For EU-based companies, VAT is chargeable on most purchases and sales of goods within the European Union. As a manufacturing company, this can result in many different VAT rates being charged.

Choosing the right country for entry into the EU can be a tough decision, especially considering countries have their own rules. Take into account that you may not know the location of goods and the situation can soon become complex.

Manufacturers can suffer disruption to their supply chains – which can often already be sophisticated as is – if this is not dealt with effectively. But where to start?

Our VAT experts are here to help. Join them in our upcoming webinar to learn about:

Register by clicking on the following links to hear from our local language experts in English, German, French, Spanish or Italian.

All European countries charge VAT on goods and services. VAT is a consumption tax added during each production stage of goods or services.

Although VAT is near-universal according to the EU VAT Directive, VAT rates within the EU do differ.

This is because the EU VAT Directive allows Member States to choose whether to implement specific measures. Our guide on understanding VAT compliance explores this in more detail.

When and where is the VAT between European countries charged?

Authorities in the EU charge VAT on all taxable supplies of goods or services at each stage of the supply chain. Our blog on who pays VAT, the buyer or seller, explains why in more depth. This is a significant distinction from Sales Tax, which only applies to the final supply. Some goods and services, such as healthcare and financial services, are exempt from VAT.

Companies must also distinguish if they are supplying goods or services to another business (B2B) or a private individual (B2C). This difference dictates how and where they need to charge VAT.

Supply of services

The general rule for B2B is that the product or service is taxed where the customer is established, while B2C services are taxed in the supplier’s country.

There are some special rules, however, such as those related to immovable property or events.

Supply of goods to businesses (B2B)

The situation starts to get complicated when transporting goods between countries. The taxable person must take the nature of the goods supplied and how the supply takes place into account.

When dispatching or transporting goods between businesses in different EU Member States, Intra-Community Supply (ICS) and Intra-Community Acquisition (ICA) of goods occur. An Intra-Community Supply of goods is a transaction where the goods are dispatched or transported by, or on behalf of, the supplier or customer between the EU Member States and is exempt, providing it meets certain conditions.

At the same time, a customer making an Intra-Community Acquisition is a taxable transaction. Where the ICA has been carried out define the location of tax, namely the location of the goods after the transport has finished.

Different rules apply to the export of goods to countries outside of the EU where the VAT is charged in the country of import. Instead, the location of the goods once they’ve arrived sets where the supply is. It is then treated as zero-rated in the Member State of export if it meets specific evidence requirements.

We know how complicated this sounds and our experienced team can answer your questions about this side of VAT. Contact our VAT experts here.

How VAT is charged

Generally, the business charges output VAT on the supply when the supplier carries out a taxable supply. The customer then deducts input VAT on the purchase, if valid to do so.

In some instances, the reverse charge mechanism applies. The reverse charge requires the customer to account for the VAT and is also known as a ‘tax shift’.

Where it applies, the customer acts as both the supplier and the customer for VAT purposes. The company charges itself the applicable VAT and then, where that service relates to taxable supplies, it recovers the VAT as input tax in the VAT return. The VAT charged is instantly reclaimed.

Typically, the customer must provide the supplier with a valid EU VAT number to use the reverse charge.

For an entry-level explanation of VAT, why not read our blog ‘who pays VAT, the buyer or seller?’.

Supply of goods to consumers (B2C)

Whilst the general rule on supplies of goods above applies, the rules have changed over the years to apply VAT where the goods are consumed.

When a business sends goods from one Member State to a private individual residing in another Member State, the VAT rate of the country of the customer should apply – unless the supplier can benefit from the EUR 10,000 threshold per annum.

In such a case, the supplier can charge the domestic VAT rate and report the sales below this threshold in the domestic VAT return. However, this exemption does not apply to suppliers established outside the EU or keeping stock in several EU countries.

To minimise the administrative burden of businesses registering in all EU Member States where the goods are delivered, the EU launched the OSS (One Stop Shop).

OSS schemes have simplified the supply of goods by taxable persons to private consumers:

Businesses established in the EU are entitled to use the Union and Import schemes, whereas non-EU companies can take advantage of the non-Union, Union and import schemes.

IOSS (Import One Stop Shop) simplifies the registration obligations for sellers established outside of the EU that sell goods to private individuals in the EU. Similar rules apply for the OSS, allowing the seller to register in one Member State where they account for VAT in their VAT returns.

Other advantages of using this scheme include exemption from import VAT and avoiding customs duties. This scheme, however, is restricted to consignments up to EUR 150.

As per the legislative proposal published by the European Commission on 8 December 2022, the EU intends to widen the scope of OSS to cover more goods and services.

How does VAT work between EU countries?

Ready for a deeper dive into VAT rates? Here’s an overview.

Standard rates

 The EU’s lowest agreed standard VAT rate in the VAT Directive is 15%, but it is not applicable in any of the EU Member States. The lowest standard VAT rate in the EU is in Luxembourg at 17%, followed by Malta at 18% and Cyprus, Germany and Romania at 19%. Hungary is one of the EU countries with the highest VAT rate at 27%, followed by Croatia, Denmark and Sweden with 25%.

Reduced rates

 Annexe III of the VAT Directive mentions the threshold for applying reduced rates within the EU Member States. The rate cannot be below 5%.

Special rates

 There are three types of special rates:

Do I now charge VAT to EU customers?

When concluding if you should charge VAT to your customers in the EU, consider the following:

EU VAT is always subject to change, so don’t be caught with outdated information. Follow our blog for the latest news on EU VAT rates and analysis of major developments the moment they happen or speak to an expert.

Your guide to the EU VAT e-commerce package

The EU VAT e-commerce package changed VAT rules for cross-border trade.

While the package makes life simpler and fairer for all, the details can be complex. This guide helps you to:

Make the right decisions for your business

Say goodbye to buzzwords, jargon and painful accounting

Ease trade and unlock business growth

Don’t have time for reading? Ask our experts instead, no question is too difficult for them on the EU VAT e-commerce package.

How to trade within and outside the EU

Knowing how to trade within the EU or as a business outside the market is more challenging than ever. Numerous rules to follow. Penalties to avoid. Even finding accurate, up-to-date information is difficult.

Our guide explains how to handle EU E-Commerce VAT compliance, from the moment you advertise a product to when and how you pay your VAT bill. Our guide is ideal reading if you are:

  • A business affected by Brexit
  • An ambitious e-commerce company that’s expanding internationally
  • A tax professional facing EU VAT headaches
  • An accounting team struggling with new compliance requirements
  • A curious retailer intrigued by online marketplaces
  • A finance person tasked with understanding the rules

Learn more about VAT compliance for e-commerce and how the Sovos Compliance Services Portal can help.

This guide to the EU VAT e‑commerce package contains:

Information. Lots of helpful information.

We go right back to basics, explaining what EU VAT is, what you need to know as a business, and the goal of the EU VAT e-commerce package.

We cover key facts too, so you can get a solid grasp of what the package is. Don’t forget a timetable with all the important dates you need to know. Then we cover the schemes enabling simpler trade for all.

Table of Contents

What is the EU VAT e-commerce package?

The EU VAT e-commerce package arrived on 1 July 2021.

It’s ultimately a set of rules defining how businesses trade within the European Union. It applies to B2C and e-commerce companies and focuses on which party pays VAT, and how.

The idea behind the EU VAT e-commerce package is to level the playing field by simplifying distance selling. The package also means B2C businesses selling into the EU can use the appropriate VAT registrations across the EU according to their requirements instead of registering in each Member State.

The EU VAT e-commerce package consists of three schemes – the Import One Stop Shop (IOSS), One Stop Shop (OSS) and Non-Union One Stop Shop (Non-Union OSS, which used to be the Mini One Stop Shop (MOSS)). Depending on where your business is based and where it operates, you could need to use just one or all three schemes.

All of these are explained later in our guide.

The most important thing to remember is that although these schemes simplify trade, they require businesses to prepare and thoroughly understand the additional requirements involved.

This means:

  • Life becomes harder for anyone responsible for VAT within a non-EU business
  • Companies must change how they process and report transaction data
  • Compliance becomes more complex
  • The chance of human error increases, as does the risk of penalties
  • Help is available to make your life easier

The EU VAT e-commerce package affects many parties, from VAT experts and tax managers to e-commerce sellers, entrepreneurs, marketplace store owners, accountants and audit firms.

An introduction to EU VAT: What you need to know

Like other regions across the globe, EU Member States charge VAT on purchases.

Member States is an official term for countries within the European Union, and Value Added Tax (VAT) is a tax collected by businesses on behalf of their government. Generally, the burden for VAT lies with the consumer, who pays VAT that applicable companies then collect through their supply chain.

There is no single standard rate of VAT in the EU. The VAT rate varies from country to country. Some tax authorities charge 19%, while others charge 25% or higher rates. The minimum EU standard rate can be no less than 15%.

Businesses must charge the correct applicable VAT rate, as mistakes can cause customer issues or, worse, result in financial penalties.

Explaining how to follow all the rules correctly is covered in our guide that introduces EU VAT as a general concept.

Key facts about the EU VAT e-commerce package

Everyone loves a fact, and we have plenty to share on the EU VAT e-commerce package.

Did you know…

  • Import One Stop Shop (IOSS) is for low value goods delivered from outside the EU
  • Union One Stop Shop (Union OSS) is for intra-EU B2C deliveries of goods and for intra-EU services provided B2C by EU established suppliers
  • Non-Union One Stop Shop (non-Union OSS) is for non-EU to EU services and replaces and extends the previous Mini One Stop Shop (MOSS)
  • Businesses using any OSS simplification must apply it to all qualifying transactions
  • Additional record keeping is required for OSS
  • Declarations for Union OSS and Non-Union OSS are quarterly, declaration for IOSS is monthly
  • Non-EU businesses might need to appoint an intermediary
  • Non-EU retailers may need to report under all three schemes

All this talk about different rates, dates and thresholds can be confusing – simplify your life by reading our EU VAT buster on rates, number formats and thresholds.

Timetable of the EU VAT e-commerce package

Businesses need to know where they’ve been to know where they’re heading. This is why we’ve summarised the package’s major milestones since the moment it was first announced.

  • 2016 – European Commission publishes ‘Action Plan on VAT’, introducing a One Stop Shop mechanism for cross-border e-commerce
  • 15 July 2020 – European Commission adopts new Tax Action Plan, a four-year plan to make tax fair and simple
  • 30 September 2020 – European Commission publishes ‘Explanatory Notes on VAT E-Commerce Rules’
  • 1 July 2021 – The EU VAT E-Commerce Package is introduced
  • 8 December 2022 – European Commission proposes changes in relation to VAT in the Digital Age initiative

Keeping track of dates is often time-consuming, especially with so much information spread across many online sources.

Visit our regularly updated live blog to answer that frustrating question: what are the latest EU VAT rates, laws and changes?

How to trade within the EU

Let’s dig deeper.

OSS stands for One Stop Shop, the umbrella term for all three schemes. Union OSS is a scheme to help EU established suppliers with providing B2C intra-EU services and for B2C deliveries of goods within the EU.

EU established businesses need to register for OSS in the Member State they are established in.

Don’t fear OSS. Our free guide covers everything you need to expand your knowledge.

Want to skip straight to the benefits? Talk to an expert about leveraging the OSS scheme for your business

Origin of Goods – Claiming Relief on Trade Between the EU and UK

How to trade outside the EU

IOSS is short for Import One Stop Shop. This scheme simplifies the registration obligations for taxpayers who carry out distance sales of goods imported from third countries to private individuals in the EU. IOSS applies to low value goods, defined as up to €150.

What is meant by distance selling?

This term covers the sale of goods, services or digital content where there is no face to face contact with the consumer. It includes online, postal, and phone sales.

What is meant by a third country?

This basically refers to any country that is not a member of the EU.

Non-Union OSS applies to all services sold B2C by suppliers not established in the EU.

Want to learn more about IOSS? We’ve got an easy to understand guide to help you get to grips with the scheme.

What non-EU countries need to know about IOSS and OSS

Does it pay to be in the EU club? Judging by the fact EU VAT becomes trickier when your business isn’t located within the region, perhaps the answer’s yes.

What’s the difference between IOSS and OSS?

IOSS accounts for B2C of goods imported from third countries, whereby the eligible supplies are restricted to a single consignment value of up to €150.

OSS accounts for B2C intra community distance sales of goods irrespective of the consignment value.

The main difference is that with IOSS the goods are located in a third country (outside the EU customs territory) at the time of the sale, whereas with OSS the goods are located within the EU’s territory.

Still unclear about the difference? Fortunately, we have another mini guide to rescue you. This guide to OSS and IOSS contains everything needed to make an informed decision.

FAQ

Do you pay VAT on e-commerce?

This of course depends on what goods or services you are supplying, but unless an exemption or zero rate applies VAT will be due on e-commerce sales into or within the EU.

How does VAT work for e-commerce?

This depends on whether you are selling goods or services as the rules vary, but generally VAT looks to tax the point of consumption, whether that be an individual streaming music in their country of residence or an individual receiving goods purchased online.

Should I be charged VAT from an EU supplier?

Most EU suppliers will need to charge VAT. There are some exceptions, such as the €10,000 threshold for small businesses and depending on the type of product a zero rate or exemption may apply.

Do you charge VAT on digital services to the EU?

Yes, for business to consumer sales, VAT is due in the country of the customers establishment / residence. The OSS simplifications are particularly useful for meeting reporting obligations.

Who is affected by the EU VAT e-commerce package?

The EU VAT e-commerce package applies to VAT for intra-EU B2C supplies of goods and imports of low value goods as well as services. It affects cross-border B2C trade and e-commerce, including businesses who sell on online marketplaces.  The schemes that make up the EU VAT e-commerce package (IOSS, OSS and non-Union OSS) are currently optional.

The EU VAT E-Commerce package has been in place since 1 July 2021. This applies to intra-EU B2C supplies of goods and imports of low value goods. Three schemes make up the package. These are based on the value of goods and the location of the sale of goods.

All OSS schemes are currently optional. The schemes mean taxpayers can register in a single EU Member State and account for the VAT due in other Member States.

For companies outside of the EU, the package schemes that apply are:

Want to understand how OSS and IOSS work? Keep reading!

Have IOSS specific questions? Our tax experts answer common questions in our IOSS guide.

How to ship to Europe

Exporting products to the EU is challenging. Couriers often have a bewildering number of services. Prices differ from service to service.

There’s no easy way to find fast, cost-effective shipping services, but here are tips to help:

  1. Look for couriers that have information about IOSS and OSS on their websites already
  2. Familiarise yourself with customs forms for the country of import
  3. Ask your courier how they support the schemes and can support your business
  4. Confirm if your carrier can act as an indirect customs representative if you do not have an EU establishment

Does my company need a VAT number?

Businesses with a certain turnover must register for VAT. This varies from country to country. For example, the UK’s VAT threshold is £85,000 for established businesses. If you are interested in a business solution, please get in touch with our sales team.

How do I get a VAT number?

Registering for VAT takes time. Each Member State has its own process for obtaining a VAT number. VAT compliance differs from Member State to Member State.

For non-EU companies, appointing a Fiscal Representative might be necessary. A Fiscal Representative acts on behalf of companies in a local VAT jurisdiction, managing VAT reporting and other requirements. For IOSS, most non-EU businesses will need an IOSS intermediary.

We know registering for VAT is difficult and involves understanding place of supply rules, fiscal representation and many other elements.

The EU VAT E-Commerce package enables taxpayers to register in one Member State to account for VAT in all Member States.

Benefits of applying for a VAT number as a non-EU business

In most cases, a VAT number will be mandatory because of your business’ activity; in some cases, it will be voluntary. There are many benefits to applying for a VAT number.

These include preventing financial penalties and receiving EU VAT refunds. EU VAT refunds depend on certain circumstances, such as on VAT exempt items.

How to register for OSS

The OSS scheme is currently optional. Before registering businesses should consider the benefits and impact on their supply chain.

When a supplier obtains either an the Member State that grants the VAT number becomes known as the Member State of Identification.

Registering for OSS in the UK

As the UK is no longer part of the EU, registering for OSS as a UK business means using the Non-Union OSS, Union OSS or IOSS schemes. There is no need to have a normal VAT registration in the EU to apply for IOSS or a non-Union OSS VAT registration, however, a local EU registration is required before obtaining the OSS registration.

The first step is to understand if an needs appointing. The intermediary, usually an agent or broker, submits the IOSS returns on behalf of the company.

The UK business will need to choose the Member State it wants to register with for the non-Union OSS scheme.

If the UK business has warehouses in the EU, then the company will still need local in each Member State with a warehouse, but they can choose one Member State for OSS registration.

The Northern Ireland Protocol adds even more complexity to cross-border trade. Stop browsing the internet for unhelpful answers; contact our experts for advice instead.

Our team of experts can help you understand OSS and IOSS further. Don’t hesitate to get in touch today, especially about the Northern Ireland Protocol’s effect on trade.

 

FAQ for non-EU countries

What is VAT number called in USA?

The USA doesn’t have VAT. The equivalent is Sales Tax, with its own permit and tax ID.

DO US companies have a VAT number?

If a US company wants to sell goods into Europe it can register for a VAT number with the relevant Member State tax authority. The business’ supply chain will determine if / where a VAT registration is required.

Do US companies have to pay UK VAT?

This depends on the product or service and whether the US company has activity in the UK that requires it to become VAT registered such as selling low value goods or importing in its own name into the UK.

How much is international shipping to Europe?

The cost of international shipping to Europe varies, depending on where you send goods from and how quick delivery is.

How much does it cost to ship from USA to Europe?

Costs for shipping from the USA to Europe vary, depending on if they are express or standard shipping times. Different couriers charge different prices too.

What is the cheapest way to ship a package from USA to Europe?

This depends on package size, insurance and delivery speed.

How long is shipping from EU to US?

Shipping from the EU to the US can take anywhere from four days to four weeks, depending on customs and import requirements.

 

You want to sell and trade within the EU with ease?

Speak to our experts. They will navigate you through the complexities of the EU VAT landscape.

Global solutions and services provider appoints executives to lead new era of growth

LONDON – January 11, 2022 – Global tax compliance provider Sovos today announced that Wendy Walker, solution principal, and Charles Maniace, vice president of regulatory analysis and design, were recognised in Accounting Today’s Top 100 Most Influential People in Accounting. Accounting Today’s list acknowledges the industry’s authoritative thought leaders, change makers, regulatory and other leaders who are shaping the profession. Additionally, Christiaan van der Valk, vice president of strategy and regulatory, was named a winner of Business Intelligence Group’s 2023 BIG Innovation Award. The BIG Innovation Awards recognise organisations and people who bring new ideas to the table and change the way we experience the world.

As the federal government moved toward reducing the threshold to trigger 1099-K reporting, Walker has been monumental in ensuring that third-party payment processing and gig economy platform organisations prepare for the upcoming changes. In addition to her responsibilities at Sovos, Walker also serves as chair of the Information Reporting Subgroup of the Internal Revenue Service Advisory Council (IRSAC), advising the IRS on a variety of withholding and information reporting issues impacting the industry.

“When the American Rescue Plan Act was signed into law in March 2021, we knew that compliance was going to be a heavy undertaking for organisations of all sizes,” said Walker. “I’ve been vocal about what these changes mean for companies, and I thank Accounting Today for recognising my efforts to empower business to stay ahead of these changes.”

Maniace leads a team of 40+ attorneys and tax professionals to ensure that Sovos’ suite of sales tax compliance solutions remains continually up to date as sales tax rules and requirements change at an increasingly frenetic pace. This is the fourth year that Maniace has been recognised by Accounting Today.

“Since SCOTUS made its historic ruling in 2018 enabling states to require tax compliance from remote sellers, legislators and regulators should be striving to simplify and streamline their requirements so that sales tax never represents an undue burden. In some places, we have seen the opposite, with complex new laws and regulations creating traps for the unprepared.” said Maniace. “My goal is to advocate for sales tax simplicity and modernisation while ensuring that our customers are always ready for whatever may come.”

As vice president for strategy and regulatory at Sovos, Christiaan Van Der Valk leads research into trends in the market and tax legislation. His insight and expertise are instrumental in determining business strategy and when to buy, build or partner to create solutions that meet emerging trends. Van der Valk holds long-standing leadership roles at the International Chamber of Commerce (ICC) and the European E-invoicing Service Providers Association (EESPA).

“The large-scale aggressive use of real-time integration technologies by governments seeking to fill tax gaps is changing the way businesses think about tax compliance and information systems” said van der Valk. “To minimise friction from this new paradigm, my long involvement with key international organisations has helped me spearhead initiatives to broker new ways in which complex government and business ecosystems can collaborate more effectively. Among other deliverables, this has led to the ICC Principles for Continuous Transaction Controls (CTCs).”

New global leaders to drive business growth

In addition to our experts’ industry recognition, Sovos has expanded its global leadership team to drive continued growth and enhanced solutions and services.

“Solving the world’s most challenging compliance issues takes strong leadership and a sustained commitment to excellence at both the technical and partnership levels,” said Andy Hovancik, CEO, Sovos. “I am confident this is the right team to bring Sovos to the next level of growth and solution delivery, anywhere our customers do business.”

To learn why Sovos is trusted by half of Fortune 500 companies, visit www.sovos.com.

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About Sovos
Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe, and is owned by Hg and TA Associates. For more information visit www.sovos.com and follow us on LinkedIn and Twitter.

Nearly every major economy has a form of VAT. That’s 165 countries, each with its own compliance and reporting rules. The main exception is the United States. VAT is by far the most significant indirect tax for nearly all the world’s countries. Globally VAT contributes more than 30% of all government revenue.

Levying VAT is a term used to describe when a company collects VAT on behalf of a tax authority. This happens at each stage in a supply chain when a taxable event occurs. A country’s tax rules define what a taxable event is.

In a nutshell, VAT essentially turns private companies into tax collectors.

How VAT works

VAT is due on nearly all goods and services. This is up to, and including, the final sale to a consumer – that’s you and me.

Applied correctly, VAT should be cost neutral for most businesses. Companies collect VAT from their suppliers, then pay this money to the government. In the UK, this is normally every three months.

As a business this means:

Companies can reclaim the VAT on some of their purchases. When applicable, this means your business pays less VAT when its VAT return is due.

Essentially, this encourages businesses to spend and help an economy grow.

Another thing a company can do is postpone its VAT accounting. There are different reasons why this is allowed, for example, in relation to import VAT.

We know VAT isn’t easy. Speak to one of our tax experts today about overcoming your VAT compliance headaches.

VAT returns

So what is a VAT return?

A VAT return is a document listing all the VAT you have collected and what you are reclaiming VAT on along with various other information on sales and purchases in the period.

Submitting VAT returns is a legal requirement in most countries. The format and frequency vary around the EU, so it’s essential to keep

In addition to VAT returns, businesses might have to submit other declarations. This depends on the company’s trading activity and the requirements in the Member State of registration. This could include or . These can be quite complicated, as we explain here.

Understanding your VAT obligations also requires mapping a supply chain for the country of registration.

The following information applies to larger businesses or businesses selling into the EU.

EU VAT can be overwhelming and exhausting. For some relief, why not download our European VAT guide.

Sales Tax vs VAT

So, what is the difference between Sales Tax and VAT?

VAT is a broad-based consumption tax and a form of indirect taxation. It is imposed on goods and services at each stage of the supply chain, with each party paying the government the tax and passing the final cost onto the ultimate consumer.

The idea is that each party effectively only pays VAT on the value added to the product or service. This is because the party can recover the VAT on associated costs (of course, there are exceptions). One of the disadvantages is that it requires accurate accounting.

On the other hand, sales taxes are generally taxes placed on the sale or lease of goods and services.

Usually, the seller collects the tax from the purchaser at the point of sale. Sales tax is calculated by multiplying the purchase price by the applicable tax rate. The seller at a later stage transfers the tax to the responsible government agency.

How does VAT work between EU countries?

The EU VAT Directive 2006/112/EC establishes the rules for where VAT is due in the EU. Member States must implement these rules in a uniform way to avoid the possibility of double or no taxation.

How EU countries apply VAT

VAT in the EU happens when:

There’s a supply of goods – Where goods are not transported, the place of taxation is where the goods are made available to the customer. Where the goods are transported, the place of supply is where the transport starts (unless an exemption applies).

There’s a supply of services – For B2B transactions the place of taxation is generally where the customer has established their business. This applies to “intangible” services where the place of consumption cannot be determined easily.

There are certain where the place of consumption can be determined. These are:

A thing called intra-community acquisition of goods occurs – The place of taxation is the place where the transport ends (i.e., the EU country where the goods are finally located after transport from another EU country).

At the point goods are imported – The place of taxation is where goods imported from non-EU countries are generally taxed (i.e., in the EU country where they are cleared for free circulation).

Why EU countries use VAT

There are many reasons why an EU country uses VAT.

VAT can be adjusted up and down depending on how a country’s economy is performing quickly. This means a country can raise taxes quickly or support a certain sector by reducing VAT.

Once collected, the money can be spent on public services, infrastructure, healthcare and other important growth initiatives.

But wait, what about those pesky questions like “should I charge VAT to EU customers?” or “do I pay VAT if buying from Europe?”. We hear these all the time from customers who struggle with VAT rates across different EU countries.

Standard rates, reduced dates, special rates. What’s the difference?

And then you have super reduced rates and zero rates? Let’s not forget intermediary rates.

If your business is expected to charge VAT to EU customers, or you yourself are faced with paying VAT on a purchase when buying from Europe, it’s important you feel confident applying the right VAT rate each and every time.

Have a question about the many different types of VAT rates in the EU? Our tax experts are yet to receive a question that stumps them, and they will happily help unload you from this burden.

Ask them a question now.

Exempt goods and services

Sometimes companies don’t have to pay VAT. This happens when the goods or products they sell fall into an exempt category.

Some examples of exceptions include education and training, charity fundraising and insurance. Insurers instead pay a tax called (IPT).

A VAT exempt business cannot register for VAT, nor can it reclaim VAT. This is slightly different to zero-rated goods or services. In that case, VAT is charged, but at 0%. Some companies can be partly exempt too.

VAT exemptions differ country to country so it’s important to check a tax authority’s website to see whether your business needs to pay VAT. ? We love setting our clients free from their tax compliance burdens so they can focus on growing their business.

Read our comprehensive guide to VAT exempt goods and services in Europe

 

Frequently asked VAT questions:

Is VAT paid by seller or buyer?

The seller collects VAT from their buyer and pays to the relevant tax authority.

Learn more about buyer and seller VAT in our guide.

Does the buyer pay VAT?

Yes. A person or company buying a service or product pays the tax when the item is chargeable.

Do sellers pay VAT?

Sellers pay VAT on any items they purchase for their own business. The VAT they collect from their own customers is paid to HRMC. In some cases, sellers also need to self-account for the VAT due from their customers.

Who pays VAT, the buyer or seller in the UK?

VAT is 20% in the UK. A buyer pays this to the seller when they purchase an item, product or service. There are also some cases where the seller pays the VAT by way of a self-accounting mechanism.

What is the difference between sales tax and VAT?

Sales tax is found in the United States and is a tax applied at state government level on the purchase of goods or services. VAT is a consumption tax and is collected by all sellers in a supply chain, not just charged to the final consumer.

Our large advisory team can help you navigate the complexities of modern VAT compliance. Don’t hesitate to get in touch today.

Changes are coming to Portugal’s Billing SAF-T reporting requirements for non-resident taxpayers that trade in the country.

The process may be stringent but that doesn’t mean it has to be difficult for your company. Here are four things you need to be aware of about Portugal’s billing SAF-T obligations.

1: Non-resident taxpayers must file the first billing SAF-T report by 8 February 2023

Billing SAF-T is already compulsory for resident Portuguese companies but from January 2023, non-resident VAT registered companies are also obligated to submit a monthly billing SAF-T. The first report is due on 8 February 2023 and has particular requirements, which we discuss below.

The monthly deadline for submitting the Billing SAF-T is the eight day of the month following the reporting period.

2: You must use a certified billing software to generate the monthly report

A unique requirement to Portugal is that the Billing SAF-T file must be generated by ‘certified billing systems’ as designated by the tax authorities. Failure to comply with this requirement is subject to a fine.

Non-resident taxpayers need to ensure they are using a certified billing software to remain compliant.

Sovos’ SAF-T cloud solution is recognised as a certified billing software by Portugal’s tax authority. This makes staying on top of Portugal’s SAF-T Billing report obligations simple, with customised options available for customers needing to take a tailored approach.

3: You must submit SAF-T Billing in the correct format

Portugal’s SAF-T requirements include specific formatting for generation and submission. Based on the original OCED 1.0 schema, this includes a specified header, master files, and source documents.

For the most part, information in the schema is conditionally required, meaning most fields only need to be submitted if the relevant data exists in a taxpayer’s source system.

Taxpayers must be able to generate the required fields in their system and understand which data is required for submission.

4: Portugal’s SAF-T requirements continue to change

Portugal’s tax authority has continued to introduce new requirements and extend the scope of SAF-T in the country.  Changes include stricter integrity and authenticity requirements and reducing the time window for invoice reporting obligations.

The tax authority’s changing requirements and increased visibility put additional strain on taxpayers to submit compliantly and on time.

Sovos’ Managed Service can help ease tax compliance burden for companies operating in Portugal and beyond. Our team of tax experts combined with our tax technologies help companies with filing and reporting obligations. Speak to our team to learn more about how Sovos can help solve tax for good.

Serbia is on the final straight to implementing its mandatory e-invoicing, which will come into effect from 1 January 2023. Legislative changes are still being proposed before that deadline to allow for a complete introduction of mandatory e-invoicing to the whole B2B sector.

On 12 December 2022, the Ministry of Finance published the following Laws on Amendments in the “Official Gazette of the RS” No. 138 among others:

1. Amendments to Serbia’s Electronic Invoicing Law

One of the changes regarding the scope of the Law on Electronic Invoicing involves natural persons who are not liable for income tax for self-employment, in the sense of the law governing personal income tax, who will be excluded from the provisions of the Law on E-Invoicing.

Regarding the type of transactions that will not be in the scope of e-invoicing, there will be no obligation to issue an electronic invoice for the sale of goods and services free of charge. Lastly, the legal entities and entrepreneurs who are not VAT payers, nor voluntary users of SEF, will not be obliged to record VAT calculation in SEF if they are tax debtors.

In case of a temporary interruption in the operation of the electronic invoice system, the system will consider an e-invoice as delivered at the time operation resumes. The act of the Ministry of Finance that regulates such procedures will be adopted on 1 April 2023 – three months from the date of entry into force of this law.

Also, the following paragraph will be added to Article 6 stating: “An electronic invoice that has been rejected can be subsequently accepted”. This provision will apply from 1 June 2023 for electronic invoices recorded in the central register of invoices, in accordance with the law regulating the deadlines for settling monetary obligations in commercial transactions.

The law will enter into force on 1 January 2023.

2. Amendments to Serbia’s VAT Law

The changes introduced to the law on VAT that impacts electronic invoicing processes stipulate that an invoice is an electronic invoice accepted by the buyer, as required by the Law on E-Invoicing.

The law ensures that the taxpayer accepting the electronic invoice within the deadline to submit the tax return may exercise the right to deduct the preliminary tax at the earliest date for the tax period where liability occurred. The taxpayer will also need to notify the tax authority about a change of data relevant to the calculation and payment of VAT contained in the registration form. The notification will be exclusively electronic and excludes notice in writing.

The law will enter into force on 1 January 2023, coinciding with the Serbian e-invoicing mandate go live date.

3. Amendments to Serbia’s Fiscalisation Law

The Law on Fiscalisation regulates, among other things, the subject of fiscalisation and the procedure conducted through an electronic fiscal device. The supply of goods and services, conducted by a fiscalization obligor to a legal entity or taxpayer of income from self-employment, outside the retail store, is not considered a retail supply. Therefore, such supply will not be subjected to fiscalization requirements and will not need to be recorded through an electronic fiscal device.

Moreover, the amendments specify that the fiscal receipt does not need to contain the value of the transaction per tax rate as a mandatory element. By scanning the QR code for verification, which has all the parts of an electronic signature when printing a fiscal invoice or a hyperlink for verification when a fiscal e-invoice is issued, it will be possible to receive additional information about the fiscal receipt.

The amendments to the Law on Fiscalisation that impact the future e-invoicing mandate cover changes related to the fiscal invoices issued to legal entities and taxpayers on income from self-employment. Transferring these fiscal invoices to the System of Electronic Invoices (SEF) will happen upon fulfilment of technical requirements. The Minister of Finance will further regulate the method and procedure of data transfer in the future.

Based on Article 7, a separate regulation will control the manner and procedure of data transfer to the SEF platform, that will be adopted within 180 days from the day when this Law enters into force. This means adoption will be in June 2023 at the earliest.

The Law on Amendments and Supplements to the Fiscalisation Act will be enforced on the 8th day following its publication, which took place on 12 December 2022.

Integration of the Fiscalisation system with SEF

The above amendments relate to the plans introduced by the MoF to integrate the Fiscalisation system with the E-Invoicing system (SEF), which will most likely start at the earliest in January 2024. As the Minister of Finance Vuk Delibašić announced on 1 December 2022: “The plan is to integrate the E-Invoicing system with the Customs Administration, e-fiscalization, as well as the creation of a semi-automatic VAT declaration, and an electronic excise tax is also being prepared.”

Need help?

Still have questions about e-invoicing in Serbia? Speak to our tax experts.

The European Commission’s  “VAT in the Digital Age” proposal brings significant modifications to the VAT treatment of the platform economy related to the operators in the short-term accommodation (max. of 45 days) and passenger transport services.

VAT treatment of the platform economy

It is worth mentioning that the ‘VAT treatment of the platform economy’ only relates to the supply of certain services via a platform. There are also a set of e-commerce rules related to the supply of goods via platforms.

The rise of the platform economy business model has triggered new challenges for the VAT system. As per the view of the EU Commission, one of these problems is VAT inequality that can be experienced if we look at:

We can better understand the EU view of the distortion of the competition if we look at the European Commission’s Impact Assessment report. The report outlines the growing importance of the platform economy in VAT collection and explains the studies conducted to ascertain where the EU Commission needs to take action.

In terms of numbers, the value of VAT revenue from the digital platform ecosystem is estimated at about EUR 25.7 billion per year for the Member States, i.e. 2.6 percent of total VAT revenue.

Scale of platform economy operation, by sectors (EU27, EUR billion, 2019)

 

Sector Revenue of digital platforms (EU27) Revenue of digital providers (EU27) Ecosystem Value (EU 27)
Accomodation 6.3 36.9 43.2
Transportation 7.2 31 38.2
E-commerce 16.6 93.8 110.4

Source: Extract from Commission Staff Working Document Impact Assessment Report, pag. 26

 

The total value of VAT revenue includes EUR 3.7 billion related to accommodation services and EUR 3.1 billion related to transportation services.

In these two sectors, private individuals and small businesses (i.e. underlying suppliers) can provide their VAT-free services (i.e. they do not account for any VAT) via a platform. With the economies of scale and network effect, these businesses can be in direct competition with traditional VAT-registered suppliers.

Taking into account the supporting study, the number of underlying suppliers who are not registered for VAT, can be up to 70%, depending on the type of platform.

For example, in the accommodation sector, over 50% of users of a particular accommodation platform specifically access the platform’s offering over a traditional hotel.  In Europe, the cost of accommodation offered via the accommodation platform can be, on average, some 8% to 17% cheaper than a regional hotel’s average daily rate.

In the view of the European Commission this means a distortion of competition between the same services offered via different channels.

The VAT treatment of the facilitation service

Clarifying the nature of services provided by the platform was the most supported intervention across different stakeholders.

In some Member States the treatment of the facilitation service charged by the platform is regarded as an electronically supplied service, whilst in others it is regarded as an intermediary service.

This is relevant because it can lead to different places of supply, which can lead to double or non-taxation. Therefore, clarification of these rules is necessary.

According to the proposal, the facilitation service (where the term “facilitation” extends to include short-term accommodation and passenger transport services) provided by a platform should be regarded as an intermediary service (Article 46a amending Directive 2006/112/EC). This allows for a uniform application of the place of supply rules for the facilitation service.

While this has no impact on the existing rules when the supply is carried out on a B2B basis, the same cannot be said about B2C supplies. Under this scenario, the place of supply will be where the underlying transactions takes place.

How will the VAT in the Digital Age proposal change the status quo?

According to the European Commission, the main issue with the platform economy is the inadequacy of the current VAT legal framework to ensure a level playing field with traditional businesses, specifically in the transport and accommodation sectors. Supplies made by small underlying suppliers via a platform are not taxed and the facilitation services made by platforms are taxed differently in different Member States. This leads to difficulties for the platforms, suppliers, and Member States.

Introducing a deemed supplier model will solve these issues, by which platforms will account for the VAT on the underlying supply where no VAT is charged by the supplier. This model ensures equal treatment between the digital and offline sectors of short-term accommodation rental and passenger transport.

In addition, clarifications will be given on the treatment of the facilitation service to allow for a uniform application of the place of supply rules, and steps will be taken to harmonise the transmission of information from the platform to the Member States.

In terms of timing, the proposed rules on the platform economy will take effect in 2025. This is a short period to put in place all needed changes to be compliant and it requires the platforms to begin looking into it as soon as possible.

Need support?

Get in touch about the benefits an expert VAT solution partner can offer to help ease your business’s VAT compliance burden.

Acquisition holds immediate benefit for customers with complex supply chains and footprints across Europe; furthers Sovos’ long-term global tax engine strategy

BOSTON – December 6, 2021 – Global tax software provider Sovos today announced it has acquired Germany-based TLI Consulting GmBH. The move significantly advances Sovos’ value-added tax (VAT) determination capabilities, with immediate benefits for businesses running SAP. VAT determination is one of three pillars of modern tax compliance, and often the first that multinational companies tackle before addressing digital reporting and complex continuous tax controls (CTCs), like e-invoicing. Sovos will leverage TLI Consulting’s software, consulting services and team to help customers Solve Tax for Good® with complete, continuous and connected solutions for every facet of the digital transformation of compliance.

Sovos is on a years’ long journey to build end-to-end offerings that help businesses infuse trust in every transaction. That journey has included the acquisition and development of global CTC, VAT reporting and SAF-T solutions, and a Sovos Connect Once API for a seamless customer experience across systems that need to comply with a wave of real-time and e-audit VAT mandates. TLI Consulting, Sovos’ ninth acquisition in the past 12 months, continues that journey with enhanced VAT determination for businesses with complex supply chains covering a broad jurisdictional landscape across Europe and beyond.

“Sovos has built the most complete suite of technology and services for frictionless compliance in digitizing economies, with advanced solutions for CTC, SAF-T, VAT reporting and other global requirements,” said Andy Hovancik, CEO, Sovos. “The acquisition of TLI Consulting continues that leadership with heightened capabilities for VAT determination, which is often the first piece of an increasingly complex puzzle companies must solve.”

TLI Consulting has served businesses whose transaction and tax determination needs are too complex or costly to configure and maintain via native SAP and in-house tax experts. The company’s software solution extends native SAP VAT determination functionality, and its consultants have the integration and implementation expertise to ensure that SAP ECC or SAP S/4 HANA enterprise resource planning systems can seamlessly determine the right VAT decisions and tax codes for any outbound or inbound transaction.

“Today’s announcement represents a key building block toward a Sovos tax determination portfolio that now helps customers meet modern indirect tax compliance challenges globally, including in Europe, the United States, Brazil and elsewhere,” said Steve Sprague, general manager, global value-added tax, Sovos. “Together, we’re creating the technology solutions that speed simpler tax determination for every transaction, in every jurisdiction, for every tax regime.”

Sovos’ acquisition of TLI Consulting has immediate potential for positive impact on customers in Germany and throughout Europe. In addition to the SAP software extensions upon which it has built its business, TLI Consulting’s expertise and experience will contribute to Sovos’ global tax engine strategy, which is to ensure any customer system can benefit from indirect tax determination, CTC and SAF-T support through a single integration.

“As we join Sovos, the TLI Consulting team gains the opportunity to help create the one-stop VAT solutions companies crave, while expanding our reach as part of a global technology leader. We look forward to this next phase and the positive impact it will have on our customers and future customers,” said Martin Grote, Sovos vice president of European VAT determination and former TLI Consulting director.

John Gledhill, vice president of corporate development for Sovos, said, “As a global organization with more than 2,300 employees, Sovos will scale TLI Consulting’s software and services business in support of the largest multinational companies with complex business transactions in Europe. With this acquisition, Sovos also establishes operations in Germany and now has employees in 14 countries.”

The terms of the deal were not disclosed. Sovos is owned by Hg, the London-based specialist private equity investor focused on software and service businesses, and TA Associates. EY served as financial advisor to Sovos, and Burness Paull and Luther provided legal counsel. Rödl & Partner advised TLI Consulting.

###

About Sovos

Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe, and is owned by Hg and TA Associates. For more information visit www.sovos.com/en-gb/ and follow us on LinkedIn and Twitter.

About TLI Consulting

TLI Consulting offers VAT determination software and associated consulting to support clients in entering VAT processes into their SAP (and other ERP) systems through developing and implementing customized, practical and compliant solutions for accounts receivable and accounts payable processes. Further, TLI Consulting offers SAP solutions for VAT ID validations and VAT reconciliations and analysis.

Sovos Partner Network drives digital transformation of tax compliance for customers while offering significant profit potential and borderless growth to partners  

BOSTON – October 6, 2022 – Global tax software provider Sovos today announced the launch of its new Sovos Partner Network designed to guide partners in addressing the critical needs of their customers as they navigate the complexity of digital compliance and changing tax regulations around the world. With access to Sovos’ complete portfolio of compliance solutions, along with its unmatched regulatory and tax expertise, this new program enables partners to bolster their tax compliance offerings and expand their business opportunities.

“Government authorities have gone increasingly digital with the calculation, reporting and compliance of taxes and Sovos continues to invest heavily in tax technology solutions.  Collaborating with Sovos allows KPMG to bring both its leading technology and tax and implementation experience to clients,” said Niren Saldanha, Partner, Tax, KPMG LLP.

The Sovos Partner Network was built to align to our partners’ business models, whether they resell, co-sell, implement or embed Sovos solutions. Competitive incentives and other business-related program benefits were designed to assist partners in expanding their businesses in ways that best fit their go-to-market strategies. The modern program includes a rich array of consistent and accessible tools, training and a self-service partner portal. Industry leaders such as Oracle, NetSuite, SAP and KPMG have already partnered with Sovos to increase customer support, in addition to hundreds of other partners across the globe, both large and small. Collectively, these partners share Sovos’ core mission to Solve Tax for Good®.

Sovos’ global commitment to partners extends to Latin America. “EY Brazil brings tax transformation and automation to its clients by leveraging process and tax automation software in the market, such as Sovos Taxrules,” says Giovanni Schiavone, Tax Transformation Partner at EY Brazil. “We conduct ‘Tax Transformation Projects’ that evaluate our clients’ GAPs and then suggest automations using the most advanced features of solutions like Sovos to help create a high-performance tax area, aligned with current and future Brazilian compliance needs.”

Why partner with Sovos?

The Sovos Partner Network offers many ways to create mutually beneficial opportunities, including:

“Strong partner relationships are a key component of our strategic business approach. This new global program represents the next step in our ability to support the evolving needs of customers in today’s global tax and compliance marketplace,” said Jonathan Eisner, vice president, global alliances and chief channel officer, Sovos. “Investing in a stronger ecosystem that better supports and rewards our partners is a critical part in solving these dynamic challenges.”

To learn more about the Sovos Partner Network or apply to become a partner, click here.

About Sovos 

Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe and is owned by Hg and TA Associates. For more information visit www.sovos.com and follow us on LinkedIn and Twitter.

Update: 3 February 2023 by Marta Sowińska

Poland: e-invoicing mandate postponement to 1 July 2024

According to an official announcement published by the Ministry of Finance on 2 February 2023, the go-live date of Poland’s mandatory e-invoicing system is now 1 July 2024 – delayed six months from the previous date.

More than a year since the roll-out of the voluntary phase and following extensive testing of the KSeF system by taxpayers, the Ministry of Finance responded to the feedback submitted by businesses and entrepreneurs in the public consultation by announcing the delay of the mandate and relaxing certain requirements.

The expected changes are:

Taxpayers should not treat the postponement of the e-invoicing mandate as a reason to pause the implementation process. Instead, taxpayers should treat the delay as an incentive to implement complex legislative and technical requirements before the go-live date and adapt their accounting and invoicing processes considering any errors that may appear.

The proposed changes will need to be adopted by law to become effective. Such legislation, considering the often-lengthy legislative process, is expected to be published just in time for the mandate roll-out in July.

Looking for more information on e-invoicing in Poland? Speak with our expert team.

 

Update: 15 December 2022 by Marta Sowińska

Poland publishes draft law on mandatory e-invoicing via KSEF

 On 1 December 2022 the Ministry of Finance in Poland published the draft legislation amending the VAT Act regarding the introduction of mandatory e-invoicing in the National e-Invoicing System (KSeF). It is the second stage of the implementation of mandatory CTC e-invoicing in Poland, which will take effect from 1 January 2024.

Due to the Council Implementing Decision (EU) No 2022/1003 of 17 June 2022 authorising Poland to apply a special derogatory measure from Articles 218 and 232 of Directive 2006/112/EC on the common system of value added tax (OJ. UE L 168/81), Poland is now able to propose amendments to the VAT Act that leads to full implementation of mandatory e-invoicing in the country.

What is KSeF and who is in scope?

KSeF is the centralised e-invoicing platform for issuing, exchanging and archiving structured invoices. We are currently in the voluntary phase of issuing invoices through the KSeF system; the system has been available for transactions since 1 January 2022.

From 1 January 2024, with the implementation of the mandatory mandate, suppliers and buyers will be obliged to issue and receive their invoices through the KSeF.

Transactional KSeF scope:

The obligatory e-invoicing will cover activities that currently require documenting an invoice issued in accordance with the VAT Act. Therefore, the transactional scope will include the supplies of goods and services made between entrepreneurs (B2B), to public authorities (B2G), and to consumers (B2C).

Subjective KSeF scope:

What amendments were introduced for KSeF?

Verification QR code

Taxpayers will need to mark structured invoices with the verification code (QR code) if issuing them outside of KSeF. The code will need to be displayed when visualising e-invoices in commercial programs or free tools provided by the Ministry of Finance (meaning in PDF or paper formats too).

KSeF will provide functionality enabling verification of the correctness of the invoice issued via KSeF. After scanning the QR code, the information contained in the code will be read, and data identifying this invoice will be displayed with information from KSeF about their correctness. The implementing regulation to the VAT Act will provide further information regarding the method of marking e-invoices.

Corrective process – new document introduced

Contrary to the previous position of the MoF, corrective invoices issued after the entry into force of the draft Act will be issued in KSeF if they are issued by a taxpayer with a registered office or permanent place of business in Poland, regardless of whether they were issued using KSeF or outside KSeF.

Also, buyers will be able to propose corrections to the original invoice (except to the NIP number). After seller acceptance it will become a corrective e-invoice (alternative corresponding to the corrective note, which can only be issued by the buyer and used when the invoice recipient finds a mistake in the delivered invoice).

Cash registers

From 1 January 2025 invoices issued via cash registers will be in scope of the KSeF system. Taxpayers keeping sales records using cash registers will be required to issue a fiscal receipt for each sale, but they should not issue an invoice from the cash register, as this document will not be considered an e-invoice.

Also, from 1 January 2024, a receipt with NIP number up to PLN 450 will not be considered an e-invoice.

Technical issues with the KSeF system

In case of KSeF system failure, taxpayers will have to issue e-invoices in accordance with the schema, but instead transfer them to the recipients outside the KSeF. The date of issue of such e-invoices will be the date specified in the P_1 field.

After the failure is over, taxpayers will have seven days to send invoices issued in this way to KSeF. Also, it is possible to issue e-invoices outside of KSeF in the event of a crisis.

KSeF penalties

According to the draft law, failure to comply with the obligations introduced in the amended VAT Act will lead to financial administrative penalties.

The head of tax office will be able to impose:

Penalties can be imposed when the taxpayer:

It’s vital to highlight that the introduction of the administrative penalties with the half year delay isn’t hindering the introduction of mandatory e-invoicing in Poland. This postponement should not be viewed as a delay to the introduction of the mandatory e-invoicing obligations. Invoices issued between 1 January 2024 and 30 June 2024 outside of KSeF will not be treated as structured invoices, and therefore penal and fiscal sanctions will apply.

Key KSeF dates highlighted by the draft regulation

KseF public consultation deadline: 23 December 2022

With the draft regulation published, the Ministry of Finance also presented the new logical structures of FA(2) and FA_RR. The public consultation on the substantive and logical correctness of the schemas is open until 23 December 2022, coinciding with the public consultation regarding the draft regulation on the mandatory implementation of KSeF.

The draft regulation amending the VAT Act is available on the Government Legislation Centre website and the draft schemas can be found: FA (2) and FA_RR.

Need help for e-invoicing in Poland?

Want to ensure compliance with the latest e-invoicing requirements in Poland? Get in touch with our tax experts.

The European Commission has announced its long-awaited proposal for legislative changes in relation to the VAT in the Digital Age (ViDA) initiative. This is one of the most important developments in the history of European VAT, and affects not only European businesses, but also non-EU companies whose businesses trade with the EU.

The proposal requires amending the VAT Directive 2006/112, its Implementing Regulation 282/2011, and Regulation 904/2010 on Administrative Cooperation on the combat of fraud in the field of VAT. They cover three distinct areas:

  1. VAT digital reporting obligations and e-invoicing
  2. VAT treatment of the platform economy
  3. Single EU VAT registration

This regulatory change proposal will still need formal adoption by the Council of the European Union and the European Parliament under ordinary legislative procedures before it can come into force. In tax matters such as these, the process requires unanimity among all Member States.

This blog focuses on VAT digital reporting obligations and e-invoicing, whereas future updates from Sovos will address the other two areas.

VAT digital reporting obligations and e-invoicing – an overview

Intra-EU B2B transaction data will need reporting to a central database:

Digital reporting requirements for domestic transactions will remain optional:

Changes will be made to facilitate and align e-invoicing:

“Transmission” will not be regulated:

The European Commission has, at this stage, chosen not to propose regulation regarding the transmission channel of the reported data to the tax authorities. This is currently left to Member States to decide on.

The reason for this decision is likely because it’s a technical issue, and that the discussion would have slowed down the process of publishing this proposal. The European Commission also appears ambiguous about whether it would want to regulate this in the future.

What does the future of VAT in the Digital Age look like?

Many countries primed to introduce continuous transaction controls (CTCs) have been waiting for EU regulators to provide an answer to what rules the individual Member State will need to abide by. It remains to be seen whether this proposal will embolden these Member States to move ahead with plans, despite the non-final status of the proposal. It’s noteworthy that Germany filed for a derogation from the current VAT Directive to be able to mandate e-invoicing just a few days before the original date that the Commission had planned to publish this proposal – 16 November 2022.

Speak to our tax experts to understand how these proposed changes will affect your company.

VAT Digitization in Eastern Europe


A Quick Guide to E-invoicing and Real-Time Reporting Tax regulations in Eastern European countries are complex but that shouldn’t be a reason not to do business there. If you’re responsible for VAT compliance, this ebook provides key details of the varying VAT digitisation mandates and business requirements across the region:
  • Understand how to comply with the e-invoicing and reporting in Eastern Europe
  • Deep dives into Hungary, Poland, Romania, Serbia and Slovakia
  • Must-read for tax professionals and consultants

A Quick Guide to E-invoicing and Real-Time Reporting

Tax regulations in Eastern European countries are complex but that shouldn’t be a reason not to do business there. If you’re responsible for VAT compliance, this ebook provides key details of the varying VAT digitisation mandates and business requirements across the region:

  • Understand how to comply with the e-invoicing and reporting in Eastern Europe
  • Deep dives into Hungary, Poland, Romania, Serbia and Slovakia
  • Must-read for tax professionals and consultants

Get the ebook

Who should read this ebook?

Tax professional

  • Need to be up to date with Eastern European regulations
  • Understand system requirements for real-time reporting and e-invoicing
  • Prepare and future-proof for upcoming tax digitization

Consultancy

  • Ensure best practices for clients
  • Keep up to date with latest regulations and developments
  • Confidently navigate the tax landscape to help clients with planning

Written by tax experts and regulatory specialists

Tax administrations continue to insert themselves into the invoicing process or demand detailed records within a matter of hours or days of transactions. Many have introduced continuous transaction controls (CTCs)and are seeing the benefits of closing their country’s VAT gap and gaining granular, real-time or near real-time insight. Eastern Europe is part of this trend, moving forward rapidly with real-time reporting and e-invoicing initiatives.

The challenge of VAT digitization in Eastern Europe

Each Eastern European country has a different approach to CTCs. These differences could extend further as mandates evolve and businesses have to deal with new filing formats like SAF-T and real-time reporting to stay tax compliant. Understanding the varying demands of VAT compliance is key for any business operating in or looking to expand into the region. With this guide you’ll gain a greater understanding of the requirements across the region. Our deep dive into key countries will help you comply with VAT regulations now and prepare for upcoming mandates.

Take a look at what's inside:

Regional tax knowledge

Detailed country guide

How to expand with confidence

What this guide to Eastern Europe e-invoicing and reporting compliance covers

Get our guide for a comprehensive picture of CTCs in Eastern Europe and the many requirements that vary country to country. This includes invoice format, connectivity, data requirements, how to submit, archiving, legacy systems, technologies and business processes-all of which need to be reconsidered and rewired to be compliant. We also conduct extensive reviews of key Eastern European economies as well as uncover what’s on the horizon in one of the most important countries in the region, Slovakia:

  • Continuous transactions controls –what are they?
  • Common clearance system features
  • Clearance regimes
  • Stay compliant with evolving CTC regulations
  • A close look at e-invoicing in the region
  • Romania
  • Poland
  • Hungary
  • Serbia
  • Slovakia
  • Compliance in Eastern Europe
  • How Sovos can help

The CTC landscape in Eastern Europe is constantly evolving, with countries at different stages of their journeys.

The Czech Republic, Austria, Croatia and Montenegro all currently allow post-audit invoicing.

Countries that have already implemented CTC regimes (either e-reporting or e-invoicing) where paper invoicing is still possible include Hungary, Albania and Greece.

In some cases, such as in Slovenia and Bulgaria, there are CTC schemes planned but details have yet to be specified.

Others have outlined their specifications and implemented voluntary schemes. Our guide covers some of these countries, providing details about the scope, document flows, key requirements and timelines of their regimes.

Romania –A sneak peak

There are three requirements for taxpayers in Romania:

  1. Mandatory e-invoicing for B2G transactions
  2. Mandatory e-invoicing for high-risk products
  3. Electronic transport mandate

Taxpayers are required to use the Romania e-transport system to issue an e-transport document regarding the transport of high fiscal risk products before transportation of goods begins. This includes data regarding the sender, recipient, goods, places of loading and unloading and details of the means of transport and carrier.

Sovos provides a cost-effective, secure, global solution capable of withstanding disruption prompted by the worldwide CTC trend.

Our unique cloud solutions keep you compliant in 60+ countries and our tax experts ensure your business complies with the latest regulations and their requirements.

Market-leading 40+ year history in global regulatory monitoring and analysis

One vendor, one technical interface

Embedded in 60+ partners (SAP, Ariba, Coupa, IBM and more)

Simple API for plug-and-play interoperability

Evolves with your technology and process choices

Sovos’ VAT Compliance Solution Suite includes both CTC reporting and CTC e-invoicing as integral components of a fully scalable solution suite and includes Sovos Periodic Reporting, SAF-T and Sovos eArchive.

Part V of V – Christiaan Van Der Valk, vice president, strategy and regulatory, Sovos 

Click here to read part IV of the series.  

Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our vice president of strategy and regulatory, Christiaan Van Der Valk to offer his guidance on how this will affect IT departments and how they can best prepare.

Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments? 

Christiaan Van Der Valk: The digitization of VAT and other taxes considerably expands the scope of the finance and transactional systems that need to meet specific – and ever-changing – government requirements. This phenomenon of broadening and decentralizing tax compliance in a company’s system and process landscape happens at the same time that more of these applications (for accounts payable automation, EDI, procurement, supply chain automation, travel and expense management, order-to-cash, customer communications management etc.) are used on a SaaS basis in multitenant mode.

This requires you to take stock of the applications that may come within the scope of VAT requirements in all relevant jurisdictions, and to review vendor contracts to ensure clarity as to responsibility for compliance. Procurement practices to license such external applications may also need to be reviewed to ensure proper contracting around tax compliance from the start.

Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend? 

Christiaan Van Der Valk: A key success factor is the degree to which IT and tax can team up to affect change in the organization. The default response to indirect tax changes will be to view these as evolutionary and best resolved by local subsidiaries. The introduction of CTCs, however, is a paradigm shift and one of the consequences is that solving these challenges in a decentralized manner can be harmful to a company’s digital transformation potential. IT and tax need to work closely together to raise awareness among all corporate and country stakeholders on the importance of a coordinated, strategic response to this profound change. The role of tax technologists who specialize in these interdisciplinary challenges cannot be underestimated.

A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.

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Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.

Problems encountered with Fire Brigade Tax rate increase in Slovenia

Slovenia’s Fire Brigade Tax (FBT) has changed.

The rate increased from 5% to 9%. This came into effect on 1 October 2022. The first submission deadline followed on 15 November 2022.

Unfortunately, the transition has been plagued by problems. We discuss some issues and how Sovos is approaching them.

Slovenia’s new tax return

We had anticipated that the tax return would remain unchanged, with the premium reduction at 20% and the standard at 100% carrying over from the previous version. Instead, the Slovenian tax authorities overhauled the return entirely. This included:

With the combinations, a return could include up to 30 different lines, but the return only includes four – one for each combination.

This layout suggests that the tax authority wishes to combine policies with the same rates, e.g., 100% and 9%.

This differs from previous returns.

Previously each class of business had a separate line. Sovos has contacted the tax authority about the most compliant way to complete this.

Telephone number information on tax return

Some aesthetic changes caused unexpected issues.

Telephone numbers now have a set number of boxes instead of an open line.

This change doesn’t accommodate longer phone numbers. For example, a UK phone number doesn’t fit.

This requires clarification from the tax authorities:

Postcodes also have the same issue.

As frustrating as these issues are, there is a more significant frustration.

The amount of time between the new return’s publishing and the first submission deadline The new return was published online roughly three weeks before the deadline.

This was a very short turnaround to upload the returns to the systems and solve any problems that may have arisen, as well as informing clients about any new information that may be required here.

Fortunately, no new information was required. Short deadlines to comply with new tax return requirements are a frequent problem we encounter.

Conflicting information about Slovenia’s new Fire Brigade Tax return

Guidance from the tax authority has been inconsistent at best.

For example, the law passed in May 2022 stated the following:

The new Fire Brigade Tax rate would apply to the cash received date. The 9% rate applies to any premiums generated after 1 October 2022.

However, guidance on the official Slovenian tax authority website stated that if the inception date for the policy was before 1 October, the 5% rate would still apply. This is regardless of when the premium was collected. This applies until the policy is renewed. At this point, the 9% rate is applied. This is a significant conflict. It’s potentially millions of euros difference in the amount due. Don’t forget the countless corrections required to balance the books.

As well as being issued late, multiple tax return versions were published online. Only one had the updated tax rate included. The return disappeared from the website and was replaced by the original return.

The English translation and other versions haven’t been updated – this is still the case even after the deadline.

Finally, the guidance on the tax authority’s website states it’s mandatory to submit the FBT returns online through the tax authority portal.

However, official communications from the tax authority directly informed us at Sovos that submissions were required by email only.

Again, this is a significant conflict. Submitting returns through the wrong channel would result in the tax authority declaring the submission late and levying fines.

Next steps with Slovenia’s new tax return

We have communicated all these issues to the Slovenian tax authority. We haven’t received a response yet, but we will update this blog as soon as we have more information.

Sovos has a wealth of experience that enables us to solve issues that arise and ensure our customers remain compliant with the latest tax requirements.

Need help with Fire Brigade Tax requirements in Slovenia?

Want to ensure compliance with the latest Fire Brigade Tax requirements? Speak to our experts.

African countries are following e-invoicing and continuous transaction control trends implemented rapidly by many countries around the globe.

Each country in the continent is developing their variation of a tax digitization system. This means there is currently no standardisation with compliance requirements differing in each jurisdiction.

A common transaction reporting feature among African countries is the use of electronic or virtual fiscal devices. Electronic fiscal devices are cash registers with software and direct communication to the tax authority. Virtual fiscal devices serve the same purpose but without the hardware component.

However, reporting transactions is one of many fiscal digitization processes applied by African countries. E-invoicing is on the agenda for several authorities, including Nigeria, Kenya and Uganda. In this blog we explain the key features of these systems.

E-invoicing in Africa: Countries

Nigeria: Automated Tax Administration System and Cross-Border e-Invoicing

Taxpayers report their transactions electronically to the tax authority through the Automated Tax Administration System (ATAS), established for electronic VAT compliance purposes.

In addition to this e-reporting function, as of February 2022, all import and export operations need an authenticated e-invoice issued according to the format specified by the Central Bank of Nigeria (CBN).

The CBN has introduced the Cross-Border e-Invoicing program, where suppliers and buyers operating in imports and exports register on the dedicated electronic platform. There are exemptions to obligatory e-invoices based on operations and taxpayers, such as the transaction value within the invoice.

Kenya: Tax Invoice Management System

Businesses subject to VAT must report their e-invoices to the Tax Invoice Management System (TIMS), which requires taxpayers to install, and use approved electronic tax register machines. These tax register machines connect to the tax authority’s online system. There is a mandatory format for submitting e-invoices to the tax authority.

Regarding the full implementation, the Kenya Revenue Authority (KRA) announced additional time to comply with the TIMS after the grace period, and taxpayers are expected to be fully prepared by the end of November 2022.

Uganda: Electronic Fiscal Receipting and Invoicing System

The Electronic Fiscal Receipting and Invoicing System (EFRIS) covers invoices and receipts of B2B, B2G and B2C transactions. Taxpayers must send e-invoices to EFRIS through electronic fiscal devices or via an API connection between the taxpayer and EFRIS. When initiating a transaction, transaction details are transmitted in real time to EFRIS to generate an e-receipt or e-invoice.

Africa’s future e-invoicing landscape

Given the growth in jurisdictions applying mandatory e-invoicing and e-reporting and the common agenda set by African Union that also refers to tax control and traceability, we can expect more African countries to introduce similar e-invoicing systems in the near future. The countries that follow will likely learn from the pioneers, leading to a more uniform development of tax digitization in Africa.

Need help for E-invoicing in Africa?

Ask our tax experts about e-invoicing compliance in African countries. Simply get in touch.