On 1 July 2021 the EU E-Commerce VAT Package was introduced. The package replaced existing distance-selling rules and extended the Mini One Stop Shop (MOSS) into a wider-ranging One Stop Shop (OSS).

The implementation of the EU E-Commerce VAT Package was designed to simplify the VAT reporting requirements for sellers and improve the tax take for Member States.

Two months in: we take a look at how it’s going.

Delays and teething problems

There were unfortunately some initial delays and teething problems when the EU E-Commerce VAT Package was introduced, which is to be expected with the adoption of such a significant new system, but as with any new scheme these can be resolved over time.

Some examples include:

Issues with the import of goods

There are also issues associated with the import of the goods.

Some Member States disallow the import of certain categories of goods due to local restrictions e.g. foodstuffs, plants etc.

It’s sometimes unclear if freight forwarders have used IOSS or not and this could lead to repeated errors of underpayment or overpayment of VAT.

Some non-EU vendors are trying to avoid an IOSS registration by stating that the customer is the importer of record. Such practice happened before the introduction of IOSS but not always at the same level as it is now – and was not always spotted or queried.

However, since the introduction of the IOSS, some tax authorities, including Germany, are questioning such an approach on the grounds that the carrier who imports the goods is acting for the non-EU vendor and is not known by the buyer.

This means import VAT is due by the vendor who must then also charge German VAT. For cases that have already occurred there may be an issue with recovery of the import VAT, as the evidence required to support the deduction will have been issued in the wrong name (consumer).

It’s still early days for the EU VAT E-Commerce Package and initial teething problems are to be expected. One thing is certain, navigating these new VAT schemes is complex. Sovos is here to help and we’ll keep you updated on the latest regulatory changes.

Want to know more about simplifying EU VAT with IOSS?

Join our latest webinar on September 22, 2021 to learn how you can use the Import One-Stop Shop (IOSS) to simplify your EU VAT compliance and unlock the full potential of the EU e-commerce market.

Take Action

Still have questions about OSS and IOSS? Download our e-book to understand the implications of the 2021 EU e-commerce VAT package and ensure your business is ready by 1 July 2021 for the significant changes ahead

Back in 2019, Portugal passed a mini e-invoicing reform consolidating the country’s framework around SAF-T reporting and certified billing software.

Since then, a lot has happened: non-resident companies were brought into the scope of e-invoicing requirements, deadlines have been postponed due to Covid, and new regulations were published. This blog summarises the latest and upcoming changes.

QR Code

Introduced in 2019, the de facto implementation of the QR code requirement was delayed, and is now expected to be fully implemented by taxpayers in January 2022. A QR code should be included in all invoices. Technical specifications about the content and placement of the code in the invoice are available on the tax authority’s website.

ATCUD – Unique ID and validation codes

The ATCUD is a unique ID number to be included in invoices and is part of the content of the QR code. The ATCUD is a number with the following format ‘ATCUD:Validation Code-Sequential number’.

To obtain the first part of the ATCUD – the so-called ‘validation code’ -, taxpayers must communicate the document series to the tax authority along with information such as type of document, first document number of the series, etc.

In return, the tax authority will deliver a validation code. The validation code will be valid for the whole document series for at least a fiscal year. The second part of the ATCUD – the ‘sequential number’ – is a sequential number within the document series.

This month, the Portuguese tax authority published technical specifications for obtaining the validation code, creating a new web service. To access this web service, a specific certificate obtained from the tax authority is required and can be assigned to taxpayers or software service providers.

In addition, the tax authority has created a standard list of document classes and types, enabling the communication of document types in a structured format.

An ATCUD will be required in all invoices from January 2022. To be ready for the deadline, taxpayers must get the series’ validation codes during the last half of 2021 to apply in invoices issued in the beginning of 2022.

Obligations for non-resident companies

In April this year, Portugal clarified that non-resident companies with a Portuguese VAT registration should comply with domestic VAT rules. This includes the use of certified billing software for invoice creation, among others. These companies must also ensure integrity and authenticity of e-invoices. In Portugal, integrity and authenticity of invoices are presumed with the use of a qualified electronic signature or seal, or use of EDI with contracted security measures.

Consequently, since 1 July 2021, non-established but VAT registered companies must adopt certified billing software to comply with the Portuguese law as required by Law-Decree 28/2019, Decision 404/2020-XXII, and Circular 30234/2021.

E-invoices in B2G scenarios

The Portuguese e-invoicing mandate for business-to-government transactions includes a format requirement attached to specific transmission methods. In other words, invoices to the public administration must be issued electronically in the CIUS-PT format and transmitted through one of the web services made available by the public administration.

Initially, a phased roll-out started in January 2021, obliging large companies to issue e-invoices to public buyers. In July, the subjective scope was enlarged to include small and medium-sized businesses. The last step is to include microenterprises by January 2022.

Due to the Covid pandemic, Portugal established a grace period that has been renewed several times, whereby PDF invoices would be accepted by the public administration. Currently, the grace period runs until 31 December 2021, meaning that, in practice, all suppliers of the public administration, regardless of their size, should comply with the e-invoicing rules in public procurement by 1 January 2022.

Take Action

Need to ensure compliance with the latest e-invoicing regulations? Get in touch with our tax experts at Sovos.

In our last look at Romania SAF-T, we detailed the technical specifications released from Romania’s tax authority. Since then, additional guidance has been released including an official name for the SAF-T submission: D406.

Implementation timeline for mandatory submission of Romania SAF-T

To alleviate taxpayer concerns due to the complexity of the report and difficulties with extraction, the tax authorities are introducing a voluntary testing period which is due to begin in the coming weeks. During this period, taxpayers may submit what is known as D406T which will contain test data that the authorities will not use in the future for audit purposes.

Submission deadlines for Romania SAF-T

The Romanian SAF-T, D406, is based on the OECD schema version 2.0 which contains five sections:

The submission deadlines are as follows:

Taxpayers must submit sections of D406 monthly or quarterly, following the applicable tax period for VAT return submission.

For the first report, tax authorities have announced a grace period for the first three months of submission. This is from the date when the deposit obligation becomes effective for that taxpayer, where non-filing or incorrect filing will not result in penalization if correct submissions are submitted once the grace period ends.

Submission information for Romania SAF-T

The D406 must be submitted electronically in PDF format, with an XML attachment and electronic signature. The size of the two files must not exceed 500 MB. If the file is larger than the maximum limit, the portal will not accept it and the file must be divided into segments according to details set out in the Romanian guidance.

The tax authorities have indicated that, should a taxpayer find errors in the original submission, a corrective statement may be submitted to rectify these errors. The taxpayer should submit a second full corrected file to replace the original file that contains errors. If a taxpayer submits a second D406 for the same period, it is automatically considered a corrective statement.

Take Action

Need to ensure compliance with the latest Romania SAF-T requirements? Speak to our team. Follow us on LinkedIn and Twitter to keep up-to-date with the latest regulatory news and updates or see this overview on VAT Compliance in Romania.

Welcome to our Q&A two-part blog series on the French e-invoicing and e-reporting mandate, which comes into effect 2023-2025. That sounds far away but businesses must start preparing now if they are to comply.

The Sovos compliance team has returned to answer some of your most pressing questions asked during our webinar.

We have outlined the new mandate, e-invoicing specifically, and questions around this topic in our first blog post.

This blog will look at the other side of the mandate – e-reporting obligations. These will apply to B2C and cross-border B2B transactions in France, which must be periodically reported.

Payments E-reporting

First let’s look at common questions around payments e-reporting.

What are the invoice and payment statuses to be reported?

Here is a slide from our webinar showing invoice statuses, whether these are mandatory, recommended, or free, origins, action to take if rejected, status data, and when it needs to be reported:

Who is responsible for payment e-reporting? The buyer, the seller, or both?

It was initially rumoured to be both on the buyer and the seller side, but the latest information from DGFIP clearly states that it will be the responsibility of the seller to report the invoice status, and, if applicable, its payment status.

Some further clarification is needed though since the seller is dependent on the buyer’s response on some status (e.g. ‘invoice rejected’).

‘Partner’ platform certification requirements

Your e-invoicing and e-reporting project cannot be done in isolation. This is a significant project with many dependencies that involve external third parties.

There will be one or, in most likelihood, several third parties in the middle of the transaction chain. This will include Chorus Pro, chosen by the French government as the official and obligatory platform for businesses to issue e-invoices to public administrations.

This section covers common questions on partner platform certification requirements.

Is there a list of official validated partner platforms?

The 13 July 2021 DGFIP workshop dedicated to this matter highlighted that there would be a registration process for third-party platforms, as well as taxpayers who would want to run their own platform.

The registration process will consist of two phases:

Phase 1. A prior selection by the tax authorities based on the general profile of the candidate (e.g. are they up to date in their own tax payment duties?) and the services they propose;

Phase 2. Within 12 months after registration, an independent audit would have to performed that demonstrates that the platform meets the DGFIP requirements, such as:

<liPerforming the control and mapping activities (extraction of invoicing data for both e-invoicing and e-reporting, certain invoice validation checks – mandatory fields, check sums, Customer ID verification – mapping to and from a minimum set of mandatory formats, compliance with GDPR, etc)

A few other key points to note are:

Implementation timeline

What is the current expectation on when exact required fields with be supplied by the government (invoice specs with all required fields and values)?

Excel files are available as a draft document at a very detailed level which Sovos can provide on request. The final specs should be known by the end of September 2021.

Take Action

Still have questions about e-reporting? Access our webinar on-demand for more information and advice on how to comply.

In our recent webinar, Sovos covered the new French e-invoicing and e-reporting mandate, and what this means for businesses and their tax obligations.

We are witnessing a global move towards Continuous Transaction Controls (CTCs), where tax authorities are demanding transactional data in real-time or near real-time, affecting e-invoicing and e-reporting obligations.

As such, from 2023, France will implement a mandatory B2B e-invoicing clearance and e-reporting obligation in an effort to increase tax efficiency, cut costs, and fight fraud.

The pace towards this mandate has been accelerating lately with the adoption of the Finance law for 2021, followed by a number of workshops organised by the Ministry of Finance — namely the Direction Générale des Finances Publiques (DGFIP).

In the first of two blogs on the mandate, we answer some of your most pressing questions asked during our webinar.

In part one, we focus on setting the scene in terms of scope, and cover questions around e-invoicing specifically, invoicing file formats, processes and controls, and archiving.

The second blog covers questions around e-reporting obligations.

Scope of the regulation

In this section, we answer questions on the scope of the regulation, such as which companies must comply with the mandate and how.

Are non-resident companies (foreign companies with only a French VAT-registration) obliged to fulfil this new regulation? Are foreign legal entities with a French VAT number in scope?

The Budget Laws for 2020 and 2021 introduced the CTC scheme from a legal perspective. Both include “persons subject to VAT” in the scope.

VAT registration is a strong indication that a company is subject to VAT, but classification as a VAT “taxable person” also depends on other factors.

Therefore, it is not as simple as just looking at whether a company has a local VAT registration, to decide whether it is subject to VAT and therefore targeted by the mentioned budget laws.

However, the scope cannot be unilaterally decided by France as the French CTC scheme is dependent on a derogation from the EU Council.

As a comparison, Italy initially included all taxable persons in the scope of its e-invoicing clearance mandate, including those with a mere VAT registration but no establishment. But in this case, the EU Council limited the scope (of its derogation) to persons established in Italy.

From an e-invoicing perspective, we can therefore expect that France will need to follow the Italian path (due to its reliance on a derogation from the EU Council), limiting the scope to established persons.

DGFIP has however suggested that companies that are non-established but VAT registered will be in scope of the reporting obligation.

Is import of goods in the scope of e-reporting? What about import of services?

Only imports (supplies from outside of the EU) of services are in the scope of the current proposal.

E-invoice formats

In this section, we discuss permitted e-invoice formats.

The fact that the new regime creates a specific process for domestic B2B e-invoicing does not change the need for businesses to demonstrate the integrity and authenticity of each invoice.

This can be done through one of the 3 legal methods defined by the existing regulations:

To ensure there’s no impact of the reform on integrity and authenticity demonstration methods, one can still apply any of them.

However, with the new regime, e-invoicing data sent to the DGFIP does need to be in a structured format.

Will digital signatures be required?

Digital signatures are not strictly required today and will not be strictly required in the new scheme. Integrity and authenticity will still need to be ensured though, irrespective of invoice format, as is the case today.

The options remain the same; use of digital signatures, use of EDI with security measures, or the BCAT option whereby the audit trail should prove the transaction and its authenticity and integrity.

Are PDF and XML invoice file formats still possible to receive from 2023-2025?

The legal invoice format can be anything, as long as the supplier and buyer agree on it and the integrity and authenticity are guaranteed. Also, a human readable version (normally a PDF) is required upon audit as part of the general EU requirements.

What e-invoicing formats are permitted?

This is not fully defined yet, but DGFIP has indicated the following syntax, based on the EN16931 standard:

Those formats would apply to:

E-invoicing process and controls

In this section, we answer questions around the processes for sending and receiving e-invoices, what information they need to include, and the Chorus Pro platform.

Will the e-invoice need to be sent real-time?

Yes, it can be considered a “real-time clearance system”. As part of the e-invoicing obligation, the reporting of mandatory data to the tax authorities and the issuance of the original invoice to the buyer by the supplier’s partner platform should happen right after receiving the invoicing data from the supplier.

If the invoice doesn’t have all the mandatory information like the SIRET number of a customer, will the Chorus Pro platform clear it?

Will Chorus Pro also be validating the VAT rates used?

No, or at least not on the fly when submitting the invoicing data to Chorus Pro. Our understanding is that those verifications will be done by the tax authorities after the fact, using data analytics / AI algorithms.

Are there common data, connection and bridges with the current SAF-T?

The French version of SAF-T (FEC) must still be available on demand from the tax authorities.

Archiving

In this section, we answer questions around compliant archiving of e-invoices.

Does the Chorus Pro/Tax Authority portal provide a compliant electronic archive for AP/AR invoices in France?

Yes. However, in our experience, even though a tax authority’s archiving solution would be available for taxable persons, few larger companies choose to solely rely on it for evidence purposes and instead continue to use their compliant internal or third-party archiving solutions.

This decision is ultimately based on the fact that the tax authority’s archiving solution poses a conflict of interest: it is maintained by the tax authority, which, from a legal perspective, is not an independent party but rather the counterparty in a fiscal claim.

In fact, from discussions with many experts and customers over that past year, we see that the market request for third-party archiving services is even stronger after the introduction of clearance, especially as customers see a need to store not only the invoice but also response messages from the CTC portal to further maintain evidence of compliance.

Take Action

Still have questions about the e-invoicing mandate? Access our webinar on-demand for more information and advice on how to comply.

In the “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalization of the Economy” issued on 1 July 2021, members of the G20 Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) have agreed upon a framework to move forward with a global tax reform deal.

This will address the tax challenges of an increasingly digital worldwide economy. As of 9 July 2021, 132 of the 139 OECD/G20 member jurisdictions have agreed to the Inclusive Framework on BEPS.

Pillar Details

Pillar 1

Pillar 1 gives a new taxing right, Amount A, to market countries to ensure companies pay tax on a portion of residual profits earned from activities in those jurisdictions, regardless of physical presence. Pillar 1 will apply to multinational enterprises (“MNEs”) with global turnover above 20 billion euros and profitability above 10%.

There will be a new nexus rule permitting allocation of Amount A to a market jurisdiction when the in-scope multinational enterprise derives at least 1 million euros in revenue from that jurisdiction. For jurisdictions with a GDP less than 40 billion euros, the nexus will instead be set at 250,000 euros.

The “special purpose nexus rule” determines if a jurisdiction qualifies for the Amount A allocation. Furthermore, countries have agreed on an allocation of 20-30% of in-scope MNE residual profits to market jurisdictions, with nexus using a revenue-based allocation key.

Revenue will be sourced to the end market jurisdictions where goods or services are consumed, with detailed source rules still to come.

More details on segmentation are still in the works, as is the final design of a marketing and distribution profits safe harbour that will cap the residual profits allowed to the market jurisdiction through Amount A.

Lastly, countries have agreed to streamline and simplify Amount B with a particular focus on the needs of low-capacity countries. The finalised details are expected to be completed by the end of 2022.

Pillar 2

Pillar 2 consists of Global anti-Base Erosion (“GloBE”) Rules that will ensure MNEs that meet the 750 million euros threshold pay a minimum tax rate of at least 15%. The GloBE Rules consist of an Income Inclusion Rule and an Undertaxed Payment Rule, the latter of which still needs to be finalised.

Pillar 2 also includes a Subject to tax rule, which is a treaty-based rule, allowing source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum rate. The rate will range from 7.5 to 9 percent.

When Will the Plan be Implemented?

There is currently a commitment to continue discussion, in order to finalise the design elements of the plan within the agreed framework by October 2021. Inclusive Framework members will agree and release an implementation plan.

The current timeline is that the multilateral instrument through which Amount A is implemented will be developed and opened for signature in 2022, with Amount A coming into effect in 2021. Similarly, Pillar Two should be brought into law in 2022, to be effective in 2023.

More Details to Come

Although the key components of the Two-Pillar Solution have been agreed upon, a detailed implementation plan that includes resolving remaining issues is still to come.

As many countries could be implementing these changes in the near future, it is important for businesses active in the digital economy to carefully track and understand the developments surrounding the OECD/G20 Base Erosion and Profit Shifting Project.

Take Action

Need to ensure compliance with the latest e-document regulations? Get in touch with our tax experts.

Download VAT Trends: Toward Continuous Transaction Controls to discover more about how tax systems around the world are evolving.

What is Intrastat?

Intrastat is a reporting regime relating to the intra-community trade of goods within the EU.

Under Regulation (EC) No. 638/2004, VAT taxpayers who are making intra-community sales and purchases of goods are required to complete Intrastat declarations when the reporting threshold is breached.

Intrastat declarations must be completed in both the country of dispatch (by the seller) and the country of arrival (by the purchaser). The format and data elements of Intrastat declarations vary from country to country, though some data elements are required in all Member States. Reporting thresholds also vary by Member State.

How is Intrastat being modernised?

In an effort to improve data collection and ease the administrative burden on businesses an ‘Intrastat Modernisation’ project was launched in 2017. As a result of this project Regulation (EU) 2019/2152 (the Regulation on European business statistics) was adopted.

The practical effects of these changes are two-fold: