for or involvement of any manual intervention.
Hospitality reduced rate expiration
In 2020, in response to the COVID-19 pandemic, the British government introduced a 5% reduced rate on specified hospitality services. This reduced rate was increased to 12.5% starting 1 October 2021. The reduced rate is currently scheduled to expire at the end of March. As a result, the following services will return to being taxed at the standard rate beginning in April:
The expiration of this reduced rate will impact businesses in both the UK and the Isle of Man.
Get in touch with Sovos’ team of experts about the benefits a managed service provider can offer to help ease your company’s VAT compliance burden.
In November 2021, a Draft Royal Decree was published by the Chancery of the Prime Minister of Belgium, aiming to expand the scope of the existing e-invoicing mandate for certain business to government (B2G) transactions by implementing mandatory e-invoicing for all transactions with public administrations in Belgium. This obligation was already in place for suppliers of the centralised public entities of certain regions (Brussels, Flanders, Wallonia). However, going forward, it will include all public entities in all Belgian regions.
More specifically, the roll-out for mandatory issuance of e-invoices by the suppliers of public institutions in Belgium will be carried out in the following phased approach:
As a result of the transposition of the Directive 2014/55/EU, all Belgian government bodies are already obliged to be able to receive and process e-invoices within public procurement. This new national legislation expands the Directive’s scope and mandates the issuance of e-invoices by all suppliers to the federal government.
These B2G developments are not the end of the story. They are just the beginning. The Belgian Minister of Finance, Vincent Van Peteghem, announced in October 2021 that the government intends to extend the existing B2G e-invoicing obligation to also cover B2B transactions. Nevertheless, official sources have not yet communicated formal information specifying details of the mandate and its following implementation. Rumour has it that a legislative proposal for the B2B e-invoicing mandate was going to be published during 2022 with the implementation process happening in 2023.
However, considering the European Parliament Resolution last week which strongly favours harmonised and mandatory e-invoicing in the EU, Belgium will likely hold its horses at least until the Commission produces a proposal for how to manage e-invoicing and reporting in the Union.
Need to ensure compliance with the latest Belgian e-invoicing requirements? Speak to our team. Follow us on LinkedIn and Twitter to keep up to date with the latest regulatory news and updates.
Registering for Insurance Premium Tax (IPT) with tax authorities across Europe can be challenging and complex, particularly when multiple territories are involved. There are many elements businesses must consider when registering for IPT. What are the required supporting documents? Who can sign? Do documents need to be legalised? Is there a two-step process? These are just a few of the questions you may ask yourself during the registration process.
Based on common pain points we come across with our IPT customers, we’ve put together our five top tips to help make your IPT registration journey easier:
Your company is likely already writing business in the territories you need to register with. Therefore, it’s important the registration is completed promptly to avoid sanctions that some tax authorities may impose. We recommend signing and returning the documents as soon as possible to avoid such complications.
European tax authorities are very specific with their requirements, and depending on the EU Member State, the rules may be different. Generally, supporting documents should be dated within the last six months and clearly legible. Some tax authorities require documents to be notarised and apostilled, some accept electronic signatures and some do not. The registration process can be delayed when supporting documents are incorrect, or templates are completed incorrectly. To avoid delays in your registration submission, be sure to pay close attention to the instructions provided.
Whilst some requested information may seem intrusive and personal, there is always a reason for the request. We will never ask you to provide anything more than what the tax authorities require to complete an IPT registration. Your personal data is always treated with the strictest confidentiality, security and complies with GDPR standards.
Timelines for IPT registration in EU Member States can vary. Some tax authorities, such as Germany, confirm registration within a week of submission, whereas Greece can take 8-12 weeks. Don’t be concerned if your registration is not confirmed as fast as you had expected.
We are keen to have your registration completed as efficiently and swiftly as possible. If you have any queries, your registration representative is always here to help. We can address your questions by email or arrange a call to go over the entire process if this is preferable to you.
Sovos’ IPT Managed Services provides support from our team of experts using software that is updated in real-time. Additionally, our team of regulatory specialists monitor and interpret global IPT regulations, so you don’t have to.
Contact our team of experts to discover how your business can benefit from a complete end-to-end IPT offering, or download our e-book, IPT Compliance: A Guide for Insurers, to learn more about IPT across Europe.
Poland has been moving towards introducing the CTC framework and the system, the Krajowy System e-Faktur (KSeF), since early 2021. As of 1 January 2022, the platform has been available for taxpayers who opt to issue structured invoices through KSeF and to benefit from the introduced incentives.
As the taxpayers have been using KSeF for a while, let’s take a closer look at what has been happening and will happen in the future regarding Poland’s CTC reform.
Initially presented as a draft act by the Ministry of Finance in November 2021, the regulation on the use of KSEF was finally adopted and published in the Official Gazette on 30 December 2021 after several reiterations.
The regulation covers mainly the categories of authorisations, methods of authentication, and information required to access the structured invoices.
According to the regulation, taxpayers using KSEF are required to authenticate using one of the following methods: Qualified Electronic Signature, Qualified Electronic Seal, Trusted Signature, or Token.
A trusted signature confirms the identity assigned to a specific Polish Identification (PESEL) number. The token method can be used to grant authorisations in the KSeF once the taxpayer has been authenticated.
The Polish tax authority has published new information on its website about KSeF features including FAQs and further documentation.
The FAQs include information regarding the scope and operational side of the system, whereas the sample XML files and the information brochure shed light on the logical structure of e-invoices and mapping requirements.
Although the tax authority continues to make every effort to clarify the many aspects of the new CTC system in Poland, we still have a long way to go regarding the full implementation of KSeF.
For instance, during the public consultation of the draft act the Ministry of Finance stated taxpayers would be able to download structured invoices via API in XML or PDF format. As of today, there is no technical information available regarding the PDF generation within the system using the API. The tax authority has published the technical documentation related to the outbound process but there is still no documentation available on the inbound side.
More importantly, a decision authorising Poland to introduce special measures derogating from Articles of the EU VAT Directive is yet to be obtained from the EU Council for roll-out of the e-invoicing mandate for all B2B transactions. The current Polish VAT Act requires the buyer’s acceptance to receive structured invoices. As the Polish authorities aim to make the KSeF mandatory in 2023 an amendment of this provision is expected once the special measures have been authorized by the EU Council.
Need to ensure compliance with the latest CTC requirements in Poland? Get in touch with our tax experts.
For more information see this overview about e-invoicing in Poland, Poland SAF-T or VAT Compliance in Poland.
Update: 22 January 2024 by Tânia Rei
In recent years, tax authorities worldwide have embraced digital transformation to streamline compliance processes, particularly through the increasing implementation of pre-filled VAT returns.
Below we explore the countries that currently provide pre-filled VAT returns or are actively working on projects to implement them:
For more information on the rollout of pre-filled VAT returns, contact our team of experts.
Update: 11 April 2023 by Gabriel Pezzato
The trend of tax authorities pre-filling VAT returns using data gathered in continuous transaction controls (CTCs) is persisting across many countries.
CTCs see transactional data sent in real-time through e-invoices or e-reports auto-populate VAT returns and ledgers. Below is the status of the countries that either make available pre-filled returns or have projects to do so:
Disproving returns created by the tax authorities using transactional data sent by the taxpayer is a challenging task. Tax authorities assume they either have all the data they need for an assessment or the taxpayer has failed to submit it in good time.
Therefore, it is imperative to maintain complete electronic records that pre-filled VAT returns can reconcile. Possessing analytics solutions that can perform such analysis in an automated way might also help taxpayers to identify mismatches and correct errors.
For more information on the rollout of pre-filled VAT returns, contact our team of experts.
Update: 9 March 2022 by Charles Riordan
We have previously written about the growing trend of tax authorities “pre-filling” VAT Returns using data from electronic invoices – a trend that began in Latin America and has since spread to several European countries. These pre-filled returns, when accurate, can serve as a simplification measure for taxpayers, who can fulfill their reporting obligations simply by approving what has been generated for them. At the end of 2021, two European countries, Italy and Spain, introduced pre-filled VAT Returns, with Hungary and Portugal planning to introduce them in some capacity.
The landscape for pre-filled VAT Returns has changed significantly in 2022. Hungary and Portugal have both postponed their plans to introduce them. The Hungarian tax authority (NAV) has reversed its decision to introduce pre-filled returns after delaying the eVAT project for several months due to the ongoing COVID pandemic. NAV will instead focus on enhancements to its real time invoice reporting model (RTIR). Because any efforts to pre-fill VAT Returns are dependent on the state of RTIR, it would not be surprising to see NAV revive the eVAT project down the line.
Portugal, meanwhile, had planned to potentially pre-fill sections of its annual VAT Return with data from the so-called “Accounting SAF-T,” which was due to become a mandatory filing in 2022. However, following a rejection of the state budget, the Portuguese tax administration is now stating that Accounting SAF-T will become a mandatory filing from 2024.
On the other side of the ledger, 2022 has seen France introduce pre-populated data into its VAT Returns, while Greece is considering using its myDATA system to pre-fill VAT Returns for taxpayer approval.
France is a particularly interesting case, as it has no e-invoicing regime to pull data from. Instead, auto-population of data on the French VAT Return is limited to information on imports, based on electronic customs declarations. France plans to introduce mandatory B2B e-invoicing in 2024, which may end up widening the scope of pre-population. This new approach was spurred on by a transfer of responsibility from French Customs authorities to French tax authorities for collecting VAT due on imports. Notably, only the VAT due to the authorities, as settled in the VAT Return, is pre-filled; corresponding input VAT amounts must be populated by the taxpayer (likely because some taxpayers won’t be able to claim full deductions).
Greek plans to introduce pre-filled VAT Returns are more undetermined, but some reports claim that a pilot program will be introduced at some point during 2022.
It is clear that, despite delays in Hungary and Portugal, European tax authorities are demonstrating a continuing interest in utilising pre-filled VAT returns. In fact, from a tax authority perspective, pre-filled VAT returns are the natural evolution from a mandatory e-invoicing system or a real-time invoice data reporting system – the data is already at their disposal. From the taxpayer standpoint, it is therefore imperative to maintain accurate and complete electronic records that can be reconciled with pre-filled VAT Returns. This will help taxpayers to correct any errors or raise any necessary challenges to VAT assessments. A high-quality accounting software program can be a useful tool to achieve this end.
Get in touch about the benefits a managed service provider can offer to ease your VAT compliance burden
Many businesses will now be involved in “cross border” transactions meaning that a business in one territory will sell and, often, deliver goods to a customer located within another territory. The existence of two or more tax territories in the transaction, and the possibility that there may be a customer in the EU and a supplier in a third country such as the UK, will inevitably lead to VAT challenges with varying degrees of complexity.
Different challenges will be faced by suppliers involved in B2B transactions compared to B2C transactions – although there will also be some common issues. This article will focus on B2B transactions.
Let’s consider a UK supplier with a contract to supply goods manufactured in the UK to customers within the EU.
The first point to recognise is that to deliver the goods to the EU customer the goods must pass through an EU customs border. And here is the first point for supply chain management.
Who will import the goods into the EU and what are the considerations?
The customer’s starting point is likely to be that they will want the supplier to import the goods and a salesperson, eager to please their customer, is likely to agree. Is this a problem for the supplier? OH YES!
A salesperson returns triumphant with an order with Incoterms of DDP (Deliver Duty Paid) – but is this a cause for celebration?
Deliver Duty Paid means that the supplier must deliver the goods to the territory of the customer from which, for VAT purposes, a local sale will be made. This will require the UK supplier to import the goods into the EU and this creates the first issue.
Under the Union Customs Code (UCC) the person presenting the goods to the customs authority (the declarant) must be established within the EU. An EU established business importing goods can be both the importer and the declarant. A business established outside the EU can be the importer but not the declarant. In this case the non-EU importer must appoint an EU established business to act as its “indirect customs agent”. This agent is jointly and severally liable for the import duties that are due and there are not too many businesses which provide such a service because of the risk. So the seller could find itself unable to satisfy a contractual obligation because it cannot find someone to act as its indirect customs agent in time to make the required delivery – or at all.
If a supplier successfully manages to overcome this hurdle then there is the issue of dealing with local VAT on the sale – must the supplier register for VAT and apply it to the sales invoice – or does the reverse charge apply? And will the customer pay the non-refundable duty costs incurred by the supplier at the border?
The takeaway here is that a contract concluded under DDP terms may be much easier for the sales team to achieve but it can create serious issues down the line. UK suppliers should seek to agree any Incoterm other than DDP wherever possible.
To reduce the possibility of delays some UK suppliers have set up warehouse facilities within the EU from which deliveries can be made. One issue which can affect both VAT and direct taxes is whether the warehouse creates a permanent or fixed establishment. For the purposes of this article we assume no – although creating a permanent establishment could avoid the need to appoint an indirect customs agent.
Once the UK supplier has successfully brought the goods into an EU warehouse it will make deliveries to customers. One big consideration here is how the import VAT is dealt with. Several Member States offer the possibility to postpone import VAT to the VAT return via a reverse charge. In such circumstances import VAT deduction is guaranteed so long as the formalities are followed and the business is able to fully recover VAT. Where goods are imported into a Member State where import VAT must be first paid and then deducted consideration as to how this will happen is important. Where there is a VAT registration in place, the VAT can normally be recovered via the VAT return. However, where the Member State of import has a reverse charge mechanism for domestic sales, a non-EU supplier will need to make 13th Directive claims to recover import VAT. One Member State where this will arise is Spain which has reciprocity rules in place so not all businesses are able to make 13th Directive claims.
Therefore if a supplier is considering utilizing an EU warehouse or making sales on a DDP basis, they should first map out all of the likely flows and then determine the VAT treatment to understand if any negative VAT issues will arise. The planning opportunities and potential pitfalls that arise from such a warehouse will be considered in a later article.
Get in touch with our tax experts to discuss your supply chain VAT requirements or download our e-book Protecting Global Supply Chains.
Unlike many other country initiatives that we have seen in the e-invoicing space recently, Australia does not seem to have any immediate plans to introduce continuous transaction controls (CTC) or government-portal involvement in their B2B invoicing.
Judging from the recent public consultation, current efforts are focused on ways to accelerate business adoption of electronic invoicing. This consultation builds on the government’s previous outreach undertaken in November 2020 on “Options for the mandatory adoption of e-invoicing by businesses”, which led to a serious government effort to enhance the value of e-invoicing for businesses and increase business awareness and adoption.
In addition to a decision to make it mandatory for all commonwealth government agencies to receive PEPPOL e-invoices from 1 July 2022, the Australian government seeks to also boost e-invoicing in the B2B space, but without the traditional mandate for businesses to invoice electronically. Instead, the proposal is to implement the Business e-Invoicing Right (BER).
Under the government’s proposal, businesses would have the right to request that their trading parties send an e-invoice over the PEPPOL network instead of paper invoices.
To make and receive these requests, businesses need to set up their systems to receive PEPPOL e-invoices. Once a business has this capability, it would be able to exercise its ‘right’ and request other companies to send them PEPPOL e-invoices.
According to the current proposal, BER would be delivered in three phases, with the first phase to include large businesses, and the later stages to include small and medium-sized businesses. The possible rollout of BER would be as follows:
The objective of the Australian BER initiative to boost the adoption of B2B e-invoicing is complemented by a proposal for several other initiatives supporting businesses in this direction. One measure would be the enabling of PEPPOL-compatible EDI networks. As EDI networks represent a barrier to broader adoption of PEPPOL e-invoicing, particularly for small businesses that interact with large businesses that use multiple EDI systems, the proposal to enable PEPPOL-compatible EDI networks could ultimately reduce costs for businesses currently interacting with multiple EDI networks. Furthermore, the government is contemplating expanding e-invoicing into Procure-to-Pay. Businesses may realise more value from adopting e-invoicing if the focus grows to embrace an efficient and standardised P2P process that includes e-invoicing.
Finally, integrating e-invoicing with payments is another proposed means to boost e-invoicing. This would allow businesses to efficiently receive invoices from suppliers directly into their accounting software and then pay those invoices through their payment systems.
How efficient the proposed measures will be in accelerating adoption of e-invoicing, and whether the Australian government will feel it was the right decision not to introduce a proper e-invoicing mandate, as is becoming more and more common globally, remains to be seen.
Need help staying up to date with the latest VAT and compliance updates in Australia that may impact your business? Get in touch with Sovos’ team of experts today.