Update: 29 November 2023 by Carolina Silva
The Malaysian 2024 Budget law, which is currently pending parliamentary approval, introduces changes to the implementation timeline of mandatory e-invoicing in the country.
According to the new budget law, implementation of electronic invoicing will be delayed and start for taxpayers with an annual turnover of revenue of more than RM100 million (appx. 20 million euros) on 1 August 2024 – instead of the original planned date of June 2024.
The implementation timeline included in the e-invoicing guidelines was updated at the end of October 2023, and the Malaysian tax authority has shared a new phased timeline:
This proposal offers more time for taxpayers to prepare for the new e-invoicing mandate, although these postponements are not significant. Taxpayers in the first implementation group should start preparing imminently for the new e-invoicing system in order to comply by August 2024.
Currently, the IRBM is set to release a software development kit including the relevant technical documentation by the end of 2023.
Interested in finding out more about e-invoicing’s global rise? Read our dedicated E-invoicing Guide.
Update: 25 July 2023 by Enis Gencer
In October 2022, the Malaysian Ministry of Finance announced in its state budget plans to launch a pilot e-invoicing program in 2023 – starting with selected taxpayers.
The budget statement views e-invoices as the main strategy to improve the country’s tax revenue and digital services infrastructure. The Inland Revenue Board of Malaysia (IRBM) and the Malaysian Digital Economy Corporation (MDEC) have been working on the e-invoicing project to meet this goal. They have organised engagement sessions with stakeholders to share details regarding the project.
Following the engagement sessions, the IRBM has published a guideline regarding the implementation details of the upcoming e-invoicing system. The Malaysian e-invoicing system will be a CTC clearance model scheduled to begin in June 2024, with approximately 4,000 companies exceeding the determined threshold.
Read this blog for more information about e-invoicing in Asia.
The new e-invoicing system, called MyInvois, will require all taxpayers engaged in commercial activities to issue invoices electronically in Malaysia. This applies to all individuals and organisations including, but not limited to, associations, corporations and limited liability partnerships.
The transactional scope of the requirements covers all B2B, B2G and B2C transactions – both domestic and cross-border.
The following will be subject to e-invoicing:
A separate guideline will provide further details on the treatment of cross-border transactions.
B2B and B2G e-invoicing will follow a similar workflow, as described below.
For B2C transactions where end consumers do not request e-invoices, suppliers will be allowed to issue receipts or invoices as per the current practices. However, taxpayers must aggregate the receipts or invoices issued to consumers and report them through the e-invoicing system within a set timeframe.
To generate e-invoices, taxpayers must use the MyInvois platform through the free solution provided by IRBM or via APIs. The authentication with the platform is based on digital certificates issued by IRBM.
Taxpayers must create and submit their e-invoices in either XML or JSON format to the MyInvois platform. After successful submission, the platform performs schema checks and assigns a unique ID to each e-invoice.
It’s important to understand that the exchange of e-invoices will not be handled by the MyInvois platform. Instead, suppliers will be responsible for including the validation link provided by IRBM, in the form of a QR Code, on the e-invoice and sending it to buyers. Buyers will utilise this QR Code to validate the existence and status of the e-invoice via the MyInvois platform.
The roll-out of the mandate will follow this schedule:
The annual turnover or revenue will be based on audited financial statements or tax returns from 2022. Once a taxpayer’s implementation timeline has been set using the 2022 financial statements, any subsequent changes to their annual turnover or revenue will not impact their go-live date.
With more detailed information now available about the implementation of e-invoicing in Malaysia, taxpayers must begin preparing their systems for the upcoming changes.
In Q4 2023, the IRBM is set to release a Software Development Kit including the relevant technical documentation and APIs. Furthermore, additional guidance on certain aspects of the implementation and anticipated legislative changes are expected in due course.
Looking for further information on e-invoicing in Malaysia? Contact our expert team.
In July 2023, the French authorities postponed the implementation timeline. A new timeline will be announced with the adoption of the finance law for 2024.
When your organisation trades cross-border, regular changes to the regulatory landscape are a given. Whether those changes are brand-new requirements in a country where you do business or the evolution of existing legislation, you must be ahead of the developments to remain compliant.
With global tax authorities continually making progress with their digitization strategies, the e-invoicing revolution continues at speed.
In this quarter’s instalment of our VAT Snapshot webinar, Kelly Muniz and Enis Gencer from Sovos’ Regulatory Analysis and Design team, will look in detail at anticipated changes in countries with emerging digital strategies and discuss updates to some of the more established regimes.
They will cover:
Join our 30-minute update on 13 July for the latest news, and for an opportunity to put your questions to our speakers.
According to the latest global market report, Billentis, the Asia Pacific region is expected to achieve the highest annual e-invoice volume growth rates compared to Latin America and Europe until 2025. This is mainly because the Asian market is new to the tax digitization journey (except for South Korea) and is accelerating the adoption of e-invoicing as an effective measure for VAT control.
Though the types of e-invoicing strategies implemented in the APAC region vary greatly, we can also identify some common characteristics.
There are jurisdictions with a strong common law legacy, such as Singapore and Japan, which typically focus regulatory measures on record retention. In recent years, many of these countries have started gearing up toward regulating e-invoicing issuance (notably by adhesion to the PEPPOL system), e.g., Singapore. Associated national standards have been adopted for a wide range of e-invoicing flows for B2B and B2G scenarios.
Conversely, Latin American clearance models and continuous transaction controls (CTCs) influence some countries. Examples of jurisdictions with CTCs are China and Taiwan.
More countries aim to introduce a staged approach to mandatory e-invoicing or CTCs in the coming years. Notable examples are Saudi Arabia, which in January 2023 introduced a clearance regime in multiple phases for different taxpayer groups, and Vietnam, which will be doing the same in the coming years.
Here’s a highlight of the recent e-invoicing developments in Asia Pacific.
In October 2022, the Malaysian Ministry of Finance announced in their state budget plans to launch a pilot e-invoicing program in 2023, starting with selected taxpayers. The budget statement views e-invoices as the main strategy to improve the country’s tax revenue and digital services infrastructure.
The Malaysian Inland Revenue Board (HASIL) and the Malaysian Digital Economy Corporation (MDEC) recently shared details regarding the project in engagement sessions.
Malaysia appears to be following a CTC clearance model, such as the one implemented in Italy, where e-invoices must be sent to the tax authority in real-time to obtain validation before being delivered to buyers. The scope of the system will likely cover all domestic (B2G, B2B and B2C) and cross-border transactions.
Following the engagement sessions, HASIL published a press release on 22 May 2023 and announced the implementation timeline of the upcoming e-invoicing mandate. As per the announcement, the mandate will be rolled-out in a phased manner starting in June 2024 for selected taxpayers and ending in January 2027 for all businesses.
Although the authorities have announced the implementation timeline, no official information or documentation about the type of the e-invoicing model is available yet. The information presented at the conference is not binding and may be subject to change.
In Thailand, the government has been working to develop a robust e-invoicing system with a framework that boosts e-invoicing using certified third-party service providers for e-tax issuance.
Using service providers is a viable alternative for businesses as some don’t want to invest or develop their own e-tax systems, whilst others cannot afford to create a compliant invoicing system. This is due to the complex technical and legal steps to maintain their own compliant system. The Electronic Transactions Development Agency (ETDA) started a certification process for electronic service providers to assess whether the applicant’s solution is secure and compliant.
More recently, the Thai Revenue Department (TRD) and the Electronic Transactions Development Agency (ETDA) published new regulations to improve the e-tax invoicing system. The regulations include aspects like the e-tax invoice content and standards for forms, delivery methods, storage and information security for operations relating to electronic invoicing.
Thailand has also recently announced an extension of tax incentives for taxpayers using the current e-tax invoicing system to promote e-invoices in the country. These measures could also signal a future mandatory e-invoicing mandate; however, there is no mandate or defined timeline yet.
E-invoicing has been gradually introduced in China, starting with B2C. In September 2020, the State Taxation Administration (STA) announced a pilot program enabling selected taxpayers operating in China to issue VAT special electronic invoices on a voluntary basis, which are generally used in B2B transactions.
In 2021, the Tax Bureaus of Shanghai, Guangdong Province and Inner Mongolia Autonomous Region announced a new pilot program covering selected taxpayers introducing a new fully digitized e-invoice.
In March 2023, the pilot program of fully digitalized e-invoices was expanded to cover newly registered taxpayers in Inner Mongolia, selected taxpayers in Henan, Jilin, Fujian and Yunnan provinces and the cities of Shenzen and Ningbo. These taxpayerscan issue a fully digitized e-invoice through the electronic invoice service platform without using special tax control equipment following real name authentication checks.
In 2018, the Singapore Government Agency, Infocomm Media Development Authority (IMDA), joined the non-profit international association OpenPEPPOL, responsible for the development and maintenance of the PEPPOL specifications. Singapore became the first National Authority outside Europe to join as a PEPPOL Authority, .
In 2019, the IMDA officially launched nationwide e-invoicing network (InvoiceNow) with intentions to extend the International Peppol E-Delivery Network by allowing businesses to transact internationally with other companies through this network. The IMDA has been encouraging businesses to use InvoiceNow in B2B and B2G transactions as an efficient, modern solution for invoicing and document delivery.
Additionally, it was recently announced by the Senior Minister of State that ‘InvoiceNow’ will become the default e-invoice submission channel for all government vendors within a few years. Although issuing electronic invoices is not mandatory for B2B or B2G transactions, it appears the InvoiceNow program and PEPPOL will be utilised for a B2G e-invoicing mandate in the near future.
Japan has adopted a voluntary e-invoicing system. The Standard Specification for Digital Invoices (JP PINT) based on the global standard PEPPOL specification is published for Japanese taxpayers wishing to issue and exchange electronic invoices over the PEPPOL network. The E-Invoice Promotion Association (EIPA) is encouraging taxpayers to use the PEPPOL standard.
In line with the country’s efforts to improve tax controls, Japan is introducing the so-called Qualified Invoice System (QIS), taking effect on October 2023. In this system, the total amount of the consumption tax corresponding to each rate must be included in the invoice along with the registration number of the qualified issuer. Taxpayers must register to issue qualified invoices. The QIS does not mandate taxpayers to issue invoices electronically.
In 2019, the Philippines introduced the Innovation Act as a part of its Digital Transformation Strategy (PDTS). In line with this strategy and the provisions of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the Electronic Invoicing/Receipting System (EIS) was launched on 1 July 2022 for 100 pilot taxpayers.
The TRAIN Act established 1 January 2023 as the target date when all taxpayers under scope would become obliged to comply with the Philippines e-invoicing and CTC e-reporting obligation. However, the authorities have not yet published an official calendar for expansion of the system. Currently, the 100 pilot and other large taxpayers individually notified by the BIR are the only ones obliged to comply, while the expansion calendar is still awaited.
The winds of change in the region are blowing strongly in favour of digitizing invoicing systems. We see influences from different parts of the world, from Latin America with its decentralised clearance models to Europe with the Italian-style centralised clearance system, as well as with PEPPOL-inspired e-invoicing frameworks.
These are only a few examples of countries in the region that have adopted a CTC system. Businesses must prepare to adopt the new e-invoice compliance requirements trending around the world, and in particular, across Asia.
Japan’s new e-invoice retention requirements are part of the country’s latest Electronic Record Retention Law (ERRL) reform.
Along with measures such as the Qualified Invoice System (QIS) and the possibility to issue and send invoices electronically via PEPPOL, Japan is implementing different indirect tax control measures, seeking to reduce tax evasion and promote digital transformation.
In line with these objectives, the amended ERRL will require taxable persons in Japan to follow several compliance rules when archiving documents originating from electronic transactions, such as e-invoices.
The reform has abolished the hard-copy retention option for electronic transactions. Starting 1 January 2024, records of electronic transaction information must be archived electronically.
As per the definition of the ERRL, “electronic transactions” includes transaction information carried out via Electronic Data Interchange (EDI), transactions via the Internet, and transactions in which transaction information is exchanged by email, among others.
The scope of such transaction information may include order forms, contracts, invoices, receipts, and other similar documents related to the transaction sent and received electronically.
Taxpayers must retain any records of electronic transaction information, including e-invoices, in an electronic archive, as prescribed in the Ordinance for Enforcement of the ERRL.
When retaining e-invoices, the following are alternative ways to ensure compliance with the ERRL:
Updated rules are also in place for taxable persons who convert their paper invoices into a digitized document and keep the invoice exclusively in electronic format.
One of the following is required to ensure the authenticity and integrity of the scanned invoice:
Under new rules as of 1 January 2022, there has been an extension to the timestamping deadline to about two months.
In addition to enforcement of the QIS and all changes described above, Japan introduced transitional measures for taxable persons to provide a grace period for necessary preparations. The tax authority will abolish transitional measures under the ERRL on 31 December 2023. Invoice issuers should check their compliance with the Japanese tax framework in the meantime.
Have questions about e-invoicing changes in Japan? Get in touch with our tax experts.
Update: 8 March 2023
South Korea has recently approved a tax reform which introduces several measures for 2023, among which is the possibility of issuance of self-billing tax invoices.
This tax reform amends the current VAT law to allow the purchaser to issue invoices for the supply of goods and services.
However, this will only be allowed in specific circumstances, such as when the supplier cannot issue the invoice. The purchaser can claim a deduction for the related input VAT by issuing a self-billing invoice.
Therefore, issuing self-billing invoices for VAT-exempted supplies of goods and services will not be permitted. However, the issuance of self-billing invoices by the purchaser depends on confirmation from a district tax office.
This amendment will enter into force and apply to all supplies of goods and services from 1 July 2023.
This South Korean tax reform will expand the transactional scope of the country’s e-invoice issuance and continuous transaction control (CTC) reporting system (e-tax invoicing), as the transactions in the scope of e-tax invoicing are generally the same as those in the scope of VAT invoicing.
Interested in learning more about e-invoicing in South Korea? Contact a member of our expert team today.
Update: 17 January 2021 by Selin Adler Ring
Collection of real-time fiscal data is becoming one of the core public finance decision making tools. Transactional data provides a timely and reliable overview of the business sector, enabling governments to rely on analytical data in the decision-making process.
This is what has led many governments to adopt CTC regimes that require taxpayers to transmit their transactional data in real/ near-real time to government services. South Korea was one of the first countries to appreciate the benefits of a CTC regime and mandated reporting of e-invoice data to the government for certain taxpayers as early as 2011.
The year after the first implementation, the South Korean authorities expanded the mandate scope and the e-invoicing system became mandatory for more taxpayers. 2014 saw another expansion of the CTC mandate to reach its current scope.
The current system requires any business that is a corporate entity or an individual whose aggregate supply value for the immediately preceding tax year is KRW 300,000,000 or more to issue an e-invoice to the recipient of goods or services subject to VAT, as well as to report the invoice data to the government.
The South Korean e-invoicing system mandates the issuance of an e-invoice to the recipient and reporting of this invoice data to the government portal within a day of its issuance. Before e-invoices are transmitted, suppliers must digitally sign them with a PKI electronic signature. E-invoices are reported in an XML format to the National Tax Agency (NTS) Portal. Due to the near-real time reporting time-limit, the South Korean e-invoicing system falls under the category of CTC.
South Korea has implemented a comprehensive e-invoicing system from the beginning and as a result there haven’t been any major changes to the requirements or practices. This is a big relief for taxpayers in South Korea compared to other CTC jurisdictions where there are constant changes.
In addition to the benefits for taxpayers, a considered CTC regime is also less burdensome for the state as the implementation costs of the constant regulatory changes can be significant.
More and more governments are considering the adoption of CTC regimes and should look to South Korea as a success story for this approach which has worked well for both the government and taxpayers.
Please get in touch to discuss how Sovos can help your business comply with CTC regime reporting in South Korea or other jurisdictions subject to e-invoicing mandates.
Singapore’s new Low Value Goods (LVG) rules came into effect at the beginning of the year. As of 1 January 2023, private consumers in the country must pay 8% GST on goods valued up to SGD 400 imported via air or post from GST-registered suppliers.
From 1 January 2024, the GST will increase to 9%.
Prior to this change , Low Value Goods procured locally from GST-registered businesses were subject to GST. Goods imported overseas via air or post were not. This change treats all goods consumed in Singapore in relation to GST.
The SGD 400 threshold does not include:
For example, a private individual orders an item that costs SGD 390. Additional transportation fees are SGD 20. As the threshold excludes transportation fees, the product’s value is SGD 390. The consumer will have to pay GST on the purchase to the supplier.
Since 1 January 2023, GST is also levied on supplies of imported non-digital services purchased from GST-registered overseas suppliers. As a result, all B2C supplies of imported services – digital or otherwise – that are supplied and received remotely are taxed.
Non-established suppliers – such as electronic marketplace operators and re-deliverers – must register, charge and account for GST where:
Companies may also voluntarily register.
Businesses should assess if these changes trigger the need to register for GST and other compliance challenges.
Still have questions about GST in Singapore? Speak to our tax experts.
Thailand has permitted e-invoicing since 2012. From 2017 – following regulations issued on e-tax and e-receipts – taxpayers may prepare, deliver, and keep their invoices and receipts electronically, subject to prior approval from the Thai Revenue Department.
Currently, the Revenue Department and the Electronic Transactions Development Agency (ETDA) are working together to improve the e-tax invoicing system in Thailand. As a result of this joint effort, they’re developing new regulations.
Thailand´s voluntary e-invoicing system aims to promote and support their e-payment policies and electronic transactions, reduce the cost and management of the government and private sector and increase confidence and safety according to international standards.
According to the Revenue Code documents that can be voluntarily issued electronically are tax invoices (known as e-tax invoices), credit notes, debit notes and receipts.
E-tax invoices are electronic tax invoices, including regular invoices and debit and credit notes prepared in a specific electronic format.
Formats may include a Microsoft Word file, a Microsoft Excel file, PDF, PDF/A-3, XML or other forms established by the Revenue Department. Finally, the e-tax invoice must be signed using a digital signature or time stamp before being delivered to the buyer.
Thailand currently has two e-invoicing systems for taxpayers to adopt voluntarily. These are e-tax invoices and e-receipt RTIR, and e-tax invoices by email.
Any taxpayer can voluntarily register for this system without a turnover threshold.
Entrepreneurs can prepare electronic tax invoices and electronic receipts in an XML file or other electronic formats with a digital signature. However, to submit the data to the Revenue Department, the information should only be in an XML file format (Bor Thor. 3-2560). They must also have an electronic certificate provided by a Certification Authority.
In this system, the supplier must submit the e-invoice to the Revenue Department by the 15th day of the subsequent tax month after delivering it to the buyer.
This system is designed for small entities with an annual turnover of less than THB 30 million. Taxpayers can email the invoice to the buyer and include the central system of the agency that develops electronic transactions in the CC field for time stamping.
The system then sends both trading parties an e-tax invoice with a time stamp. In this system, the file format is PDF/A-3. Information is automatically sent to the Revenue Department.
It’s important to note that once approved by the Thai Revenue Department to issue electronic invoices, taxpayers must comply with all the regulations and rules for preparing and storing electronic invoices and receipts.
The Thai Revenue Department has recently published new announcements from the Director-General of the Revenue Department regarding VAT, namely: no. 48, 247, 248 and 249.
E-tax invoices and credit and debit notes should include specific statements from those announcements. As of January 2023, they must specify that electronic invoices were prepared and sent to the Revenue Department electronically.
The Thai Revenue Department also set forward new standards in the Announcement of the Director-General of the Revenue Department No.48 regarding forms, method of delivery, storage and documentary evidence or books and information security for operations relating to electronic invoicing.
These new standards entered into force on 19 August 2022.
This regulation reinforces the need for prior approval and permission from the Revenue Department to connect with the electronic systems to issue e-tax invoices. It is subject to the requirement that a data security system can ensure the fulfilment of e-tax invoices and e-receipts.
The taxpayers opting for e-invoicing must follow the rules and conditions for this process. They need to inform the Revenue Department of the e-tax invoice by submitting a receipt for the tax invoice and the certificate used for digital signature.
The Thai Revenue Department also issued new standards in Announcement No. 48 for storing and archiving e-tax invoices and e-receipts.
Taxpayers who are obligated to issue an invoice and choose to do so electronically have to keep the electronic invoice or receipt according to specific criteria:
(a) Use reliable methods to maintain message integrity from the time the message is completed and can display that message later.
(b) Keep information on tax invoices or receipts, which can be accessed and reused, and the meaning does not change.
(c) Keep the information of tax invoices or receipts in the format in which they were created, sent, or received – or in a form that can display messages correctly, and
(d) Retain information indicating the origin and destination of the tax invoice or receipt and the date and time they sent the message.
According to the Thai Revenue Code, electronic invoices must be stored electronically for no less than five years but no more than seven years. Taxpayers must keep tax audit e-invoices until the completion of the audit.
These were significant steps towards the digitalisation of taxation in Thailand. Although there is no future timeline or mandate, they’ve taken more measures to solidify and mature the e-invoicing mandate.
While e-invoicing is still not mandatory in Thailand, the government intends to promote e-tax invoices to help businesses to increase efficiency and decrease costs. These measures could be applicable in a future compulsory e-invoicing mandate.
If you want to learn more about e-tax in Thailand or have any other question please feel free to get in touch with a tax expert today.
Since 1 January 2019 foreign electronic service providers must issue electronic invoices, a type of e-invoice, for sales of electronic services to individual buyers in Taiwan. Alongside this, Taiwan’s local tax authorities have been introducing incentives for domestic taxpayers to implement e-invoicing despite not being a mandatory requirement.
Before diving into the details of the e-invoicing system in Taiwan, we’ll discuss the Government Uniform Invoice (GUI), which the e-invoicing system is based on Government Uniform Invoices.
The government uniform invoice is a standard VAT invoice governed and pre-numbered by the tax authorities in Taiwan. All business entities must issue GUIs for all sales of goods and services subject to VAT, except for any legal exemptions.
Taxpayers can issue GUIs once following business registration approval by the local competent tax authority in Taiwan. Taxpayers can issue different types of GUIs including paper-based GUIs and Electronic Government Uniform Invoices (eGUIs) as well.
eGUIs are a type of GUI issued, transmitted, or obtained via the internet or other electronic means.
Issuing an eGUI is mandatory for foreign electronic service providers who sell electronic services to individuals in Taiwan as of 1 January 2019. However, issuing eGUIs for B2B, B2C and B2G transactions is optional for the broader economy, including domestic taxpayers in Taiwan.
Business entities in Taiwan must use a sequential track number called the electronic invoice track number (eGUI number for short) in their electronic invoices. Business entities must apply to the local tax authority to have eGUI numbers assigned.
The e-invoice issuance process requires the use of these eGUI numbers and must comply with MIG 3.2.1 based on an XML format provided by the tax authority.
Following the issuance of an electronic uniform invoice, businesses have 48 hours to upload the invoice information to the tax authority platform for B2C transactions and seven days for B2B transactions This model is known as continuous transaction controls (CTCs), whereby the tax authorities receive transactional information from taxpayers in real time or near-real time.
Business entities can appoint a certified e-invoicing service provider, also known as value-added centers, to issue and transmit uniform invoices electronically.
Taiwanese authorities have encouraged electronic invoicing for many years. As a result, more and more businesses have started issuing eGUIs.
The requirement to issue e-invoices for foreign electronic service providers has played an important role in the widespread adoption of e-invoicing throughout the country. While it’s clear Taiwan has come a long way in terms of the digitalization of e-invoicing processes, paper-based invoices can still be issued according to Taiwanese regulations.
We’ll monitor developments in the future to see whether the mandatory implementation of e-invoicing will be extended to the broader economy in Taiwan.
Need to issue GUIs electronically in Taiwan? To comply with tax authority requirements in Taiwan and around the world, contact us now.
The Philippines continuous transaction controls (CTC) Electronic Invoicing/Receipting System (EIS) has been officially kicked off for the 100 large taxpayers selected by the government to inaugurate the mandate. Although taxpayers were still struggling to meet the new e-invoicing system’s technical requirements just before the go-live date, the Philippines upheld its planned deadline and went live with this pilot on 1 July 2022.
The Philippines roll-out has once again highlighted the challenges of complying with new mandates and shown that readiness is vital.
Together with one of the six initial pilot companies, which started testing early this year, Sovos has developed the first software solution to obtain approval by the EIS to operate e-invoice transmission through the government’s transmission platform. Sovos’ solution is up and running in the Philippines.
One day before the EIS go-live, the Philippines tax authority, BIR (Bureau of Internal Revenue), published Revenue Regulations n. 6-2022, 8-2022, and 9-2022, containing the new system’s policies and guidelines and documenting the rules and procedures adopted by the EIS.
While the regulations do not represent news for pilot taxpayers who have successfully implemented their CTC e-invoice reporting systems, the same might not be accurate for those preparing to comply with the new mandate. The legislation officially establishes the country’s e-invoice/receipt issuance and reporting initiative, first introduced in 2018 by the Tax Reform for Acceleration and Inclusion Act (TRAIN), and documents relevant information.
As of 1 July 2022, 100 selected pilot taxpayers have been obliged to issue and transmit e-invoices and e-receipts through the EIS. The BIR is planning a phased roll-out for other taxpayers within the scope of the mandate, starting in 2023, but no official calendar has been announced yet.
Taxpayers covered by the mandate are:
The mandate requires electronic issuance of invoices (B2B), receipts (B2C), debit and credit notes and transmission through the EIS platform in near real-time, that is, in up to three (3) calendar days counted from issuance date. Documents must be transmitted using the JSON (JavaScript Object Notation) file format.
Issuance and transmission can be done through the EIS taxpayer portal or using API (Application Programming Interface), in which taxpayers must develop a Sales Data Transmission System and secure certification before operating through the EIS. This entails the application for the EIS Certification and a Permit to Transmit (PTT) by submitting documentation with detailed information about the taxpayer’s system.
Although the regulations state that the submission of printed invoices and receipts is no longer required for taxpayers operating under the EIS, archiving requirements have not been modified. This means that during the 10-year archiving period, taxpayers must retain hard copies of transmitted documents for the first five (5) years, after which exclusive electronic storage is allowed for the remaining time.
Additionally, the legislation states that only the invoices successfully transmitted through the EIS will be accepted for VAT deduction purposes.
Many of the 100 pilot taxpayers struggled to comply with the country’s deadline. For this reason, the EIS has allowed alternations to the deadline for certain taxpayers, provided they submit a Sworn Statement detailing the reasons why they are not able to meet the requirement on time and a schedule with the date they intend to comply by, which are subject to the EIS’ approval.
Regarding non-compliance, the regulations state that the tax authority shall impose a penalty for delayed or non-transmission of e-invoices/receipts to the EIS and that unreported sales will be subject to further investigation.
After the pilot program kick-off and legally establishing the CTC framework, the government plans to gradually roll out the mandate to all taxpayers included in the scope in 2023. However, taxpayers who are not in the mandatory scope of the EIS may already opt to enrol in the system and be ready to comply beforehand.
Sovos was the first software provider to become certified, in conjunction with one of the pilot taxpayers, to transmit through the EIS, and is ready to comply with the Philippines CTC e-invoice reporting. Our powerful software combined with our extensive knowledge of the Philippines tax landscape helps companies solve tax for good.
Need to ensure compliance with the latest e-invoicing requirements in the Philippines? Speak with a member of Sovos’ team of tax experts
2014 – e-Faktur Pajak introduced
2016 – e-Faktur Pajak became effective
1 October 2020 – New e-Faktur Pajak version 3.0 released
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Thailand’s current e-invoicing legal framework has been in effect since 2012 and follows a post-audit approach.
The Thai Revenue Department and Electronic Transactions Development Agency (ETDA) are working together to improve and further develop the e-tax invoicing system. As a result, new regulations on e-tax invoicing and receipts are expected in the future.
From 2017, the Thai Revenue Department issued regulations on electronic tax invoices and receipts. Subject to approval, taxpayers can prepare, deliver and keep their e-tax invoices and receipts in electronic format. Read more about e-tax in Thailand here.
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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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Over the last 10 years, the Vietnamese government has worked on developing a solution to tackle the country’s VAT fraud and the VAT gap, introducing an e-invoicing mandate for all companies doing business in Vietnam from 1 July 2022.
The Vietnam e-invoicing mandate was initially slated to be in force by July 2020, but ultimately was delayed. In October 2020, a new timeline was laid out through Decree 123 announcing implementation dates for the new e-invoicing mandate rules that were originally envisaged in the Law on Tax Administration.
An initial rollout will begin from March 2022 to a select number of provinces and cities. The country’s new e-invoicing requirements will come into effect nationwide on 1 July 2022.
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There have been improvements in recent years to VAT revenue collection in the Philippines, but there are a considerable number of exemptions from the country’s 12% VAT rate.
After receiving funding from South Korea to investigate and adopt a CTC e-invoicing regime, the Philippines is expected to roll out a phased VAT control reform over the coming years.
In 2018, the Philippines launched the Tax Reform for Acceleration and Inclusion (TRAIN), which included several tax reform proposals.
The TRAIN proposals included the requirement for large taxable persons who were engaged in e-commerce or export to issue e-invoices, e-receipts and to report sales data to the country’s tax administration, the Bureau of Internal Revenue (BIR).
2018 – TRAIN law was introduced.
End of January 2022 – Pilot program environment was made available to eligible taxpayers to establish test connectivity and verify file formats.
April 2022 – Six pilot companies will test the system end-to-end by transmitting e-invoices to the EIS.
July 2022 – 100 pilot taxpayers, including the initial six will have to report all their invoicing data to the EIS through the new system.
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China’s VAT digitization journey began nearly two decades ago with the rollout of a tax regime called the Golden Tax System. This created a national taxation platform for reporting and invoicing, as well as legislation regulating the use and legal effect of e-signatures.
With the increase of mobile payment adoption, the push towards customer-facing e-invoicing grows. The Chinese government has taken initiatives to further reform reporting and invoicing with a proposed nationwide e-invoicing service platform to provide an e-invoice issuance service to all taxpayers free of charge.
E-invoicing has been gradually introduced in China, starting with the B2C segment – in some cases by mandating large amounts of taxpayers in the public service sector to issue VAT e-invoices to their customers.
Whilst e-invoicing is not yet fully permitted, the issuance of e-invoices has been widely accepted in B2C instances for several years. They are mandatory in certain core service-based industries including telecommunications and public transportation. Invoices are issued via the national system with hardware and software certified by the state authority.
A pilot program was launched in September 2020, which enables specific taxpayers operating within China to voluntarily issue VAT special e-invoices. Special invoices are used to claim input VAT and are generally used in B2B transactions.
As China’s new e-invoicing program will shortly expand to include most companies, we inch ever closer to full scale e-invoicing possibilities in China.
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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.
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John Dowd, Indirect Tax Manager at sport-fashion retailer JD Sports discusses how he managed cross-border VAT compliance with the help of Sovos’ managed services
“For us at JD Sports and me personally I’m looking for a partnership, something long term, as it takes time and costs money to change advisors. I’m looking for a long-term relationship over a number of years with a VAT service provider.
“I want my advisor to have specialist knowledge, for us that’s retail and cross-border supply chains, overseas tax authorities, and I want to see new talent joining the team. I prefer a single point of contact to make it easier to move things along and of course, competitive pricing, and Sovos ticked all of these boxes for us.”
John Dowd, Indirect Tax Manager at JD Sports
VAT compliance has many elements, beginning with an understanding of place of supply rules to determine where VAT registration is required. Fiscal representation might be required to register in EU Member States.
Once VAT registration is underway, the next step is to determine EU VAT obligations by mapping the supply chain for the country of registration. There are also additional requirements to consider including exemptions, recovering VAT, Intrastat and varying continuous transaction controls (CTCs) mandates.
Submitting VAT returns to ensure compliance is a never-ending process. Each country has its own VAT return regulations and additional declaration requirements.
The VAT compliance cycle also includes preparation for VAT audits. Tax authorities can carry out audits for a variety of reasons so it’s important businesses prepare for audits and ensure they are able to manage the process successfully.
Sovos’ end-to-end, technology-enabled VAT Managed Services can ease your compliance workload and mitigate risk where-ever you operate today, while ensuring you’re ready to handle the VAT requirements in the markets you intend to dominate tomorrow.
During the last decade, the Vietnamese government has been developing a feasible solution to reduce VAT fraud in the country by adopting an e-invoice requirement for companies carrying out economic activities in Vietnam. Finally, on 1 July 2022, a mandatory e-invoicing requirement is scheduled to enter into force nationwide.
Despite the postponement of the original starting date for the mandatory nationwide e-invoicing obligation, which was first intended to enter into force in July 2020, the Vietnamese government quickly established a new deadline.
Later that year, in October 2020, the new timeline was communicated through Decree 123, delaying the e-invoicing mandate until 1 July 2022. This new deadline is also in line with the implementation dates for the rules concerning the e-invoicing system envisaged in the Law on Tax Administration.
Vietnam’s General Taxation Department (GTD) announced its plan to work first with the local tax administrations of six provinces and cities: Ho Chi Minh City Hanoi, Binh Dinh, Quang Ninh, Hai Phong and Phu Tho to start implementing technical solutions for the new e-invoice requirements and the construction of an information technology system that allows the connection, data transmission, reception, and storage of data. According to the GTD’s action plan, by March 2022, these six cities and provinces should be ready for the e-invoice system’s activation.
The GTD announced that, from April 2022, the new e-invoicing system will continue to be deployed in the remaining provinces and cities.
Finally, under this local implementation plan, by July 2022, all cities and provinces in Vietnam must deploy the e-invoicing system based on the rules established in Decree 123 and the Circular that provides guidance and clarification to certain aspects of the new e-invoicing system.
Taxable persons operating in Vietnam will be required to issue e-invoices for their transactions from 1 July 2022 and must be ready to comply with the new legal framework. Enterprises, economic organisations, other organisations, business households and individuals must register with the local tax administration to start using e-invoices according to the rules established in the mentioned Decree 123.
Vietnam is finally moving forward to adopt mandatory e-invoicing. However, there is plenty of work related to the necessary technical documentation and local implementation of the new e-invoicing system. We will continue to monitor the latest developments to determine whether the GTD can meet all the requirements in time for the mandatory e-invoicing roll-out.
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