Since 1 January 2019 foreign electronic service providers must issue cloud 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 this 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), as the e-invoicing system is based on Government Uniform Invoices.

What is a Government Uniform Invoice (GUI)?

The government uniform invoice is a standard VAT invoice governed and pre-numbered by the tax authorities. 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 their business registration has been approved 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 that are issued, transmitted, or obtained via the internet or other electronic means. As previously mentioned, 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 is optional for the broader economy, including domestic taxpayers in Taiwan.

How are eGUIs issued?

As part of the eGUI issuance process, taxpayers are required to use the numbers provided by the tax authorities during the business registration process. An eGUI 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, the invoice information must be uploaded to the tax authority platform within 48 hours for B2C transactions and seven days for B2B transactions.

Foreign business entities within the scope of requirements or any entity that opts to issue eGUIs can appoint a third-party service provider called Value Adding Center to issue eGUIs. An alternative is implementing a solution based on the Turnkey transmission software provided by the Ministry of Finance.

What’s next?

Electronic invoicing has been encouraged by Taiwanese authorities for many years. As a result, more and more businesses have started to issue eGUIs. Also, the requirement to issue cloud 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 that 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.

Take Action

Need to ensure compliance with Taiwan’s eGUI? Speak to our tax experts or download the 13th Annual Trends to learn more about the global e-invoicing landscape.

Japan's Tax System

Japan's Tax System

Starting with the introduction of a multiple tax rate system in 2019, Japan is in the middle of a multi-year process of upgrading its consumption tax system. Through this significant change, the Japanese government seeks to solve a tax leakage problem that has existed for years.

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Japan's tax reforms

The recent series of tax reforms in Japan started with the introduction of its multiple tax rate system on 1 October 2019. Following this, changes in the country’s indirect tax, the Japanese Consumption Tax (JCT), started to take place. To counter systemic problems caused by the current ledger system structure, anew system – the Qualified Invoice System –will be introduced from 1 October 2023. The key difference from the current system is that a Qualified Invoice must include a breakdown of applicable tax rates for that given transaction.

Not long after these changes were announced, a new organisation, the E-Invoice Promotion Association (EIPA), was established in July 2020. It aims to promote digitization of overall commercial transactions. Leveraging the opportunity presented by the new Qualified Invoice System, the EIPA began to work on developing a standard specification for electronic invoices.

Since January 2021, the EIPA – with support from the Japanese government – has been working with the OpenPEPPOL team to develop a Japanese specification that meets the country’s regulatory framework and business demands. In September 2021, Japan acquired PEPPOL Authority status and aims to allow businesses to issue and receive electronic invoices through PEPPOL in the Autumn of 2022.

Japan's tax system quick facts

  • Under the new system, only registered JCT payers can issue qualified tax invoices. On the buyer side, taxpayers will only be eligible to input tax credit where a qualified invoice has been issued
  • Taxpayers must register with Japan’s National Tax Agency (NTA) to issue qualified invoices. Registration began in October 2021 and must be completed before 31 March 2023
  • Invoices must be archived according to Italian-style storage requirements: to be compliant, taxpayers must either timestamp their invoices or draw up a Storage and Maintenance Guideline describing how the invoices are archived and how this meets applicable requirements
  • Invoices should be stored in such a way to guarantee the integrity, authenticity and availability during the storage period
  • Foreign storage is allowed provided it fulfills the requirement for storage under Japanese law
  • Outsourcing of invoice issuance is allowed with no restrictions or requirements

Japan's mandate rollout dates

  • 1 October 2019 – Japan introduces its multiple tax rate system
  • 14 September 2021 – the Japanese Digital Agency obtained PEPPOL Authority status
  • 1 October 2022 –EIPA aims to enable businesses in Japan to issue and receive electronic invoices through PEPPOL
  • 31 March 2023 – Latest date to apply for registration with the NTA to issue qualified invoices
  • 1 October 2023 – Qualified Invoice System will be introduced

Quick facts about Japan's Consumption Tax

Introduced in January 1989, it’s the indirect tax charged on the consumption of goods and services in Japan. There are national and regional levies, and a reduced rate of Consumption Tax in Japan.

Japan’s Consumption Tax is the equivalent of VAT which is charged across the European Union.

Consumption Tax in Japan is levied when a business transfers goods, provides services or imports goods into Japan.

A refund of Consumption Tax in Japan isn’t possible for businesses without taxable sales in the country.

How Sovos can help

As Japan implements its Consumption Tax System updates, requirements for Japanese taxpayers will change. Need help ensuring your business stays compliant with all future Japanese Consumption Tax system updates?

Our experts continually monitor, interpret and codify regulatory changes from around the world into our software, reducing the compliance burden on your tax and IT teams.

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.

Release of new regulations

One day before the EIS go-live, the Philippines tax authority, BIR (Bureau of Internal Revenue), published Revenue Regulations n. 6-20228-2022, 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.

Who needs to comply?

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.

Issuing and transmitting

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.

Taxpayers were not ready to comply

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.

What’s next?

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.

Take Action

Need to ensure compliance with the latest e-invoicing requirements in the Philippines? Speak with a member of Sovos’ team of tax experts

Indonesia’s VAT requirements

Indonesia’s e-invoicing system and continuous transaction controls

After experiencing challenges in its tax control system, Indonesia adopted an e‑invoicing system, locally known as e‑Faktur. Leveraging data reported in real-time via continuous transaction controls (CTCs) allows the Indonesian tax authorities to reduce occurrences of fraud whilst helping to close the tax gap.

Have questions? Get in touch with a Sovos Indonesia CTC expert.

CTC reforms

Introduced in 2014 and effective from 2016, Indonesia’s e‑invoicing system seeks to combat the tax gap. Indonesia’s solution was the implementation of an invoice clearance system, where invoices must be approved by the local tax authority prior to being sent to a customer.

Quick facts

  • E-invoicing has been mandatory for all corporate VAT taxpayers since July 2016.
  • E-invoices (e-Faktur Pajak or e-FP) should be created by applications and systems prescribed by the Director of Taxation (DGT). These include client desktop, web-based and host-to-host applications.
  • Electronic signatures are required for the issuance of e-invoices.
  • It’s compulsory for all invoices to be processed and issued electronically via the government hosted eFaktur platform. The submission platform for the VAT return has been integrated with the e-invoicing platform.
  • Electronic certificates are required to verify taxpayer identity and are valid for two years.
  • Activation code and password are required for access to e-Nofa to request electronic tax invoice serial numbers.
  • Using e-Faktur, VAT returns are periodically submitted (typically monthly).

Mandate rollout dates

2014 – e-Faktur Pajak introduced

2016 – e-Faktur Pajak became effective

1 October 2020 – New e-Faktur Pajak version 3.0 released

How can Sovos help?

Need help to ensure your business stays compliant with the e-invoicing obligations in Indonesia?

Our experts continually monitor, interpret and codify changes into our software, reducing the compliance burden on your tax and IT teams.

Learn how Sovos’ solution for VAT compliance changes can help companies stay compliant in Indonesia and around the world.

Thailand’s New Approach to Electronic Invoicing

New regulations for e-tax invoicing solutions and receipts expected soon

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.

Get in touch with a Sovos Thailand electronic invoicing expert.

E-tax invoicing solutions

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.

Quick facts about Thailand electronic invoicing

  • E-invoices must be digitally signed using a certificate issued by a certification authority and approved by the Thai Revenue Department.
  • E-invoices must be submitted in XML format to the Revenue Department monthly.
  • Outsourcing of e-invoice issuance is allowed provided the third-party service provider is certified by the Thai Revenue Department.

E-tax invoicing rollout dates

  • 2012 – E-invoicing permitted
  • 2017 – New regulations issued on electronic e-tax and receipts.
  • 2020 – EDTA began a certification process for service providers to assess whether applicants’ solutions are secure and compliant.

How can Sovos help with invoicing solutions?

Need help to ensure your business stays compliant with emerging e-invoicing obligations?

Our experts continually monitor, interpret and codify legal changes and requirements into our software solutions, taking care of your indirect tax compliance so you can focus on your core business.

Learn how Sovos’ solutions for continuous transaction controls and VAT compliance obligations can help companies stay compliant.

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.

United States

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 BPC e-Invoice Exchange Market Pilot

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.

Future vision

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.

Australia and New Zealand

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.

Australia

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.

New Zealand

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.

To find out more about what we believe the future holds, download Trends 13th Edition.

Take Action

Need help ensuring your business stays updated on the changes in the US, Australia and New Zealand e-invoicing systems? Get in touch with our team of experts to learn how Sovos’ solutions can help.

Vietnam’s VAT Requirements

VAT in Vietnam

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.

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Reforms

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.

Quick facts

  • Applicable taxpayers in Vietnam will be required to issue e-invoices for their transactions from 1 July 2022.
  • Legal framework must be followed for all e-invoice submissions.
  • Enterprises, organisations (economic or otherwise), business households and individuals must register with the local tax administration to start using e-invoicing.
  • There are two types of e-invoicing processes in Vietnam. Authenticated invoices are granted an authentication code by the tax authority before the invoice is transmitted to the buyer, whereas unauthenticated e-invoices do not require the tax authority’s authentication code.
  • Electronic invoices must be issued in XML format.
  • VAT, sales invoices, and the invoices used for selling public assets are among the documents under the scope of the e-invoicing mandate.
  • Ensuring of the integrity and authenticity of the e-invoices is required and must be digitally signed by the supplier.
  • E-invoices must be archived electronically and taxable persons may choose archiving methods guaranteeing security and integrity and authenticity during the entirety of the archiving period.
  • Service providers meeting specific requirements can provide the contracting parties with e-invoicing solutions.

Mandate rollout dates

  • March 2022 – Vietnam General Taxation Department (GTD) will first work with six local tax administrations: Ho Chi Minh City, Hanoi, Binh Dinh, Quang Ning, Hai Phong and Phu Tho to start implementing technical solutions for new e-invoicing requirements and construction of an IT system for connection, data transmission, reception and storage of data.
  • April 2022 – E-invoicing system will be rolled out to the remaining provinces and cities.
  • 1 July 2022 – All cities and provinces 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.

How can Sovos help?

Need help to ensure your business stays compliant with evolving e-invoicing requirements?

Our experts continually monitor, interpret and codify changes into our software, reducing the compliance burden on your tax and IT teams.

Learn how Sovos’ solutions for continuous transaction controls and VAT compliance obligations can help your company stay compliant.

Philippines VAT Requirements

VAT in the Philippines

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.

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CTC reforms

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).

Quick facts

  • In July 2022, the Department of Finance (DOF) intends to launch a CTC e-reporting system pilot program covering B2B invoicing and B2C receipts per the TRAIN law mandate. By this date, the 100 largest taxpayers in the country must be live with the system.
  • E-invoice data must be reported in JSON format and contain the issuer’s electronic signature.
  • All e-invoice data and e-receipts must be transmitted to the tax authority’s invoice system (EIS) either immediately after issuance or in a batch submission once per day (near real-time).
  • E-invoice data reporting and e-receipt reporting can be done either through dedicated APIs or through the BIR’s web portal.
  • Suppliers can deliver invoices to customers electronically via email in PDF format or as a hard copy.
  • E-invoices must be archived for 10 years.

Mandate rollout dates

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.

ONE PAGER

Philippines CTC Requirements

Understand more about Philippines’ continuous transaction controls including when businesses need to comply, and how Sovos can help.

How can Sovos help?

Do you need help ensuring your business stays compliant with the upcoming e-invoicing obligations in the Philippines?

Sovos already provides early adopters with a solution connected to the Philippines Tax Authority Platform and helps other taxpayers prepare for the extended rollout of the CTC e-reporting system.

Learn how Sovos’ solution for VAT compliance changes in the Philippines can help your business stay compliant.

China's E-Invoicing Regime

The move to customer facing e‑invoicing grows in China.

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.

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Reforms

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.

Quick facts

  • E-invoices must have an electronic signature instead of the original invoice stamp.
  • Taxpayers can use the tax authority’s platform for VAT services to check and verify the electronic signature of e-invoices.
  • Accounting documents, including invoices, may be stored electronically provided that the e-archive meets integrity and authenticity criteria, and the processing system adheres to requirements on functionality and security.

Mandate rollout dates

  • September 2020 – China’s e-invoicing pilot program began allowing e-invoice issuance for B2B purposes. It initially only included Ningbo, Shijiazhuang and Hangzhou.
  • December 2020 – Pilot expanded to include Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui, Guangdong, Chongqing, Sichuan and Shenzhen.
  • January 2021 – Pilot further expanded to include Beijing, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Fujian, Jiangxi, Shandong, Henan, Hunan, Guangxi, Hainan Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Dalian, Xiamen and Qingdao.
  • December 2021 – A new pilot program, only for selected taxpayers, started in Shanghai, Inner Mongolia and Guangdong, introducing the so called “fully digitized e-invoice”, a new type of e-invoice that simplifies the e-invoice issuance for both B2B and B2C purposes.

How can Sovos help?

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.

Our experts continually monitor, interpret and codify changes into our software, reducing the compliance burden on your tax and IT teams.

Register your interest now to learn how Sovos’ solution for tackling this major VAT reform in China will help your company stay compliant.

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).

What Is 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:

Further measures to support e-invoicing adoption

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.

Take Action

Need help staying up to date with the latest VAT and compliance updates in Australia that may impact your business? Get in touch with Sovos’ team of experts today.

Managed Services for VAT Compliance

Many multinational companies find VAT compliance challenging, especially when trading cross-border.
With the increase in real-time reporting across Europe and differing VAT registration and reporting requirements, VAT compliance now requires significant resources and specialist knowledge to ensure compliance and avoid costly penalties.
As your business expands, so do your VAT obligations. This is why many organisations, turn to managed service providers to ease the burden of VAT compliance, audits and fiscal representation.
This e-book discusses the many elements of VAT compliance including:

Download a copy of the VAT managed services e-book

Get the e-book

How JD Sports manage VAT compliance with Sovos’ Managed Services

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

The many elements of VAT compliance

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.

How Sovos VAT Managed Services can help with VAT compliance

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.

Download the VAT managed services e-book

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.

2020 e-invoicing mandate postponement 

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.

Ongoing regional readiness plan

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.

Next steps for businesses

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.

Take Action

Need help staying up to date with the latest VAT and compliance updates that may impact your business? Get in touch with our team of experts today.

The Tax Bureaus of Shanghai, Guangdong Province and Inner Mongolia Autonomous Region have all issued announcements stating they intend to carry out a new pilot program for selected taxpayers based in some areas of the provinces. The pilot program will involve adopting a new e-invoice type, known as a fully digitized e-invoice.

Introduction of a new e-invoice type

Many regions in China are currently part of a pilot program that enables newly registered taxpayers operating in China to voluntarily issue VAT special electronic invoices to claim input VAT, mostly for B2B purposes.

The new fully digitized e-invoice is a simplified and upgraded version of current electronic invoices in China. The issuance and characteristics of the fully digitized invoice are different from other e-invoices previously used in the country.

Characteristics of the fully digitized e-invoice

Verification of fully digitized e-invoices

Relying on the national unified electronic invoice service platform, tax authorities will provide selected taxpayers for this pilot program with services such as issuance, delivery, and inspection of fully digitized e-invoices 24 hours a day. Taxpayers will be able to verify the information of all electronic invoices through the electronic invoice service platform or the national VAT invoice inspection platform (https://inv-veri.chinatax.gov.cn ).

What’s next for e-invoicing in China?

This new pilot program has been effective in Shanghai, Guangzhou, Foshan, Guangdong-Macao Intensive Cooperation Zone, and Hohhot since 1 December 2021. Despite the lack of an official timeline for implementation, it’s expected that the scope of this pilot program will be extended in 2022 to cover new taxpayers and regions in China, paving the way for nationwide adoption of the fully digitized e-invoice.

Take Action

To find out more about what we believe the future holds for VAT, download the 13th edition of Trends. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.

Indirect Tax Rules for Insurance Across the World

Many tax authorities are increasing their focus on the insurance industry in an effort to close tax revenue gaps, with many introducing Insurance Premium Tax (IPT) and other indirect taxes for insurance. Globally, IPT is fragmented across over 200+ countries and achieving compliance can be a complex process requiring specialist knowledge.

Insurers, especially those operating across multiple territories, can find keeping up to date with the latest IPT rates, rules and regulations to ensure compliance challenging.

This guide provides a helpful snapshot of the indirect tax rules that apply to insurance premiums across the world, including:

  • Europe
  • Asia
  • Africa
  • Australia and New Zealand
  • North America
  • South America

Download the Indirect Tax Rules for Insurance Across the World guide

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The guide provides a useful reference of indirect rules across Europe including:

Albania, Andorra, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Jersey, Kosovo, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Monaca, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Slovakia, Slovenia, Spain, Switzerland, United Kingdom

And across Asia including:

Armenia, Azerbaijan, Bahrain, Bangladesh, Brunei Darussalam, Cambodia, Hong Kong, India, Indonesia, Israel, Japan, Kazakhstan, Korea (the Republic of) (South), Lao People’s Democratic Republic, Macau, Malaysia, Maldives, Mongolia, Myanmar, Pakistan, Philippines, Qatar, Saudi Arabia, Singapore, Sri Lanka, Taiwan (Province of China), Thailand, Turkey, United Arab Emirates, Vietnam

Across Africa including:

Angola, Benin, Botswana, Burkina Faso, Congo, Egypt, Eritrea, Gambia, Ghana, Kenya, Libya, Mauritius, Mozambique, Namibia, Nigeria, Saint Helena, United Republic of Tanzania, Zambia, Zimbabwe

For Australia and New Zealand including:

American Samoa, Australia, Fiji, French Polynesia, Marshall Islands, New Caledonia, New Zealand, Wallis et Futuna

Across North America including:

Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Bermuda, Canada, Cayman Islands, Costa Rica, Curacao, Dominican Republic, El Salvador, Greenland, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Puerto Rico, Saint Kitts and Nevis, Saint Lucia, Saint Martin (French part), Saint Vincent and the Grenadines, Trinidad and Tobago, Turks and Caicos Islands, United States of America, Virgin Islands

And, finally, the indirect tax rules for insurance across South America including:

Argentina, Bolivia, Brazil, Chile, Ecuador, Falkland Islands, Paraguay, Peru, Uruguay, Venezuela

Insurance Premium Tax compliance

The digitization of tax is a trend that will undoubtedly continue. Organisations need to prepare for any changes to reporting as this will impact compliance obligations for the countries they operate in.

Tax authorities have increased their focus on the insurance industry to ensure IPT and parafiscal taxes are collected correctly, accurately, and on time.

Operating in multiple countries inevitably means also having to comply with many local regulations in line with IPT statutory and parafiscal filing. Compliance regimes can be simple or complex, but the difficulty is that they’re varied.

Download our guide to ease this burden.

TRENDS AND UPDATES ON VAT COMPLIANCE

Trends 13th Edition 2022

TRENDS AND UPDATES ON VAT COMPLIANCE

Trends 13th Edition 2022

Welcome to the 13th edition of Sovos’ annual Trends report where we put a spotlight on current and near-term legal requirements across regions and VAT compliance domains.

This report provides a comprehensive look at the regulatory landscape as governments across the globe are enacting complex new policies to enforce VAT mandates. It examines the demanding and unprecedented insight now required into your economic data so that regulatory authorities enforce standards and close revenue gaps.

This year’s report examines the evolution of law and practice around the four emerging megatrends that Sovos experts identified in the 12th edition. These trends, many of which revolve around tax compliance and controls being ‘always on’, have the potential to drive change in the way organizations approach regulatory reporting and manage compliance.

Authored by a team of international tax compliance experts, we provide extensive recommendations on how companies can prepare for and thrive through these changes.

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 The four mega-trends that we examine are:

  1. Continuous Transaction Controls (CTCs) – Countries with existing CTC regimes are seeing improvements in revenue collection and economic transparency. Now, other countries in Europe, Asia and Africa are moving away from post-audit regulation to adoption of these CTC-inspired approaches. The report highlights how countries like France and Hungary have accelerated their transition to CTCs, and how many jurisdictions are combining invoice controls with CTC transport documents, thereby expanding their real-time reach from financial to physical supply chains.
  2. A shift toward destination taxability for certain cross-border transactions – Cross-border services have historically often escaped VAT collection in the country of the consumer. Due to a large increase of cross-border trade in low-value goods and digital services over the past decade, administrations are taking significant measures to tax such supplies in the country of consumption or destination.
  3. Aggregator liability – With the increase of tax reporting or e-invoicing obligations across different taxpayer categories, tax administrations are increasingly looking for ways to concentrate tax reporting liability in platforms that naturally aggregate large numbers of transactions already. Ecommerce marketplaces and business transaction management cloud vendors will increasingly be on the hook for sending data from companies on their networks to the government, potentially even inheriting liability for paying their taxes. The report notes how the July 2021 introduction of sweeping changes in e-commerce VAT legislation via OSS and IOSS are confirming this trend.
  4. E-accounting and e-assessment – Combining CTCs with obligations to synchronize entire accounting ledgers makes onsite audit necessary only in cases showing major anomalies across these rich data sources. Over time, the objective is for VAT returns and other tax reports to be prefilled by the tax administration based on taxpayers’ own, strongly authenticated source system data. A brief deep-dive into the origins and potential future of SAF‑T shows how this trend is evolving to become a solid companion to CTCs globally.

CTCs have emerged as the primary concern for multinational companies looking to ensure compliance despite growing diversity in VAT enforcement approaches. Tax authorities are steadfast in their commitment to closing the VAT gap and will use all tools at their disposal to collect revenue owed. This holds especially true in the aftermath of COVID-19, when governments are expected to face unprecedented budget shortfalls.

The potential costs and risks associated with the trends highlighted in the report cannot be effectively mitigated with a reactive or opportunistic approach. The digital transformation of tax administration can – if approached as just an evolution of the legacy ‘post audit’ VAT world – significantly contract the digital transformation of businesses. This report suggests an analysis framework that companies can use to ensure ongoing VAT compliance whilst maximizing the opportunities of modern information and communication technologies for their own benefit.

In addition, Trends includes a major review of the country and regional requirement profiles. These profiles provide a snapshot of current and near-term planned legal requirements across the different VAT compliance domains.

Saudi Arabia - E-Invoicing

Saudi Arabia leads the way to continuous transaction controls in the Gulf

Saudi Arabia e-invoicing from December 2021

Saudi Arabia will introduce an e-invoicing regime in a phased approach starting in December 2021. Having only introduced VAT on 1 January 2018, the country is leading the way in digitizing tax compliance in the Gulf Region.

The finalised rules published by Saudi Arabia’s tax authority, Zakat, Tax and Customs Authority (ZATCA) confirm the go-live date of the second phase from 1 January 2023.

In addition to other requirements, phase two also introduces integration with a digital ZATCA platform for continuous transaction controls (CTCs), requiring taxpayers to clear invoices ahead of transmission to buyers.

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Mandate Quick Facts

Phase 1 – Mandatory e-invoicing generation with post audit controls: Starts on 4 December 2021

  • Applies to all resident taxable persons in Saudi Arabia.
  • Requires taxpayers to generate, amend and store e-invoices and electronic notes (credit and debit notes) across B2B, B2C and B2G transactions, including exports.
  • Businesses must generate e-invoices and their associated notes in a structured electronic format.
  • Electronic invoices and notes must contain all necessary information.
  • Any structured electronic format permitted.
  • B2C invoices must include a QR code.
  • All invoices must contain a time-stamp.
  • Integrity of e-invoices is explicitly required.
  • Storage requirements same in phase 1 and 2 (must be archived in a system or server that is physically located within the territory of Saudi Arabia. Upon meeting certain additional requirements, taxpayers who have a subsidiary in Saudi Arabia may have their central computer systems located outside Saudi Arabia).
  • Suppliers must store e-invoices in structured format regardless of how they’re exchanged with buyers.
  • Certain prohibited functionalities for e-invoicing solutions.

Phase 2 – CTC regime: Starts on 1 January 2023 requiring taxpayers to transmit e-invoices in addition to electronic notes to the tax authority, ZATCA, for clearance.

  • A phased approach across different taxpayers is anticipated.
  • B2B invoices will operate under a clearance regime while B2C invoices must be reported to ZATCA’s platform within 24 hours of issuance.
  • All e-invoices must be issued in the mandatory XML format.
  • Tax invoices can be sent in XML or PDF/A-3 (with embedded XML) format to buyers. B2C invoices must be presented in paper form, however, based on mutual agreement by the parties, B2C invoices can be shared electronically or through any other way where the buyer can read it.
  • A compliant e-invoicing solution must have the following features:
    • Generation of a universally unique identified (UUID) plus invoice sequential number.
    • Tamper-resistant invoice counter.
    • Some ability to save and archive e-invoices and electronic notes.
    • Generation of a cryptographic stamp for B2C invoices, a hash, and a QR code for each e-invoice and electronic note.

Important dates

Phase 1: 4 December 2021 – all resident taxable persons in the Kingdom to generate, amend and store e-invoices and electronic notes (credit and debit notes).

Phase 2: 1 January 2023 – additional requirements for taxable persons to transmit e-invoices as well as electronic notes to the ZATCA. This will be a phased adoption starting with larger companies with gradually more coming into scope of the mandate. Companies can expect six months’ notice ahead of the deadline by which they must comply.

INFOGRAPHIC

Saudi Arabia CTC Requirements

Understand more about Saudi Arabia’s continuous transaction controls including when businesses need to comply, phase one and two compliance and how Sovos can help.

How Sovos can help

Need help to ensure your business is VAT compliant in Saudi Arabia? Sovos serves as a true one-stop-shop for managing all e-invoicing compliance obligations in Saudi Arabia and across the globe. Sovos uniquely combines local expertise with a seamless, global customer experience.

India’s Continuous Transaction Control e-invoicing model applies to both domestic and cross-border transactions

India E-Invoicing

Under the new Goods and Services Tax (GST) framework, the Indian e-invoicing system falls under the category of continuous transaction controls (CTCs). The invoice data reporting obligation to the governmental portal is a mandatory step before an invoice can be issued.

The legal validity of the invoice is conditional on the Invoice Registration Portal (IRP) digitally signing the invoice and providing an Invoice Registration Number (IRN). If the IRN is not included in an invoice, the invoice will not be legally valid.

The scope covers both domestic and cross-border transactions. The IRP process is mandatory for B2B, B2G and export transactions. So, taxpayers in scope must issue their invoices (as well as other documents that need an IRN e.g. associated eWaybills) according to the new system for all B2B, B2G or export transactions. India has made multiple changes to the initial regulation and future changes are inevitable.

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Mandate Quick Facts

  • Invoice data should be transmitted to the IRP in JSON format.
  • The IRN obtained from the IRP is a validity requirement for invoices.
  • Invoices can be exchanged in JSON or PDF format as well as in paper form between the supplier and buyer.
  • Archiving is mandated (storage period of eight years).

Mandate Rollout Dates

  • 1 January 2020: Voluntary period for businesses with a turnover of Rs.500 Crore or more.

  • 1 February 2020: Voluntary period for businesses with a turnover of Rs.100 Crore or more.

  • 1 October 2020: Beginning of the mandatory period for businesses with a turnover of Rs.500 Crore or more (six months later than previously intended). For the first 30 days, there was a grace period during which invoices could be reported after they had been issued.

  • 1 January 2021: Beginning of the mandatory period for businesses with a turnover of Rs.100 Crore or more.

  • 1 April 2021: Threshold for mandatory e-invoicing lowered to taxpayers with  turnover between Rs. 100 Crore to Rs. 50 Crore.

  • 1 April 2022: Threshold lowered from Rs. 50 Crore to Rs. 20 Crore. Taxpayers above Rs. 20 Crore must implement e-invoicing.
  • 1 October 2022: Threshold lowered to taxpayers with an annual threshold of Rs. 10 Crore.

Penalties

If an invoice is not registered on the IRP, it will be considered unissued and will result in penalties of at least 10,000 Rupees for each instance of noncompliance. Penalties under various sections of GST will be levied with interest.

Sovos Helps Companies Stay Compliant with India E-invoicing

By February 2021 the initial specifications published by the Indian tax authority in December 2019 had already been revised three times. Future changes are inevitable.

Our experts continually monitor, interpret, and codify these changes into our software, reducing the compliance burden on your tax and IT teams.

Find out how Sovos can help you to meet your clearance e-invoicing obligations in India.

South Korea's Long Standing e-Tax Invoice System

South Korea E-Invoices

South Korea introduced its Electronic Tax Invoice System i.e. e-Tax in 2010. Since 2011, this has become a mandatory e-invoicing requirement alongside the obligation to report e-tax invoices shortly after issuance. This requirement means South Korea has a continuous transaction controls (CTCs) reporting obligation. The scope of the mandate has been expanded to cover more taxpayers, however the initial workflows and requirements of the mandate have remained relatively stable.

E-invoicing in South Korea has been mandatory for all corporations since 2011 and for individual taxable persons when exceeding a certain turnover threshold.

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Mandate quick facts

  • Mandatory e-invoicing with CTC reporting model: An issued e-tax invoice must be transmitted to the National Tax Service (NTS) within one day of the invoice being issued
  • Invoice data is reported to the NTS in XML format
  • Invoices and amended invoices (credit and debit notes) are in scope
  • E-invoicing in South Korea applies to domestic transactions only. Cross border transactions are out of scope

Mandate rollout dates

  • January 2011: The electronic issuance of VAT invoices and next day reporting became mandatory for all Korean corporate taxpayers
  • January 2012: : In addition to the first category, sole proprietors with a supply value of 1 billion KRW and above must issue e-tax invoices
  • July 2014: The threshold changed from 1 billion KRW to 0.3 billion KRW and above
  • July 2019: Introduction of the tax-free portion of the income to be included when calculating the threshold of 0.3 billion KRW
  • July 2022: The threshold was updated from 0.3 billion KRW to 0.2 billon KRW and above
  • July 2023: The threshold will be updated from 0.2 billion KRW to 0.1 billon KRW and above

Penalties

Penalties vary between 0.3-1% of the supply price based on the failure type e.g. non-issuance, issuance form, delayed issuance, non-transmission, late transmission.

INFOGRAPHIC

South Korea CTC Requirements

Understand more about South Korea’s continuous transaction controls including when businesses need to comply and how Sovos can help.

Good to Know

Yes, VAT is South Korea’s consumption tax and is charged on virtually everything sold throughout the country.

Yes, e-invoicing in South Korea is mandatory for all corporations and for certain individuals with supplies over a certain amount.

VAT is charged on all supplies of goods and services. There are some exemptions and also zero-rated supplies of goods and services.

Here’s further information about some of the countries within Asia that require e-invoicing.

How Sovos can help

As countries around the globe digitize their tax systems to close VAT gaps, our experts continually monitor, interpret and codify these changes into our software, reducing the compliance burden on your tax and IT teams.

Discover how the Sovos solution is tailored to manage all e-invoicing and related VAT obligations in South Korea.