There are many taxes (IPT) and parafiscal charges levied on insurance premiums throughout Europe. As a consequence of the lack of tax harmonisation, no general rules can be applied to establish which taxes exist in which countries and how to calculate the correct IPT amounts.

Some insurers do not have a dedicated IPT team; this is usually the case with smaller insurers. This could lead to IPT miscalculation and can trigger penalties. Without the proper and up-to-date knowledge, it is easy to be lost in the rules and regulations.

The following blog gives an overview of the tax calculation methods highlighting some unique elements of the IPT calculation.

Tax calculations methods

There are two basic tax calculation methods in the European IPT world

  1. Percentage of the premium
  2. Fixed amounts

In the first instance, there is a tax rate. For example in Bulgaria (2%) businesses can easily determine the tax amount by multiplying the taxable basis with this tax rate. Fortunately, several IPT calculations are based on this so-called basic rate model.

While in the second case, the local regulations determine the tax amount which needs to be settled on the insurance policies. Irish Stamp Duty can be mentioned as an example.

One can say that this is not rocket science. Furthermore, it is easy. These calculation models are just the basics. IPT regulations are built on these basic models adding several specific rules making the IPT calculations fairly complex. Here are some examples of these specific rules:

Reverse tax calculation

To add further colour to this topic, we can mention that reversing a policy line in the calculation does not always result in the same tax amount in a negative position. The best example is Malta, where the same amount of Stamp Duty is not refunded when the policy is cancelled after the cooling-off period. Instead of getting back the same stamp duty paid, an additional EUR 2.33 Stamp duty is triggered if certain conditions are met.

Although this is a unique regulation this highlights that when it comes to reversing a policy line, it is strongly recommended to check the rules beforehand and clarify whether or not the negative IPT can be offset or reclaimed and adjust the calculation method accordingly.

Take Action

IPT calculation requires detailed knowledge of the rules and regulations. Sovos has a dedicated team of compliance experts to walk you through even the most challenging calculations. Contact our team today.

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SAF-T Global Standards: An Introduction to the Standard

Understanding the flexible SAF-T global standards adopted by Austria, France, Lithuania, Luxembourg, Norway, Portugal and Romania

SAF-T (Standard Audit File for Tax) is an international standard for the electronic reporting of accounting data from organisations to a national tax authority or external auditors used by tax administrations to gather granular data from businesses either on demand or periodically.

The SAF-T standard has been adopted in mostly European countries, alleviating the need for tax authorities to physically visit companies to extract and review wide-ranging corporate data.

This e-book includes:

  • What is SAF-T? – an exploration of the standard and its origins
  • A deeper dive of the SAF-T format – the current datasets and data requirements
  • The challenges of SAF-T for businesses – the flexibility and wider use of the standard
  • The future of SAF-T – what’s next?
  • How Sovos can help

Get the SAF-T Global Standards e-book

Countries that have introduced legislation to enforce SAF-T requirements include Austria, France, Lithuania, Luxembourg, Norway, Poland, Portugal and Romania. SAF-T requirements are continuing to be adopted in a number of EU Member States and countries in other regions are actively considering introducing it.

The latest SAF-T standard includes accounting, accounts receivable, accounts payable, fixed assets and inventory datasets. In most cases authorities request a text file on an XML structure.

The SAF-T guideline is flexible, enabling governments to freely adapt SAF-T to suit their tax filing and audit systems, to perform audits, or as a basis for prefiling periodic tax declarations such as VAT returns or inventory statements.

This e-book discusses the introduction of SAF-T back in 2005 and how the standard has evolved since then, as well as the challenges of SAF-T for both businesses and governments.

How Sovos can help with SAF-T compliance

Sovos helps customers manage their SAF-T requirements across multiple jurisdictions through software solutions that automate the processes to seamlessly extract required data, map data accurately to SAF-T structures in the latest legal formats and perform deep analysis on the SAF-T output generated.

Sovos provides certainty with a future-proof strategy for tackling compliance obligations across all markets as VAT regulations evolve toward continuous e-reporting and other continuous transaction controls requiring increasingly granular data. Sovos’ solution for SAF-T combines extraction, analysis and generation providing our customers with the certainty they need.

Experience end-to-end handling with compliance peace of mind with Sovos.

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Compliance Mandates Around the World Have Elevated the Importance of Tax

Sorting out indirect tax issues was not traditionally at the top of any IT organisation’s to-do list. Today that’s changed and new VAT compliance mandates being introduced at an increasing rate around the world have elevated its status.

It’s more important than ever that IT decision makers and in-house tax and finance professionals engage and have meaningful, strategic discussions about how – and also why – to accelerate their digital transformation. This will enable them to not only respond but also to prepare for invasive new tax mandates.

Each time a product or service is sold in a new country or under the watchful eye of evolving national tax regimes, enterprises must respond. They must ensure their VAT recognition and reporting processes are aligned to new and evolving mandates for continuous controls on e-invoicing and other critical sales and purchase processes and documents.

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A cascade of tax compliance mandates

Multinational companies continue to leverage new technologies to optimise borderless supply chains. The spectacular growth of e-commerce and a new generation of technologies is opening global markets for even the smallest of micro-enterprises.

Global businesses and supply chains increasingly intersect new national mandates. Many of these mandates impose sophisticated real-time controls on business transactions and make compliance more complex than it’s ever been before. And the cost of non-compliance can be high.

Non-compliance can affect an organisation in many ways – financial, operational, employee productivity, customer experience, legal, and even brand perception.

IT, tax and finance teams need to communicate and collaborate effectively to fully understand their compliance obligations in each of the markets where they operate. If they can’t companies will likely find their digital transformations inhibited by disparate local point solutions that can be so entrenched, they can become impossible to replace.

With better collaboration between functions and alignment on tax, your entire organisation can achieve real operational efficiencies.

Download our e-book and read about

  • The opportunities that exist when tax and IT work together
  • How joined up thinking can reduce risk and uncover opportunities
  • A shared vision and modern tax solution
  • How better conversations drive a better compliance process

As  tax compliances becomes increasingly interconnected with core business processes, organisations must make all aspects of tax reporting central to, and integrated with, core business activities.

A modern tax compliance solution must be engineered from the ground up to handle modern regulatory mandates. This especially applies to global manufacturers and retailers that do business in numerous countries around the world and must comply with mandates established by hundreds of tax authorities.

Read more and download the e-book

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Simplify EU VAT with IOSS

The EU E-Commerce VAT Package came into effect on 1 July 2021. And with it, the need for operational change, business disruption and plenty of accounting complexity.

A key component of the package is the Import One Stop Shop (IOSS) – a new way for companies to meet their EU VAT obligations when trading cross-border. 

In this e-book we explain IOSS’s key concepts and common use cases so you can better understand and take advantage of IOSS and how you apply it to your business.

IOSS is expansive, complicated and rewrites the rules for companies selling into and within Europe. This e-book aims to simplify that for you. We cover:

  • The basics
  • Intermediary requirements
  • Key considerations for your business
  • How to ensure IOSS compliance
  • How we can help

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We spend ample time on each of these topics so that you feel confident understanding whether IOSS is the right option for your business.

Our e-book starts with an easy-to-understand primer on IOSS. This includes how IOSS operates, its many rules and what has happened. The e-book also explains more on IOSS intermediaries as well as their purpose and when they can be used.

Find out more about the IOSS registration process, including its effects on:

  • Customer experience
  • VAT registration
  • VAT simplification
  • Record keeping
  • Data collection and invoicing
  • Contingency planning
  • Commercial matters

We answer some important questions you should consider about IOSS registration:

  1. Will you need to appoint an intermediary?

  2. How will you appoint one?

  3. How will you get set up for IOSS registration – will you do this yourself or search for help?

  4. How will you submit monthly returns and pay the VAT or use a partner?

  5. How can you ensure record keeping data is in the right format and up to date?

  6. How will you respond to tax authority audits?

Whatever your eventual IOSS decision is, our e-book will help you make an informed decision for the good of your business.

Compliance peace of mind with a complete, global VAT Managed Service from Sovos

Whatever your VAT implications, Sovos has the expertise to help you navigate your global events and the complexities of cross-border VAT obligations.

Our VAT Managed Services ease your compliance workload while mitigating risk wherever you operate today. In addition, we ensure you’re ready to handle the VAT requirements in the markets you intend to lead tomorrow.

Faced with a VAT gap of nearly €13 billion, France is introducing mandatory e-invoicing for business-to-business (B2B) transactions from 2023, as well as e-reporting of additional data types. Applying to all companies established or, for e-reporting, VAT-registered in France, this new mandate is complex. It will also require significant planning.

According to the ICC, businesses will need at least 12-18 months to prepare for such continuous transaction control (CTC) mandates so it’s clearly important to start planning now to prepare for the change.

This infographic provides answers to your pressing points surrounding the mandate including:

DOWNLOAD THE INFOGRAPHIC

Mandate aim

The aim of the new mandate is to increase efficiency, cut costs and fight fraud via access to more transaction data. All B2B invoices will need to be transmitted through a central platform. This is either directly or via registered service providers connected to the platform.

The new mandate will provide the French tax authority with access to all VAT relevant data related to B2C and B2B transactions, so it’s crucial to adjust your business systems and processes to avoid penalties and fines.

France is the latest country to adopt CTCs, as tax authorities across the world look to gain greater insight and close the VAT gap. The proposed requirements come into effect during the years 2023-2025.

 

France e-invoice and e-reporting rollout dates

1 January 2023: Large companies will be subject to the B2B e-invoice clearance and e-reporting mandate. There is no real-time transmission requirement for B2C and cross-border invoices. However there is an obligation to e-report these periodically so that the tax administration has full visibility. All companies must accept e-invoices under the new mandate from this moment onwards.

1 January 2024: E-invoice sending and the e-reporting obligations will apply for medium-sized companies.

1 January 2025: All companies will be in scope of the mandate by 1 January 2025.

 

How Sovos can help

As France looks set to become the next country in Europe to introduce CTCs with its B2B e-invoicing and e-reporting mandate in 2023, it’s crucial that businesses prepare for and understand their new VAT obligations.

Sovos serves as a true one-stop-shop for managing all e-invoicing compliance obligations in France and across the globe. Sovos uniquely combines local excellence with a seamless, global customer experience.

Our scalable, end-to-end solution ensures e-invoicing and e-reporting compliance in France and additionally in 60+ other countries.

Sovos is purpose built for modern tax – an evolving, complex landscape in which global tax authorities are requiring increased visibility and control into business processes, in many cases at the transaction level.

Tax authorities around the globe have embraced digitization to speed up revenue collection and reduce fraud while closing tax gaps. This is the catalyst for companies to move complete, connected and continuous tax compliance software into their digital financial core.

Understanding VAT Obligations: European Events

Global events are popular once again and conferences and exhibitions often create VAT registration obligations in different European Union Member States that your business operates in.

Navigating these complex place of supply rules can be challenging. Legislation varies country-to-country and the type of event you’re organising affects this. Download our helpful guide to understand what your VAT obligations are.

Place of Supply Rules

When determining where tax applies to an event, it’s important to consider the place of supply rules.

These can be confusing and hard to interpret. When organising events and conferences, there are two basic rules to think about:

  1. Does the service being supplied fall under the general place of supply rules, in which case, if the supply is B2B, VAT is due where the customer is based. In this scenario if the customer is established outside the UK, then the customer has to account for VAT on behalf of the supplier in the country they are established in under the reverse charge rules in the EU or potentially equivalent if non-EU.
  2. Does the supply fall under any of the exceptions to the main rule? The most common example being admission to conferences and events whereby VAT is due where the event is held.

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As you can see, VAT and events is a complex affair.

Admission to events, exhibitions and conferences in the EU is subject to VAT in the country where the event takes place. In addition to admission, other considerations include stand rental, local suppliers, sponsorship packages and catering services.

Our guide covers these topics:

  • VAT registration – where should I register and what VAT rules should I consider?
  • Event organisers – what VAT liabilities apply and how does it affect clients?
  • Online events – how do the rules differ for online events, both for B2B and B2C?
  • Hybrid events – are these taxed differently?
  • VAT reclaims – what claims are possible and what VAT can I recover?

Tour operators margin scheme (TOMS)

In addition to these common concerns, the Sovos Understanding VAT Obligations: European Events guide also explores TOMS – the tour operators margin scheme.

If a business buys in and sells services such as hotel accommodation, passenger transport or excursions to its clients/delegates in its own name, TOMS may well apply. The supply of services that fall under the scheme receive a different tax treatment to most supplies of services. They can require the undertaking of a complex calculation.

Also covered is a summary of non-EU events and how to apply VAT when hosting an event outside of the European Union.

For example, some non-EU countries will apply similar rules to the EU and a registration may be

Needed. However the issues will often be complex and require a business to carefully consider the organisation of the event at the outset. VAT recovery in non-EU countries will also vary and not all countries will allow refunds to overseas businesses.  

Compliance peace of mind with a complete, global VAT Managed Service from Sovos

Whatever your VAT implications, Sovos has the expertise to help you navigate your global events and the complexities of cross-border VAT obligations. Our VAT Managed Services ease your compliance workload while mitigating risk wherever you operate today. In addition, we ensure you’re ready to handle the VAT requirements in the markets you intend to lead tomorrow.

DOWNLOAD THE GUIDE

France – Mandatory B2B
e-Invoicing 2024

Faced with a VAT gap of nearly €13 billion, France is introducing mandatory e-invoicing for business-to-business (B2B) transactions from 2024, as well as e-reporting of additional data types. Applying to all companies established or, for e-reporting, VAT-registered in France, this new mandate is complex. It will also require significant planning.

According to the ICC, businesses will need at least 12-18 months to prepare for such continuous transaction control (CTC) mandates so it’s clearly important to start planning now to prepare for the change.

This infographic provides answers to your pressing points surrounding the mandate including:

  • What your company needs to do to comply with the new mandate
  • When your business needs to comply by
  • Other key information surrounding the mandate requirements
  • How Sovos can help

DOWNLOAD THE INFOGRAPHIC

Mandate aim

The aim of the new mandate is to increase efficiency, cut costs and fight fraud via access to more transaction data. All B2B invoices will need to be transmitted through a central platform. This will be either directly or via registered service providers connected to the platform.

The new mandate will provide the French tax authority with access to all VAT relevant data related to B2C and B2B transactions, so it’s crucial to adjust your business systems and processes to avoid penalties and fines.

France is the latest country to adopt CTCs, as tax authorities across the world look to gain greater insight and close the VAT gap. The proposed requirements come into effect during the years 2024-2026.

France e-invoice and e-reporting rollout dates

July 2024: All companies, irrespective of size, must accept to receive e-invoices under the new rules. The largest 300 companies will be subject to the B2B e-invoice issuance mandate and wider e-reporting mandate. The e-invoicing mandate does not apply to B2C and cross-border invoices. However, there is an obligation to report those transactions so the tax administration has full visibility.  

January 2025: Obligations will apply to a further 8,000 medium-sized companies. 

January 2026: All remaining medium and small companies will be in scope of the mandate. 

How Sovos can help

As France looks set to become the next country in Europe to introduce CTCs with its B2B e-invoicing and e-reporting mandate in 2024, it’s crucial that businesses prepare for and understand their new VAT obligations.

Sovos serves as a true one-stop-shop for managing all e-invoicing compliance obligations in France and across the globe. Sovos uniquely combines local excellence with a seamless, global customer experience.

Our scalable, end-to-end solution ensures e-invoicing and e-reporting compliance in not only France but also 60+ other countries.

Sovos is purpose built for modern tax – an evolving, complex landscape in which global tax authorities are requiring increased visibility and control into business processes, in many cases at the transaction level.

Tax authorities around the globe have embraced digitization to speed up revenue collection and reduce fraud while closing tax gaps. This is the catalyst for companies to move complete, connected and continuous tax compliance software into their digital financial core.

DOWNLOAD THE INFOGRAPHIC

How Tax Compliance Impacts Supply Chain Globalisation: The VAT Effect in Europe and Beyond

VAT compliance throughout a global supply chain is paramount. It has never been more important to get right.  

165 countries worldwide levy a form of VAT. Each has its own set of rules for both compliance and reporting. 

Some governments are also now placing increased emphasis on indirect tax and changes to their tax regulations, with technology-enabled enforcement efforts.

Download this e-book for an in-depth look at the vital elements needed for today’s VAT compliance. There’s guidance to help with your tax strategy so you can maximise the benefits from an efficient global supply chain.

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Your VAT compliance strategy   

Tax shouldn’t impede growth, and it doesn’t have to if you have a proactive tax compliance strategy. So to minimise risk, VAT needs to be a critical factor in supply chain planning.  

In this e-book, we take a detailed look into crucial elements of VAT compliance, with clear explanations to inform your tax strategy and to also help you reap the full benefits of an efficient global supply chain. In detail, we look at: 

  • What factors should you consider in VAT compliance planning? These include import VAT, local supply of goods, intra EU deliveries, chain transactions and triangulation, VAT reverse charge, in addition to zero-rated vs exempt goods.
  • What are the impacts of these types of tax and transactions? How these types of tax and transactions affect your business, when they apply, and what you need to do to avoid noncompliance. 
  • What are the new and changed regulations and what do they mean for businesses? Many governments have dramatically changed their tax regulations, introducing continuous transaction controls (CTCs) and the Standard Audit File for Tax (SAF-T) so tax authorities can better detect errors in tax reporting, and also look for discrepancies. 

 The cost of getting it wrong 

Failure to comply creates both risk and consequences for businesses such as: 

  • Disrupting operations. Noncompliance can disrupt operations, putting supplier relationships and supply chain stability on the line. Consequently, goods may be delayed at customs borders goods may be delayed at customs borders if formalities are not complied with. 
  • Delays in VAT refunds. Businesses could have their VAT refunds delayed, tying up significant sums of money that could instead be put toward paying suppliers or investing in innovations. 
  • Fines and penalties. Errors can result in penalties or fines of up to 200% of VAT owed. This directly impacts the bottom line and also transforms VAT from a neutral to a hard cost. 

The right technology for the job   

VAT is becoming more complex and governments are digitizing indirect taxes. Therefore, businesses need to be armed with the right technology to simplify and streamline global tax obligations. 

In the ever-changing legislative environment, businesses must also be able to maintain both control and visibility of their global tax obligations effectively. They need to use insights to predict what will change next. 

With standardisation, automation and new levels of data, Sovos combines unparalleled regulatory expertise with technology that supports compliance by enabling:

  • Complete, continuous management of VAT determination and reporting, as well as business-to-government reporting in every country in which your business operates. 
  • Comprehensive functional and geographic coverage of VAT reporting, CTCs, compliance archiving, and determination around the globe. 
  • Integration with complex ERP, billing systems, POS, P2P and EDI systems as CTC and other VAT requirements create a much broader footprint on transactional and record-keeping systems. 

Contact us now and let Sovos help you reap the full benefits of an efficient global supply chain. 

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The Zakat, Tax and Customs Authority (ZATCA) announced the finalised rules for the Saudi Arabia e-invoicing system earlier this year, announcing plans for two main phases for the new e-invoicing system.

The first phase of the Saudi Arabia e-invoicing system is set to go live from 4 December 2021.

With the mandate just around the corner, we’ve highlighted the latest news on a reform that is still evolving.

The Detailed Guidelines

The latest documentation communicated on the requirements was the Detailed Guidelines, published in August 2021. The Detailed Guidelines provided clarity on the following topics:

Overview of readiness for the first phase

The first phase requirements are not as complex as the second phase requirements that will be enforced from 1 January 2023.

The ZATCA has been successful in providing taxpayers with the necessary information. The go live date is set to go ahead as planned and a delay is not currently expected.

Take Action

Find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.

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

The widespread adoption of electronic invoicing regimes has given tax authorities access to enormous quantities of taxpayer data.

In many jurisdictions, this data enables tax authorities to summarise a taxpayer’s transactional information for a given filing period. It also enables them to present the taxpayer with a draft VAT Return, filled in ahead of time by the authorities themselves.

This is known as a ‘pre-filled’ VAT Return. This module has now been adopted by several countries, with others planning to implement soon.

Countries introducing pre-filled VAT returns is rising, with variations in models

Chile was the first country to introduce a pre-filled VAT Return, in 2017. Soon after its introduction, more than 92% of taxpayers used the model prepared by the authorities to declare their VAT.

Chile was able to achieve this in part due to the high quality of its IT infrastructure, by which the tax administration was able to process a large volume of purchase and sales records. In addition, Chile provided taxpayers with ‘calculation assistants’ that facilitated compliance.

European countries already using e-invoicing or e-reporting regimes have been quick to follow.

Here are some key processes and implementation dates for different countries:

It’s likely that other countries with e-invoicing or e-reporting regimes, such as Greece (MyData regime, under development) and France (proposed e-invoicing regime for 2023) will follow suit.

Limited scope due to derogation from the EU VAT Directive and technological infrastructure

It’s worth noting that European Union countries cannot mandate electronic invoicing for business-to-business transactions without applying for a derogation from the EU VAT Directive.

Italy has been granted such a derogation, but other countries may be reluctant to enter such an uncertain process. This could potentially limit the scope of pre-filled VAT Return offerings. In Spain, for example, the pre303 was initially available only for certain taxpayers making use of SII and submitting relevant data (though this has since been expanded).

Technical infrastructure can also be a limiting factor in countries’ ability to offer pre-filled VAT Returns.

The benefits of pre-filled VAT returns, and why they’re still being rapidly adopted

Nevertheless, the rapid adoption of pre-filled VAT Returns in the past five years indicates the concept’s staying power.

Tax authorities clearly see efficiency benefits in having a pre-filled VAT Return that are fileable with a simple approval from the taxpayer.

From the taxpayer standpoint, it’s imperative to maintain accurate and complete electronic records that can be reconciled with pre-filled VAT Returns, and accounting software can be a useful tool to achieve this. 

This is just the start of VAT trends and changes across the world

Pre-filled VAT returns are just another example of the complex regulatory tax landscape that organisations must navigate to remain compliant.

As the world moves forward with initiatives like digital transformation and real-time reporting, and new or updated regulations can vary widely across countries, Sovos is on a mission to help you Solve Tax for Good. To find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls.

Need more information?

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

In Insurance Premium Tax (IPT) compliance, the Aviation Hull and Aviation Liability policy is defined under Annex 1, Classes of Non-Life Insurance, as described in DIRECTIVE 138/2009/EC (SOLVENCY II DIRECTIVE).

But there are variations and identifying which class the policy is covering can be a challenge.

This article will cover what insurers need to know about Aviation Hull and Aviation Liability policy and what IPT rate to apply.

Variations in the Aviation policy

Aviation can fall under Class 5, Class 11 or General Liability.

There are five different variations of an Aviation policy, either taken out individually or in combination. Although the descriptions vary, the most referred to are:

Class 5 Aviation policies are focused on the hull and physical aspect of the aircraft, whereas Class 11 Aviation Liability mainly covers the public and passengers or damage to property owned by third parties.

Defining and applying the correct classification

Defining between Aviation Liability Class 5 and 11 can be a headache. As aviation policies can include a combination of liabilities, it can be difficult to know the correct classification to apply.

Some tax authorities have recognised this and applied similar rates for both, but there are exceptions.

For example, in Hungary Class 5 is considered CASCO , which stands for Casualty and Collision (automobile insurance). So, it has a higher IPT rate of 15% whereas IPT for Class 11 on Aviation Liability is 10%.

There are also parafiscal taxes to consider. These mainly come into effect when the policy includes a fire element. But as always there are exceptions – in Greece both classes are exempt from IPT, but TEAEAPAE (or Pension Fund) can be due on Class 5 Aviation when cover includes the maintenance of the aircraft.

Once the correct class of insurance has been applied to the policy, an additional reference to an AVN clause is made.

AVN clauses are additional to the main risk and more specific than some of the other coverages, which are also included in aviation contracts. There are over 214 AVN clauses and most fall under Class 13 General Liability.

Reporting

The last piece of the puzzle is how to report a policy document that could have up to three different classes.

The territory could have apportionment rules, meaning an insurer could benefit from some of those exemptions. Some insurers choose to take the prudent approach and apply the highest rate from the three classes to avoid noncompliance or penalties.

Easing the IPT compliance burden of aviation liability

For most insurers, classification of an aviation policy is only the beginning of the journey. There are other considerations such as location of risk rules outside of Europe, which can mean double taxation, or exemptions depending on the use of the aircraft.

To ease the burden on compliance, many insurers work with a managed service provider with IPT expertise.

Take Action

Get in touch with Sovos about the benefits a managed service provider can offer.

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.

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:

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.

A tax authority audit can come in various forms, whether it be directly to the insurer itself or indirectly through a policyholder or broker.

It can be targeted, for example, where an insurer has been specifically identified to be investigated due toa discrepancy on a tax return, or it can be indiscriminate in its nature as part of a wider exercise being carried out by an authority.

Whatever form the audit takes, the key to responding is in the preparation beforehand.

What information should be kept for a tax authority audit?

First and foremost, insurers should ensure they are retaining copies of evidence that can be used to justify the tax amounts declared and settled. This may include the insurance contracts themselves, the invoices issued to policyholders and a record of their data that comprises the declarations that have been made.

It’s worth noting that in Italy there is a formal requirement to maintain IPT books which detail each of the premiums received during each annual period. Although this is not necessarily a specific requirement in other countries, applying this approach to all premiums received will put an insurer in a strong position if an audit is carried out.

Further documentation demonstrating compliance is also useful. If external advice has been sought, e.g., to determine the appropriate class of business for a policy and the consequent tax application, then retaining a record of this advice is advised in case this is required later.

There may be cases where a tax authority’s advice has specifically been sought and such correspondence will inevitably hold considerable weight if tax treatment is queried during a subsequent audit. Documentation of any processes in place to ensure compliance is also valuable.

As statutory limitation periods vary across jurisdictions, evidence should be kept as long as is practicable (subject to relevant data protection laws where applicable) so that it can be produced if an audit takes place.

The consequences of noncompliance

In the digital age, this practice should hopefully not seem overly burdensome. It’s worth referring to the penalty regimes in place in some countries to put the potential repercussions of an unsatisfactory audit into context.

The UK is an example of where a behaviour-based approach to determining penalties is used, with the highest level of penalties reserved for cases of deliberate and concealed undeclared tax where the authority itself has prompted the declaration.

Lower penalties (or indeed no penalties at all) will be levied where reasonable care is taken, and reasonable care will be far more likely to be considered to have been taken where records are kept in the ways described.

Audits can happen at any time so it’s important insurers have taken the necessary steps to ensure information and data to demonstrate compliance is available to the tax authority when requested.

Ensuring the accurate and timely submission of tax returns is likely to reduce the possibility of a targeted audit. The IPT managed services team at Sovos has a huge amount of experience with tax filings in the UK and across Europe and has assisted many insurers with unexpected audits.

Take Action

Get in touch with Sovos today about the benefits a managed service provider can offer to ease the burden of IPT compliance.

Insurance Tax Act reforms in Germany, effective from 10 December 2020, continue to cause uncertainty in the insurance market.

The main area of concern relates to the location of risk for Insurance Premium Tax (IPT) purposes. The reform can impact a policy taken out with either an EEA or non-EEA insurer where the policyholder is established in Germany, i.e. a German enterprise, permanent establishment, or corresponding institution, or an individual habitually resident in Germany, where the policy covers non-EEA risks.

These changes affect all classes of business and are irrespective of the physical location of any insured risk.

Double taxation with policies written by EEA insurers

If a policy for the German policyholder includes non-EEA countries, then German IPT is due not only on the premium allocated to Germany, but also to premiums allocated to the non-EEA countries as well. This could be in addition to any applicable premium taxes due in the non-EEA countries.

Therefore, double taxation is a possibility. However, if the policy includes other EEA countries, then German IPT cannot be charged on premiums allocated in these EEA countries.

Double taxation with policies written by non-EEA insurers

If a policy for the German policyholder includes both other EEA and non-EEA countries, then German IPT is due not only on the premium allocated to Germany, but also to 100% of the premiums allocated to all the other countries as well. This could be in addition to any applicable premium taxes due in all these countries. Therefore, again, double taxation is a possibility.

What is a ‘permanent establishment’ or ‘corresponding institution’ for German IPT purposes?

The law reforms did not clarify what is deemed to be a ‘permanent establishment’ or ‘corresponding institution’ that would bring a non-EEA risk to be within the scope of German IPT.

Guidance from the Federal Ministry of Finance (BMF) published on 4 March 2021 did confirm that a non-EEA branch of a German policyholder would be deemed to create a permanent establishment. But it was silent on whether the same applied for a non-EEA subsidiary.

Several scenarios were also included in this guidance to aid insurers and brokers with taxing policies correctly, but unfortunately there wasn’t one for this subsidiary scenario. The BMF issued a new version of their general leaflet on insurance tax and fire protection tax for EU/EEA insurers on 20 July 2021. This included a flowchart showing the changes in taxability of policies as a result of IPT law reforms, but the non-EEA subsidiary question is not specifically answered here.

The German Insurance Association (GDV) issued a Frequently Asked Questions (FAQs) document dated 28 April 2021 to help insurers understand the reforms in several areas, which included answering some questions around the treatment of non-EEA subsidiaries.

Whilst the answers appear to provide hope that these subsidiaries do not constitute a permanent establishment, there is a caveat at the beginning of the FAQs document: it says it is non-binding, and that every insurer can interpret and apply the statutory provisions (and the associated BMF letter from 4 March 2021) at their own discretion.

This means that if insurers don’t tax non-EEA subsidiaries based solely on this guidance, they could be left open to tax assessments later, where German IPT has not been charged. The FAQs document will continue to be updated, so it will be interesting to see if there is further clarity on this point in the future.

Ongoing uncertainty around double taxation

With this ongoing uncertainty, we understand that insurers have approached the tax authorities to obtain clarity. Responses indicate that non-EEA subsidiaries are not within the scope of the reforms, so double taxation should not occur.

Any such direct confirmation from the tax authorities on this matter will protect these insurers from future assessments. It also offers the possibility for IPT refunds to be claimed where it was charged on policies that should not have been taxed in the first place.

However, until this matter is publicly clarified, which includes further communication from the BMF, the likely position is that insurers and brokers will continue to use the current, prudent approach and charge German IPT in this scenario. This means that double taxation of policies will still occur.

Take Action

Need to ensure compliance with the latest IPT regulations? A managed service provider can help. Get in touch with our tax experts today.

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.