In this blog, we provide an insight into continuous transaction controls (CTCs) and the terminology often associated with them.

With growing VAT gaps the world over, more tax authorities are introducing increasingly stringent controls. Their aim is to increase efficiency, prevent fraud and increase revenue.

One of the ways governments can gain greater insight into a company’s transactions is by introducing CTCs. These mandates require companies to send their invoice data to the tax authority in real-time or near-real-time. One popular CTC method requires an invoice to be cleared before it can be issued or paid. In this way, the tax authority has not only visibility but actually asserts a degree of operational control over business transactions.

What is VAT?

The basic principle of VAT (value-added tax) is that the government gets a percentage of the value added at each step of an economic chain. The chain ends with the consumption of the goods or services by an individual. VAT is paid by all parties in the chain including the end customer. However only businesses can deduct their input tax.

Many governments use invoices as primary evidence in determining “indirect” taxes owed to them by companies. VAT is by far the most significant indirect tax for nearly all the world’s trading nations. Many countries with VAT see the tax contribute more than 30% of all public revenue.

What is the VAT gap?

The VAT gap is the overall difference between expected VAT revenues and the amount actually collected.

In Europe, the VAT gap amounts to approximately €140 billion every year according to the latest report from the European Commission. This amount represents a loss of 11% of the expected VAT revenue in the block. Globally we estimate VAT due but not collected by governments because of errors and fraud could be as high as half a trillion EUR. This is similar to the GDP of countries like Norway, Austria or Nigeria. The VAT gap represents some 15-30% of VAT due worldwide.

What are Continuous Transaction Controls?

Continuous transaction controls is an approach to tax enforcement. It’s based on the electronic submission of transactional data from a taxpayer’s systems to a platform designated by the tax administration, that takes place just before/during or just after the actual exchange of such data between the parties to the underlying transaction.

A popular CTC is often referred to as the ‘clearance model’ because the invoice data is effectively cleared by the tax administration and in near or real-time. In addition, CTCs can be a strong tool for obtaining unprecedented amounts of economic data that can be used to inform fiscal and monetary policy.

Where did CTCs begin?

The first steps toward this radically different means of enforcement began in Latin American within years of the early 2000s. Other emerging economies such as Turkey followed suit a decade later. Many countries in LatAm now have stable CTC systems. These require a huge amount of data for VAT enforcement from invoices. Other key data – such as payment status or transport documents – may also be harvested and pre-approved directly at the time of the transaction.

What is e-invoicing

Electronic or e-invoicing is the sending, receipt and storage of invoices in electronic format without the use of paper invoices for tax compliance or evidence purposes. Scanning incoming invoices or exchanging e-invoice messages in parallel to paper-based invoices is not electronic invoicing from a legal perspective. E-invoicing is often required as part of a CTC mandate, but this doesn’t have to be the case; in India, for example, the invoice must be cleared by the tax administration, but it’s not mandatory to subsequently exchange the invoice in a digital format.

The objective of CTCs and e-invoicing mandates is often to use business data that is controlled at the source, during the actual transactions, to prefill or replace VAT returns. This means that businesses must maintain a holistic understanding of the evolution of CTCs and their use by tax administrations for their technology and organisational planning.

What’s on the horizon?

As more governments realise the revenue and economic statistics benefits that introducing these tighter controls bring, we’re seeing more mandates on the horizon. We expect the rise of indirect tax regimes based on CTCs to accelerate sharply in the coming five to 10 years. Our expectation is that most countries that currently have VAT, GST or similar indirect taxes will have adopted such controls fully, or partially, by 2030.

Looking ahead, as of today we know that in Europe within the next few years that France, Bulgaria and also Poland will all introduce CTCs. Saudi Arabia has also recently published rules for e-invoicing and many others will follow suit.

Upcoming mandates present an opportunity for a company’s digital transformation rather than a challenge. If viewed with the right mindset. But, as with all change, preparation is key. Global companies should allow enough time and resources to strategically plan for upcoming CTC and other VAT digitization requirements. A global VAT compliance solution will suit their needs both today and into the future as the wave of mandates gains momentum across the globe.

Since 1993, supplies performed between Italy and San Marino have been accompanied by a set of customs obligations. These include the submission of paperwork to both countries’ tax authorities.

After the introduction of the Italian e-invoicing mandate in 2019, Italy and San Marino started negotiations to expand the use of e-invoices in cross-border transactions between the two countries. Those negotiations have finally bore fruit, and details are now available.

Building SDI connectivity to San Marino

Italy and the enclaved country of San Marino will abandon paper-based customs flows.

The Italian and Sammarinese tax authorities have decided to implement a “four-corner” model, whereby the Italian clearance platform SDI will become the access point for Italian taxpayers, while a newly created HUB-SM will be the SDI counterpart for Sammarinese taxpayers.

Cross-border e-invoices between the countries will be exchanged between SDI and HUB-SM. The international exchange system will be enforced on 1 July 2022, and a transition period will be in place between 1 October 2021 and 30 June 2022.

FatturaPA: The format of choice

HUB-SM’s technical specifications are now available for imports from Italy to San Marino, and exports from San Marino to Italy. The countries have also decided to choose FatturaPA as the e-invoice format, although content requirements for export invoices from San Marino will slightly differ from domestic Italian FatturaPA e-invoices.

The SDI and HUB-SM systems will process e-invoices to and from taxpayers connected to them, or under each country’s jurisdictions.

In other words, Italian taxpayers will send and receive cross-border invoices to or from San Marino via the SDI platform, while Sammarinese taxpayers will perform the same activities via HUB-SM.

Both platforms will deliver invoices to the corresponding taxpayers through the Destination Codes assigned by the respective tax authorities. This means HUB-SM will also assign Destination Codes for Sammarinese companies.

Integration documents for Sammarinese companies

Inspired by the Italian methodology for fiscal controls in cross-border transactions, San Marino will require Sammarinese buyers to fill out an additional integration document (similar to a “self-billing” invoice created for tax evidence reasons) upon receipt of the FatturaPA. This document will be filled out in a new XML-RSM format created by the enclave and sent to HUB-SM.

After the larger rollout of the SDI for B2B transactions in 2019, the platform has proven capable of adapting to new workflows and functionalities.

Since last year, e-purchase orders from the Italian National Health System have been exchanged through the NSO, an add-on to the SDI platform. In January 2022, the FatturaPA replaces the Esterometro as a cross-border reporting mechanism.

SDI has already debuted in the international arena through the acceptance of the e-invoices following the European Norm, which are mapped into a FatturaPA before being delivered to Italian buyers. This integration between SDI and HUB-SM might also reveal the early steps of interoperability between both tax authorities’ platforms for cross-border trade.

Starting in 2023, French VAT rules will require businesses to issue invoices electronically for domestic transactions with taxable persons and to obtain ‘clearance’ on most invoices before their issue. Other transactions, such as cross-border and B2C, will be reported to the tax authority in the “normal” way.

This will be a major undertaking for affected companies and although the changes are more than a year away, planning should start now. But what does planning mean in the context of a continuous transaction control (CTC) rollout? What have businesses on the cusp of such a transformation learnt when faced with the same challenge in countries such as Italy, India, Mexico and Spain? And how can businesses leverage those best practices for future CTC rollouts?

We share the points businesses should consider when planning for any CTC rollout, which can be used as a checklist for the France 2023 mandate to help you prepare.

Understand the new changes, and be aware of what’s ahead

• Is your organisation aware of, and do the relevant functional teams understand, the material changes proposed by the government?
• Do your teams understand what specifically is changing and do they have a reliable source of information to use as guidance?
• In a situation as dynamic as a CTC rollout, do your teams have the means to monitor new developments and analyse future changes?
• Is there a process in place in your organisation for implementing new changes once they’ve been introduced in law?

Understand how your business and operations are affected

• Which of your business transactions are in scope? When do they need to be compliant?
• How are your intercompany invoices processed today? It’s not uncommon for businesses to overlook compliance requirements for their intercompany invoice flows, but in a clearance system these invoices are almost always in scope.
• How will invoices be sent to the French tax authority under the new system? Can you manage this internally or is a third party involved?
• What information in addition to the invoice information must be sent?
• Where an invoice is not required today e.g. B2C sales, what information must be sent?
• How should these invoices be archived? Are there any specific legal or technical requirements for such storage?

Design or evaluate potential solutions

• Is the CTC reform best solved through an internally developed solution?
  • If yes, talk to IT as soon as possible so they can start planning and allocate both the necessary time and budget for the project.
  • If no, who are the service providers that could help?
• If external providers are used, how will the data go from your source systems to them and ultimately to the tax authority?
• Which of your source systems contain the required data? Is it one or multiple?
• Does the external provider have a ‘ready to go’ extractor for your ERP system/source system? Or, if your organisation relies on an API first strategy, which source systems will you use to send the data on to your provider or the tax authority?

Execute the solution

• How much notice does your IT department need for such a project? Resources from IT will be required, regardless of whether it will be an external or internal project.
• How much will development and implementation cost? Budget will need to be secured regardless of how you plan on implementing your solution of choice, internal or external.
• When does the cost need to be submitted for budget approval?
• When do you need to kick off the project? Once the planning is completed and the time required is known (including testing and training) you can work backwards to achieve a start date. This date should be confirmed with IT as soon as possible.

Once you’ve answered the questions above, you’ll be in a good position to both plan the roadmap to ensure compliant processes in time for the entry into force, as well as to estimate the cost and secure the needed funding for the project.

Norway announced its intentions to introduce a new digital VAT return in late 2020, with an intended launch date of 1 January 2022. Since then, businesses have wondered what this change would mean for them and how IT teams would need to prepare systems to meet this new requirement. Norway has since provided ample guidance so businesses can begin preparations sooner rather than later.

With this new VAT return, the Norwegian Tax Administration (Skatteetaten) seeks to provide simplification in reporting, better administration, and improved compliance.

This new VAT return provides for an additional 11 boxes, increasing the count from 19 to 30 boxes which are based on existing SAF-T codes to allow for more detailed reporting and flexibility. It’s important to note that the obligation to submit a SAF-T file will not change with the introduction of this new VAT return.

This change is for the VAT return only – with the SAF-T codes being re-used and re-purposed to provide additional information. Businesses must still comply with the Norwegian SAF-T mandate where applicable and must also submit this new digital VAT return.

Technical specifications of Norway’s digital VAT return

Skatteetaten has created many web pages with detailed information for businesses to look through over the next few months including the following:

• Implementation Guide – this guide was created to assist developers and businesses in assessing the technical requirements needed to implement upcoming changes
• Validation Rules – this list will be continually updated with more validation rules as needed
• XSD for VAT Return – contains the technical specifications (XSD) for the new VAT return as well as example files and descriptions of the fields contained in the return
• API Submission – contains information on submission and validation of the VAT return including error messages
• Testing Portal Information – contains information on test data and environments
• Questions and Answers – FAQ page for businesses to understand answers to common questions that may come up including registration, submission method, and additional files

Submission method for Norway’s digital VAT return

Norway is encouraging direct ERP submission of the VAT return where possible. However, the tax authorities have announced that manual upload via the Altinn portal will still be available. Login and authentication of the end user or system is carried out via ID-porten.

Additionally, Norway has provided a method for validation for the VAT return file, which should be tested before submission to increase the probability that the file is accepted by the tax authorities. The validator will validate the content of a tax return and should return a response with any errors, deviations, or warnings. This is done by checking the message format and the composition of the elements in the VAT return.

What’s next?

Businesses should begin preparations for the implementation of this new VAT return, as there will likely be challenges along the way.

In addition to the new VAT return, Norway has also announced plans to implement a sales and purchase report, which is currently in an early proposal stage in review with the Ministry of Finance. The next phase is mandatory public consultation which is when a desired launch date will be set. Skatteetaten notes that implementation time will be considered when determining an introduction date for the report.

Norway SAF-T: Everything You Need to Know

Designed to reduce the compliance burden and administrative costs associated with audits—while providing tax authorities with greater visibility into a company’s tax and financial data—SAF-T has continued to gain popularity across a growing number of European countries.

SAF-T may seem complicated in this country, but it doesn’t have to be. Read on for your ideal overview of this tax rule.

Table of contents

1. The legal framework of SAF-T in Norway

2. When to submit a SAF-T declaration in Norway

3. Norway’s SAF-T timeline

4. Implementing SAF-T as a business

5. FAQ

6. How Sovos can help

7. Additional resources

The legal framework

Norway’s SAF-T requirements apply to businesses with bookkeeping obligations who use electronic accounting systems, including registered foreign bodies. Submission is on request and doesn’t currently have periodic submission requests. SAF-T files must by ideally submitted via the Altinn internet portal.

Businesses with a turnover of less than NOK 5 million who aren’t subjected to mandatory bookkeeping are exempt unless they have electronic bookkeeping information available. Enterprises with less than 600 vouchers annually that hold accounts in spreadsheets or a text editor program are exempt.

When to submit a SAF-T declaration in Norway

In Norway, although SAF-T (Regnskap) reporting is mandatory, submission is on an on-demand basis following a request in connection with an audit.

Please note, however, that Norway’s VAT return, which is also a SAF-T and must be submitted every two months, should not be confused with the financial SAF-T Regnskap.

Timeline

• 1 October 2016 – The Norwegian tax authority publishes the first version of the SAF-T financial
• 1 January 2017 – Voluntary adoption of SAF-T begins
• 1 January 2020 – Norway introduces mandatory SAF-T reporting on demand
• 1 January 2022 – Updates to Norway’s VAT return require users to map transactions to the existing tax codes utilised in the SAF-T mandate, with users able to submit returns from ERP systems
• 1 January 2025 – New SAF-T Financial format (version 1.30) becomes mandatory

Other requirements for VAT compliance in Norway

On 1 January 2022, the tax authority introduced digital submission of its VAT return, which was also enhanced to capture other data that’s already required whenever a SAF-T submission is needed. However, as SAF-T doesn’t yet need to be submitted regularly in Norway, the completion of these new summary boxes creates a challenge for companies who are unfamiliar with SAF-T.

In addition to its requirements, taxpayers should be aware of Norway’s e-invoicing requirements for B2G transactions. 

With the EU’s ViDA initiative now approved, Norwegian businesses will need to send invoices electronically for cross-border B2B transactions from 1 July 2030. 

Implementing SAF-T as a business

Complying with your tax obligations is vital. SAF-T is one of the VAT requirements for Norwegian businesses, adding to compliance workloads.

How Sovos can Help

Sovos SAF-T solutions can help your organisation to spend less time on compliance and more on growing your business. Automate your preparation process to drive efficiency and ensure accuracy, providing peace of mind that you will avoid potential fines and penalties.

Get in touch with us

FAQ

What is the SAF-T requirement in Norway?

SAF-T reporting in Norway is mandatory as of 1 January 2020 but submission is on an on-demand basis.

What is the OECD SAF-T format?

SAF-T stands for Standard Audit File Tax and is a format used internationally for the electronic exchange of accounting data. The OECD (Organisation for Economic Co-operation and Development) defines the standard for SAF-T.

Additional resources

Norway e-invoicing

An overview of e-invoicing requirements in Norway.

Learn more

Introduction to SAF-T

An eBook explaining the SAF-T international standards.

Read now

Poland’s VAT Requirements

Poland’s CTC and SAF-T framework

In an effort to modernise its tax systems and close the VAT gap, Poland’s tax authority, the Krajowa Administracja Skarbowa (KAS), continues to advance its implementation of VAT reform with changes to SAF-T and the introduction of continuous transaction controls (CTCs).

Get the information you need

Poland’s SAF-T evolution

Poland introduced its version of the Standard Audit File for Tax (SAF-T) known as Jednolity Plik Kontrolny (JPK) in 2016. This incorporated multiple regulated JPK structures, of which two, JPK_VAT and JPK_FA, were relevant for VAT.

The requirement for monthly submissions of JPK_VAT was extended to all taxpayers on 1 January 2018. JPK_VAT was combined with the VAT return during 2020 and the consolidated JPK_VAT with the declaration is submitted per the frequency of the VAT Return (monthly or quarterly).

JPK_VAT with the declaration has two variants:

1. JPK_V7M for taxpayers settling VAT monthly
2. JPK_V7K for taxpayers who settle VAT quarterly

The remaining JPK structures are submitted upon request of the tax authority in event of an audit.

SAF-T quick facts

There are eight Polish JPK structures that taxpayers should be prepared for. Most are required on demand, but the JPK­_V7M/K must be submitted periodically (monthly or quarterly).

• JPK_V7M/K declaration for records of VAT purchases and sales combined
• JPK_FA for VAT and VAT invoices
• JPK_WB for bank statements
• JPK_PKPIR for revenue and expense ledger

• JPK_EWP for revenue account
• JPK_KR for accounting books
• JPK_MAG for warehouses
• JPK_FA_RR for flat rate VAT invoices

Poland’s CTC reforms

Aiming to combat fraud and improve tax collection capabilities, Poland’s first Continuous Transaction Controls (CTC) legislation, the Krajowy System e-Faktur (KSeF), was published in Poland in early 2021.

Adoption of the proposed CTC reform occurred on 18 November 2021, following consultation with industry representatives. The implementation process is ongoing, with the voluntary phase having begun in January 2022 and the mandate due to go-live on 1 July 2024.

CTC quick facts

Participants who wish to get ahead of the mandate can now opt to use the Polish electronic invoice in structured XML format the FA-VAT, to submit supplier invoices to the KSeF (Krajowy System e-Faktur) electronically.

Other considerations for businesses include:

• During the voluntary phase, buyer acceptance of e-invoices is necessary to receive invoices via KSeF (otherwise supplier will still need to issue invoices in the agreed form/format, such as PDF, paper or via EDI)
• Refund period reduced from 60 to 40 days
• Incentives provided to businesses to issue invoices through the KSeF portal during voluntary phase

• Outsourcing using third-party service provider will be permitted
• All invoices will be archived in KSeF for ten years
• A qualified electronic signature or seal (QES), trusted profile or token will be required to authenticate access to the portal

Mandate rollout dates for JPK and CTCs in Poland

Poland SAF-T

• 1 July 2016: SAF-T introduced in Poland in the form of JPK files
• 1 January 2018: Poland mandated JPK_VAT for all taxable persons
• 1 July 2018: Taxpayers must be able to produce accounting documents in JPK structures
• 1 October 2020:  JPK_VAT with declaration consolidates the VAT Return and JPK_V7M/K
• 1 July 2021: Amendments to the mandatory JPK_V7M/K adopted
• 1 January 2022: Amendments to the JPK_V7M/K structure including changes to better align it with the EU VAT e-Commerce package
• 1 January 2025: Reporting of JPK EWP, JPW PKPIR, and JPK_KR becomes a periodic reporting obligation

Poland CTC

• 29 October 2021: Legislation for a Continuous Transaction Control (CTC) e-invoicing system adopted; draft specifications released and test system made available
• 1 January 2022: Voluntary phase begins for the CTC system. There is no obligation to use the e-invoicing system in B2B transactions though there are several benefits if businesses chose to do so, including quicker tax refunds and exemptions from submitting the report of invoices, JPK-FA
• 10 June 2022: The Council of the European Union published the Council Implementing Decision authorizing the Republic of Poland to apply a special measure derogating from Articles 218 and 232 of Directive 2006/112/EC, based on the European Commission proposal published on 30 March 2022. The decision will be granted from 1 January 2024 until 31 December 2026, after being published in the Official Journal of the European Union.
• 1 July 2024: The CTC system will become mandatory
• 1 January 2025: The mandatory e-invoicing expands to the VAT-exempted taxpayers
• 1 January 2025: The end of the grace period for the application of the penalties

Penalties

The new SAF-T structure, like the JPK_VAT and VAT returns, must be submitted monthly, or quarterly. Failure to submit accurately and on time may result in penalties. The Polish tax authority will react quickly to inconsistencies detected in SAF-T files and use data analysis algorithms to identify fraudulent transactions.

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Poland's SAF-T Requirements

Understand more about Poland SAF-T including when to comply, penalties, requirements and how Sovos can help.

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Poland CTC Requirements

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

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Need help to ensure your business stays compliant with the evolving reporting and emerging SAF-T and CTC obligations in Poland?

Keeping up with VAT compliance obligations has become more difficult as Poland continues to take steps to reduce its VAT gap and modernise the system.

Our experts continually monitor, interpret and codify complex legal and technical changes into our software solutions, keeping you up-to-date and reducing the compliance burden on your tax and IT teams.

Learn how Sovos’ solution for JPK_V7M/K, CTC reforms and other VAT compliance changes can help companies stay compliant in Poland and around the world.

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SII Spain: An Overview

SII Spain: Suministro Inmediato de Información

SII Spain is an electronic VAT system that affects thousands of large companies across the country. It can seem complicated, but it doesn’t have to be.

The mandate is demanding, with the impacted groups having to stay on top of the four-day reporting period. If your business meets the criteria of SII Spain, you will likely be feeling the pressure of having to comply.

Sovos is here to help, breaking down Spain’s SII system into:

• How companies can comply (and what to expect if they don’t)
• Key details about the mandate and how it’s developed over time
• How Sovos can ease the burden for you at every stage

SII Spain is only one of the country’s tax compliance obligations. Our Spain VAT Compliance overview can help you stay on top of other mandates and obligations you may be subject to.

Get in touch

Table of Contents

1. Who SII affects
2. Where is SII applicable in Spain?
3. Quick facts
4. What rollout dates
5. Penalties: What happens if you don’t comply
6. Sovos Helps Companies Stay Compliant with Spain’s SII
7. Additional obligations for VAT compliance in Spain
8. FAQ

Who SII affects

The mandate affects Spanish companies above an annual turnover threshold of over €6 million. It’s also applicable to VAT business groups, companies that participate in the monthly tax refund system known as REDEME and other businesses that voluntarily sign up.

Where is SII applicable in Spain?

Spain’s compliance obligations are further complicated by the country being divided into regions. Depending on where your business is based, you may well be subject to a specific combination of tax mandates.

The distinct areas where SII is applicable include:

• Mainland Spain
• Canary Islands
• Bizkaia
• Gipuzkoa
• Alava

Quick facts about SII Spain

• The Spanish mandate applies to companies with an annual turnover above €6 million, companies that are part of VAT groups, and companies using the REDEME system.
• The following records must be sent to the tax authority:
  • Registered book of issued invoices
  • Registered book of received invoices
  • Registered book of investment goods
  • Registered book of certain intra-community operations
• The transmission of the information must be via web services available to exchange XML messages.
• Some formal obligations are reduced as taxpayers will no longer be required to file the information returns form 347 (third-party information), form 340 (transactions in register books) and form 390 (VAT annual summary).
• In 2020 the Spanish tax administration introduced a service to pre-populate the periodic VAT return (Modelo 303) using the information taxpayers supplied via the SII.

Spain: Rollout dates

2 January 2017: The immediate supply of information on a voluntary basis for taxpayers in Spain begins.

1 July 2017: The mandatory phase of the immediate supply of information for taxpayers under the scope of the mandate begins.

1 January 2018: The period to supply information was reduced from 8 days to 4 days. The mandate also extended to other Spanish territories (Basque Provinces and Canary Islands).

1 January 2020: Introduction of a ledger to record operations related to the sale of goods in consignment.

4 January 2021: Introduction of new validations and fields that record the sales of goods in consignment

Penalties: What happens if you don’t comply

• Omissions or inaccuracies in the information reporting obligation have a penalty of up to 1% of the total amount missed, with a maximum of €6,000.
• Late reporting of real-time electronic VAT ledgers will trigger a penalty of 0.5% of the total amount reported, with a minimum of €300 and a maximum of €6,000 per quarter.
• Errors or omissions in the Registered book of certain intra-community transactions and Registered book of Investment goods have a fixed penalty of €150.

Sovos Helps Companies Stay Compliant with Spain’s SII

Sovos serves as a true one-stop shop for managing all VAT compliance obligations in Spain and across the globe.

Sovos supports the Suministro Inmediato de Información (SII) platform, ensuring our customers remain compliant with the legal and technical framework developed by the Spanish tax authority (AEAT).

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

Learn more about our solution

Additional obligations for VAT compliance in Spain

While SII Spain affects many large companies nationwide, there are numerous other compliance obligations taxpayers must be aware of.

Spain B2G E-invoicing: E-invoicing has been mandatory in Spain for all transactions between public administrations and their suppliers since 2015.

Read our dedicated Spain e-invoicing overview for more information on B2G electronic invoicing.

Spain B2B E-invoicing: Businesses are under varying obligations where e-invoicing is concerned, largely depending on the nature of transactions. Mandatory B2B e-invoicing is anticipated to be implemented from 2024.

Read our dedicated Spain e-invoicing overview for more information on B2B electronic invoicing.

Bizkaia Batuz: Batuz is a tax control strategy governed by the government of Bizkaia which applies to all companies and taxpayers that are subject to the province’s regulations.

Find out more about Bizkaia’s Batuz tax system.

TicketBAI: TicketBAI is an e-invoicing mandate from the numerous tax authorities in the Basque Country which covers Álava, Biscay, and Gipiuzkoa. It outlines obligations for both individuals and companies to use software to report invoice data to the Tax Administration in real-time.

Understand TicketBAI with our dedicated blog.

FAQ for SII in Spain

What is SII in Spain?

The Suministro Inmediato de Información (SII) is a platform to submit invoice data to the tax authority in Spain. Taxable persons who are in scope must report invoice data within four business days following the date of issue.

In 2020 the tax administration announced a new version of the SII, introducing a ledger to record operations related to the sale of goods in consignment. This came into effect on 1 January 2021.

When did Spain introduce SII?

The Suministro Inmediato de Información (SII) was introduced on 2 January 2017 on a voluntary basis, extending to a mandatory basis on 1 July 2017. Since then, there have been changes and additional requirements

What regions in Spain use SII?

SII applies to multiple regions in Spain, including Mainland Spain, the Canary Islands, Álava, Biskaia, and Gipiuzkoa.

This was not the case when the legislation originally came into effect, as it excluded the likes of the Canary Islands, Ceuta, Melilla, Basque Country and Navarra.

What is SII reporting in Spain?

The Immediate Supply of Information (Suministro Inmediato de información) SII is a system for keeping the Value Added Tax record books in the local Tax Authority’s electronic headquarters by supplying VAT-relevant information on a near-real-time basis.

What submissions are required for SII?

1. Issued Invoices Ledger
2. Received Invoices Ledger
3. Investment goods ledger
4. Certain Intra-Community operations ledger

Looking for more VAT compliance resources?

Guide to European VAT Compliance

Your guide to making VAT compliance simple

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Spain VAT compliance

A comprehensive overview about VAT compliance in Spain

Read now

E-invoicing Guide

This guide is all you need to understand e-invoicing for good.

Read the guide

Spain e-invoicing

What you need to know about e-invoicing in Spain.

read now

Need immediate help with tax compliance in Spain?

Contact us to prepare for the Spain SII today.

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Tax in Hungary: All you need to know about RTIR Hungary

RTIR Hungary

In 2018, Hungary established a legal framework requiring taxpayers to use a designed schema to report invoice data to the tax authority (NAV) in real-time for domestic transactions above a minimum VAT amount.

Due to the success of this measure, the scope of the mandate has been extended to include a wider range of transactions, and the earlier thresholds have been abolished. The impact of the mandate is now broadly felt in Hungary where all transactions between domestic taxable persons must be reported to the NAV, regardless of the amount of VAT accounted.

 

Have questions? Get in touch with a Sovos expert on RTIR Hungary.

Hungary VAT mandate quick facts

• Immediate disclosure of data from all invoices issued under the scope of the mandate.
• Once an e-invoice is issued, transmission of data must occur automatically using a machine-to-machine interface and must be done without human intervention
• The transmission must include identification data and the obligatory data content as required under the Hungarian VAT Act.
• VAT returns are filed monthly or quarterly and are due on the twentieth of the month after the end of the tax period.
• The VAT return contains several appendices requiring additional information on transactions such as supplies of new means of transport and metals subject to the domestic reverse charge.
• Alongside the VAT return, taxpayers must submit a summary report on all domestic purchases for which they’re claiming an input tax deduction.

Mandate rollout dates

• 1 July 2018: Mandate applies to all taxable persons to report invoice data in real-time to the National Custom and Tax administration of Hungary for domestic transactions with a minimum VAT amount of 100,000 HUF.

• 1 July 2020: The VAT threshold was abolished and all domestic transactions between taxable persons in Hungary must be reported regardless of the VAT accounted.

• 1 January 2021: Reporting obligations include B2C invoice issue and B2B intra-community supplies and exports.

• 1 January- 31 March 2021: The Ministry of Finance granted a sanction-free three-month grace period to comply with new reporting obligations and to give businesses time to transfer from the current version (v 2.0 XSD) to the new version v3.0 XSD.

• 1 April 2021: Mandatory usage of the new version (v3.0 XSD) begins.

RTIR Penalties

• Failure to report the invoices in real-time could lead to an administrative penalty of up to 500,000 HUF per invoice not reported.

• Additional penalties would apply for non-compliance with the invoicing software requirements.

Infographic

Hungary’s CTC Requirements

Understand more about Hungary’s NAV system, how to file invoices, when businesses are required to comply and how Sovos can help.

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Sovos helps companies stay compliant with Hungary Real Time Reporting Requirements

As Hungary edges ever closer to CTC e-invoicing invoice clearance, Sovos enables businesses to stay up to date with the latest requirements and technical specifications so they can effectively connect with the NAV and honour their VAT compliance obligations.

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What is Turkey's E‑Transformation?

While many governments and tax authorities are now on an e-Transformation journey, this trend began in Latin America in the early 2000s. Turkey followed suit a decade later when it began the digitization of its tax system.

Turkey is further along in its e-Transformation journey than most countries – including EU Member States, which are working towards digitization in their own way with the overarching VAT in the Digital Age initiative.

From e-invoicing to electronic self-employment receipts, Turkey now has a fully-fledged, established digital tax system with many moving parts. To understand Turkey’s e-Transformation, bookmark this page then read on.

Table of Contents

• At a glance: e-Transformation Turkey
• E-Transformation in Turkey
• E-Transformation practices and applications
• Who is affected by e-Transformation?
• What are the benefits of e-Transformation?
• Tax compliance and e-Transformation
• How Sovos can help with your e-Transformation journey
• E-Transformation FAQ
• Related resources to e-Transformation

At a glance: E-Transformation Turkey

E-Fatura Turkey

CTC Type
E-invoice clearance with both parties registered on the portal

Network
Centralised – e-Fatura Portal delivers the e-invoices to Buyers for B2B transactions

Format
UBL-TR format

eSignature Requirement
Required – fiscal stamp or qualified electronic signature

Archiving requirement
10 years

E-arşiv Fatura Turkey

CTC Type
E-invoice reporting (daily basis)

Network
Decentralised – e-Fatura Portal does not deliver e-arşiv invoices; it’s the taxpayers’ responsibility

Format
UBL-TR format or in a free format such as PDF and must also be available in paper form

eSignature Requirement
Required – fiscal stamp or qualified electronic signature

E-Transformation in Turkey

Turkey stepped up its tax system through digitization in 2012 to help important information be gathered and transmitted with ease and accuracy. It’s further ahead than many other countries, with a variety of electronic systems and documents mandated for many taxpayers – all starting with its e-Ledger obligation.

Turkey joined the eEurope+ initiative and moved fast to ensure it was keeping up with tax digitization efforts, relieving its entire economic ecosystem where information is concerned. The aims of such changes are to reduce VAT fraud, increase governmental access to and control of data, standardise financial and accounting processes and reduce errors.

Now effectively utilising electronic versions of invoices, ledgers, delivery notes, self-employed receipts and more, there are a lot of challenges for taxpayers to overcome to remain compliant amidst Turkey’s e-Transformation.

Learn more

E-Transformation practices and applications

Turkey’s ambition to electronically transform its tax ecosystem required the development and implementation of many products and services. This presented taxpayers with new requirements and, subsequently, new challenges.

Here are the products and services in Turkey’s e-Transformation system:

e-Fatura

e-Fatura is Turkey’s e-invoicing initiative. Mandated for companies with turnovers of over TRY 5 million, this obligation came into effect on 1 April 2014. There are also sector-based parameters for the nation’s e-invoicing mandate, ignoring the turnover threshold, qualifying the following for an electronic invoice obligation:

• Companies licensed by the Turkish Energy Market Regulatory Authority
• Middlemen or merchants trading fruits or vegetables
• Online service providers facilitating online trade
• Importers and dealers

Turkey’s e-invoicing initiative is a clearance model and two-way application, with issued invoices needing to be in the UBL-TR format and archived for 10 years. Sovos’ e-invoice solution enables compliance with e-Fatura requirements.

e-Arşiv Fatura

e-Arşiv Fatura is Turkey’s e-arşiv invoice initiative. Taxpayers registered in the e-Fatura system must also issue e-Arşiv invoices, either in the UBL-TR format or in a free format such as PDF.

Real-time clearance is not conducted for the issuance of these invoices, though an e-Arşiv report must be submitted electronically to the tax authority by the end of the following day. e-Arşiv invoices are always created electronically but must be available in paper form unless the buyer agrees to receive the document electronically.

The Sovos e-Arşiv Invoice solution makes e-archive invoice compliance simple.

e-İrsaliye

e-İrsaliye is Turkey’s e-WayBill initiative. The use of e-İrsaliye documents became obligatory for taxpayers that surpass the TRY 10 million revenue threshold on 1 July 2023, though those outside of the scope can voluntarily switch to electronic WayBill documents.

There are two types of paper waybills, namely shipment and transportation. e-İrsaliye largely replaces the shipment waybill.

Information required in this type of e-document includes:

• Supplier information
• Issue date and document number
• Buyer information
• Type and quantity of the transported goods
• Shipment date and time

Legally, there is no difference between paper waybills and eWayBills, though the electronic version requires both parties to be registered in the national system.

e-Defter

e-Defter is Turkey’s e-Ledger initiative. The Turkish tax authorities made the e-Ledger application mandatory for e-invoice users and taxpayers, subject to independent audit, in 2015.

These e-documents must be prepared in XBRL-GL format and include specific information in standard XML format – all signed with a financial seal. In addition to producing e-ledgers, taxpayers are required to create a ledger summary which is to be sent monthly to the TRA and archived for 10 years.

Electronic ledgers reduce the time it takes to collect data, save costs associated with the notarization process and ensure compliance with tax processes.

e-Mutabakat

e-Mutabakat is Turkey’s e-Reconciliation initiative. Reconciliation is the communication between accounts to mutually agree on the debit and credit between companies that are part of an agreement.

Turkey’s tax authority has ruled that companies are obliged to make reconciliations at particular times. The last day of the year is typically the day when the account between two parties will be closed unless an agreement or legal requirement states otherwise.

The BA-BS web application developed by the TRA for e-Reconciliation enables taxpayers to compare current agreements and unbalanced agreements before electronic submission of the BA-BA forms.

e-Müstahsil Makbuzu

e-Müstahsil Makbuzu is Turkey’s e-Producer Receipt initiative. This commercial e-document is issued by farmers or wholesalers to keep a record of the products they buy from farmers that don’t bookkeep.

Taxpayers that are obliged to issue producer receipts have had to issue electronic versions of the document, known as e-Müstahsil Makbuzu, since 1 July 2020. However, fruit and vegetable brokers or merchants have been required to issue e-Producer Receipts since 1 January 2020.

Those obliged to utilise e-Producer Receipts may be outside of the scope of e-Fatura, e-Arşiv Fatura and e-Defter requirements.

e-Serbest Meslek

e-Serbest Meslek is Turkey’s e-Self-Employed Receipt (e-SMM) initiative. This obligation came into effect on 1 February 2020 and applies to all self-employed individuals, including:

• Architects
• Engineers
• Financial advisors
• Lawyers
• Screenwriters, writers, composers and painters
• Self-employed doctors, dentists and veterinarians

e-SMM receipts can be created, submitted and reported electronically and carry the same legal weight as paper Self-Employment Receipts. They must be archived for 10 years.

While all the above are prominent e-documents, there are even more electronic documents in Turkey that you should know about. To learn more, read our e-documents overview.

Who is affected by e-Transformation?

E-Transformation includes many documents, each subject to specific thresholds and criteria based on their type. Additionally, certain documents are mandatory for particular sectors without any threshold criteria. E-invoicing is now mandatory for the majority of taxpayers, but it is important to understand which documents are required to be submitted to the tax authorities.

The TRA continues to announce new taxpayer groups in scope of the different document types, so it’s important that businesses stay up to date with the latest information to ensure they remain compliant.

What are the benefits of e-Transformation?

Turkey’s tax transformation aimed to deliver benefits to both the government and taxpayers.

The e-Transformation initiative aims to produce the following benefits:

• Real-time collection of financial data
• Reduce VAT fraud and the circulation of fake invoices
• Increased standardisation to automate accounting processes
• Improved efficiency and reduction of manual errors through data auto-population

Tax compliance and e-Transformation

Turkey’s e-Transformation has impacted tax compliance, successfully implementing real-time transmission of important financial data.

With data automatically being populated in documents, it reduces the possibility of error via manual input and fraudulent invoices being submitted. The reduction of the VAT gap has been a driving force for many countries, including Turkey. 

Eliminating paper, cartridge, shipping and archiving costs associated with paper invoices is also an advantage to businesses and government.

With over 16 document regulations, Turkey’s e-transformation system requirements are extensive and complex. Understanding which regulations apply and keeping up with the latest tax compliance guidelines is key.

How Sovos can help with your e-Transformation journey

Sovos provided the first global e-Transformation solution suite, helping businesses of all shapes and sizes to meet the demands of Turkish tax mandates. Our platform meets all the requirements, standards and formats defined by the Turkish Revenue Authority.

Organisations choose Sovos as their global compliance partner, partly due to the convenience of having a single vendor to aid compliance wherever and however they do business.

See our solutions

E-Transformation FAQ

Is e-defter mandatory if I am using e-fatura voluntarily?

E-defter is not mandatory for voluntary e-fatura use.

What is a special integrator?

A special integrator is an intermediary service provider authorised by the Turkish Revenue Administration. Special integrators have the authority to create electronic records on behalf of taxpayers.

Related resources to e‑Transformation

Navigate Turkey’s evolving tax landscape

As an early adopter of the ‘clearance model’, Turkey positions itself as one of the leading countries in the world when it comes to tax digitisation.

Learn more

Tax compliance software for Turkey

Sovos e-Invoice provides full compliance with Turkey’s e-invoicing mandate.

Learn more

Turkey’s e-transformation solutions and benefits

Over the years, the scope of e-transformation has expanded to include different e-documents. This infographic brings you clarity.

Learn more

Sovos recently sponsored a benchmark report with SAP Insider to better understand how SAP customers are adapting their strategies and technology investments to evolve their finance and accounting organizations. This blog hits on some of the key points covered in the report and offers some direct responses made by survey respondents, as well as conclusions made by the report author. To get the full report, please download your complimentary copy of SAP S/4HANA Finance and Central Finance: State of the Market.

In this year’s benchmark report, research found that most companies are focused on reducing complexity and cost as a primary driver of their overall finance and accounting, including tax, strategies. With this reduction, they are working to solve their biggest pain point which continues to be a lack of visibility into financial transactions and reporting.

The survey revealed several key strategies and investments that SAPinsiders are prioritizing to evolve their finance and accounting processes and organizations. The number one driver of finance and accounting strategy in 2021 is to reduce cost and complexity. This was named by 57% of our audience as the top driver of their finance and accounting strategy. This jumped 24% from last year. To support their top drivers, a majority (56%) of the finance and accounting teams in the study plan to increase their use of automation in 2021.

Clean and harmonized data and a centralized single point of truth are the most important requirements that SAPinsiders are prioritizing. 83% of survey respondents report that clean data is important or very important, while 80% highlight the significance of the Universal Journal in centralizing critical information.

How do technology and tax intersect?

Continued complexity within core financial and accounting systems is limiting organizations’ ability to adapt rapidly to changing business conditions and provide real-time visibility into operations. That is why the number one driver of finance and accounting strategy based on this year’s survey is the pressure to cut both cost and complexity.

Survey responses and interviews with customers about their largest sources of pain consistently mention system and process complexity as one of their most significant challenges. Respondents are focused on addressing this obstacle in a variety of ways such as through investments in analytics, automation, centralization, and system consolidation.

This directly impacts how companies approach tax as rapidly changing global tax laws and mandates often have organizations playing catch up to ensure they are charging and remitting the proper amounts of tax to each country in which they operate. Failure to do this can lead to costly audits, potential fines and penalties and damage to brand reputation.

Why move to SAP S/4HANA Finance?

Simplicity, speed, and easy access to data were among the top benefits cited by survey respondents who have completed or nearly completed their move to SAP S/4HANA Finance. Several mentioned the ease with which they can go from high-level reports and drill down to the document or line-item level, making it easier to understand the numbers and perform in-depth analysis quickly. This directly aligns with the pain points that were identified in the benchmark report survey.

Why now?

What is clear from this survey and subsequent report is that complexity across all layers of finance is having a direct impact on a companies’ ability to function at the highest operational level possible and is threating to impact the bottom line.

Accounting for tax early in your migration strategies and technology upgrades is a key component to ensuring that you are prepared to handle the challenges of modern tax on an international scale. For companies that operate on a multi-national basis, having a centralized approach to tax with enhanced visibility and reporting capabilities is imperative to achieving and remaining compliant no matter how many changes to tax law are introduced every year.

Please download the full report for a more detailed explanation of these critical areas of focus.

Six months after Brexit there’s still plenty of confusion. Our VAT Managed Services and Consultancy teams continue to get lots of questions. So here are answers to some of the more common VAT compliance concerns post-Brexit.

How does postponed VAT accounting work?

Since Brexit, the UK has changed the way import VAT is accounted for. Before January 2021, you had to pay or defer import VAT at the time the goods entered the UK. Because of the volumes of trade between the UK and the EU, the government have understandably changed this. So, now rather than having to pay import VAT you can choose to postpone it to the VAT return. In practice, this effectively means it’s paid and recovered on the same VAT return. This is a significant cash flow benefit. It’s common among many EU Member States and it was allowed in the UK many years ago. The UK reintroduced it from the start of this year.

There’s no need to be approved to use postponed VAT accounting but an election to use it must be made when completing each customs declaration. It doesn’t happen automatically and the reality is that businesses can choose whether they want to use it or not. The import VAT is then accounted for in box 1 of the UK VAT return and then recovered in box 4. If you’re a fully taxable business and the VAT is recoverable, this will mean that there is no need to make any payment of the import VAT. There are no costs involved in using postponed VAT accounting. The business will have to download a monthly statement from the Customs Declaration Service. The statement shows the postponed amount of VAT.

There are also import VAT accounting mechanisms in place in the EU but they vary from country to country. If you’re a UK business and you’re going to be the importer of the goods into the EU, there is the ability to use postponed accounting in some other countries but the rules on how it applies can vary. In some countries it’s like the UK, so no permission required.

In others you’ll need to make an application and meet the conditions in place. If there is no postponed VAT accounting, there may be the opportunity to defer import VAT which can still provide a cash flow benefit. It’s really important that companies understand how it works in the Member State of import, and if it’s available to them as it can have a big impact on cash flow. It’s good news that the UK have reintroduced postponed VAT accounting as it’s certainly a benefit and applies to all imports, not just those that come from the EU.

I’m shipping my own goods to a third party logistics provider in the Netherlands. I will ship the goods to customers around the EU. How do I value the goods for customs purposes as they remain in my ownership? They’re not of UK origin so customs duty may apply.

This question comes up a lot as customs valuation, like the principle of origin has not arisen for many years for UK companies who have only traded with the EU.

The rules on customs valuation are complex. In this scenario, there is no sale of the goods. So it’s not possible to use the transaction value which is the default valuation method. As customs duty is not recoverable, it’s essential that the correct valuation method is used. This minimises the amount of duty paid and also to remove the possibility of the customs and VAT authorities challenging a valuation. We would recommend seeking  specialist advice.

If I sell B2C to customers in the EU do I need to register for VAT in each Member State?

When goods go from Great Britain to the EU, we’re currently in the transition period between Brexit and the introduction of the EU e-commerce VAT package which comes into play on 1 July 2021. Until then, whether you need to be registered or not in an EU country depends on the arrangements in place with your customer. If you sell on a Delivery Duty Paid (DDP) basis, you’re undertaking to import those goods into the EU. So if you do that, you’ll incur import VAT on entry into each country and then make a local sale. If you do that in every Member State country, you’ll have to register for VAT in every Member State.

It should be noted that these are the rules for GB to EU sales and not those from Northern Ireland. This is because the Northern Ireland protocol treats NI to EU sales under the EU rules. The distance selling rules that were in force before the end of 2020 still apply.

Going forward, the EU has recognised that this isn’t really a manageable system. There has been significant abuse of low value consignment relief. LCVR relieves imports of up to €22 from VAT. So they’re introducing a new concept – the Import One Stop Shop (IOSS). IOSS will be available from 1 July 2021 as part of the EU E-Commerce VAT package. From this point, the principle is that for goods with an intrinsic value of below €15. you can use the IOSS. IOSS accounts for VAT in all the countries to which you deliver. You only need a VAT registration in one country where you then pay all your VAT. You submit one return in that country on a monthly basis. This should simplify VAT compliance and ease the admin burden.

There will also be a One Stop Shop (OSS) for intra-EU transactions. So the simplifications ahead will reduce the burden to businesses. What’s important is making sure you review your options. Make an informed decision as to which is the right scheme for your business. Ensure you can comply with VAT obligations to avoid VAT compliance problems in the future.

In Poland, the Ministry of Finance proposed several changes to the country’s mandatory JPK_V7M/V7K reports. These will take effect on 1 July 2021. The amendments offer administrative relief to taxpayers in some areas but create potential new hurdles elsewhere.

Poland JPK_V7M and V7K Reports

The JPK_V7M/V7K reports – Poland’s attempt to merge the summary reporting of a VAT Return with the detailed information of a SAF-T – have been in effect since October 2020. Taxpayers must submit these reports (V7M for monthly filers, V7K for quarterly filers) in place of the previously-used VAT Return and JPK_VAT files.

The JPK_V7M/V7K reports require taxpayers to designate within each file the invoices subject to special VAT treatment. For example, invoices representing transfers between related parties or invoices for transactions subject to Poland’s split payment regime.

Split payment designations are particularly complex for taxpayers to manage. Poland’s split payment regime is broadly applicable. In some cases can be exercised at the buyer’s option. This makes it difficult for sellers to predict which of their invoices should be marked.

As a result of these complexities, and in response to taxpayer feedback, the draft amendment for 1 July would abolish the split payment designation. This would significantly reduce the administrative burden on taxpayers.

The draft amendment does, however, give rise to an additional complexity in the reporting of bad debts. Under the amended rules, taxpayers need to indicate the original due date of the payment for an unpaid invoice. For which the taxpayer is seeking a VAT relief. This is intended to help the tax authority verify bad debt relief claims. This could potentially present difficulty for taxpayers who do not maintain such information or cannot easily access it in their accounting systems.

Poland and EU One Stop Shop

Finally, the draft amendment would modify reporting of cross-border business to consumer (B2C) supplies of goods. This is as well as similar supplies of electronic services. These supplies are at the heart of the European Union’s One-Stop Shop regime that takes effect 1 July 2021, and as such, the current invoice designations for these supplies in JPK_V7M/V7K would be consolidated into a single, new invoice designation under the amended rules.

Poland’s JPK_V7M/V7K filings are enormously ambitious in scope. It is clear from these latest proposals that the tax authority is willing to make substantial adjustments to the structure of these filings, at very short notice. In such a dynamic landscape, it is critical that businesses stay on top of regulatory developments in order to remain compliant.

As detailed within our annual report VAT Trends: Toward Continuous Transaction Controls, there’s an increasing shift toward destination taxability which applies to certain cross-border trades.

In the old world of paper-based trade and commerce, the enforcement of tax borders, between or within countries, was mostly a matter of physical customs controls. To ease trade and optimise resources, many countries have historically applied ‘de minimis’ rules. These set specific limits (e.g. EUR 10-22 applied in the European Union) below which imported goods had an exemption from VAT.

Cross-border services, which couldn’t, or not easily, be checked at the border would often escape VAT collection altogether or be taxed in the country of the service provider. There has been a huge increase in cross-border trade in low-value goods and digital services over the last decade. As a result, tax administrations are taking significant measures to tax these supplies in the country of consumption/destination.

VAT treatment of B2C digital/electronic supplies by foreign suppliers

Since the 2015 publication of the OECD/G20’s Base Erosion and Profit Shifting (BEPS) Project Action 1 Report on Addressing the Tax Challenges of the Digital Economy, most OECD and G20 countries have adopted rules for the VAT treatment of B2C digital/electronic supplies by foreign suppliers. The International VAT/GST Guidelines issued in conjunction with the Project Action 1 Report recommend the following approaches for collecting VAT/GST on B2C sales of electronic services by foreign suppliers:

• The country of the customer will have the right to levy VAT on the supply
• The foreign seller must register for VAT in the customer’s country under a simplified registration and compliance regime, and
• The foreign seller must collect and remit VAT

Many industrialised and emerging countries have since passed laws on this OECD guidance; most apply to B2C transactions only, although some of these jurisdictions have imposed obligations that apply or could apply to both B2B and B2C transactions.

For low value goods, the OECD has made similar recommendations providing for both a vendor and an intermediary-based collection model. The destination-based taxability trend affects many different areas of consumption tax, including the following examples.

• US sales and use tax – the South Dakota v. Wayfair decision
• The European Commission’s 2018 proposals for a ‘definitive’ VAT system
• EU e-commerce package and digital services
• Latin America

EU E-Commerce VAT Package and Digital Services

The EU has been gradually introducing new rules for VAT on services. This is to ensure more accurately accrues to the country of consumption. From 1 January 2015, and as part of this change, where the supply of digital services is taxed changes. It will be taxed in the private end customer’s EU location, has their permanent address or usually resides. These changes sit beside the introduction of the One Stop Shop (OSS) system which aims to facilitate reporting for taxable persons and their representatives or intermediaries. Under the EU e-commerce VAT package scheduled to take effect from 1 July 2021, all services and all goods including e-commerce based imports are subject to intricate regulations that include changes to the way customs in all Member States operate.

With this shift toward destination taxability for certain cross-border transactions it’s key that companies fully understand the impact. That is not only on their business processes but also comply with changing rules and regulations.

Update: 25 October 2023 by Maria del Carmen

Mexico releases Carta Porte Version 3.0

On 25 September 2023, the Tax Authority in Mexico (SAT) published Version 3.0 of the Carta Porte Supplement on its portal with some adjustments.

The use of Version 2.0 of the Carta Porte became mandatory as of 1 January 2022 in accordance with the Fourth Resolution of modifications to the Miscellaneous Tax Resolution of 2021.

However, the authority established 1 January to 31 December 2023 as a grace period to correctly issue said supplement, without sanctions or fines for non-compliance with any requirement.

Main changes of Carta Porte V3.0

One of the adjustments announced is the introduction of seven catalogues:

• RegimenAduanero
• RegistroISTMO
• SectorCOFEPRIS
• FormaFarmaceutica
• CondicionesEspeciales
• TipoMateria
• DocumentoAduanero

There was also the introduction of fields for foreign trade operations, such as:

• TypeMatter
• DescriptionSubject

The Customs Document replaces the Pedimento Section with the addition of fields to identify the type, Tax ID of the Importer and ID custom document.

Through the anticipated version of the 8^th RMRMF, the SAT has modified Rule 2.7.1.7 relating to the requirements of the printed representations of the CFDI, indicating that in the case of the CFDI to which the Carta Porte is incorporated, the structure of the supplement allows the printed representation of the CFDI and the Carta Porte to be displayed separately.

Likewise, Rules 2.7.7.1.1. and 2.7.7.1.2 for the CFDI of the income type and the transfer type to which the Carta Porte is incorporated, respectively, will serve to prove the legal stay and/or possession of the goods and merchandise of foreign origin during their transfer in national territory, providing the number of the customs request or custom document in said receipt in terms of the applicable customs provisions.

Transition and mandatory terms for Carta Porte 3.0

1. Carta Porte Version 3.0, published on 25 September 2023 on the SAT Portal, must be used as of November 25, 2023
2. Taxpayers obliged to issue CFDIs to which the Bill of Lading complement is incorporated, may continue to issue the complement in Version 2.0, until 31 December 2023.
3. From 1 January 2024, the only valid version of the Bill of Lading supplement will be 3.0

Printed representation

The printed representation introduces a new two-dimensional barcode that will accompany the printed representation of the Carta Porte.

Technical documentation about the latest changes to Carta Porte is available at:

It is important to note that the authority has not yet updated Filling Guide of said complement, so we must be attentive to these regulations.

Want to learn about other tax requirements in Mexico? Read our Mexico tax rules.

For historical information on the initiative, read our dedicated Carta Porte 2.0 blog.

Key information about the Carta Porte Supplement

Update: 31 July 2023 by Maria del Carmen

Updates to the Scope and Definitions of the Carta Porte Supplement

Mexico’s Carta Porte supplement was introduced in May 2021 to ensure the traceability of products moved within the country. Use of the supplement became mandatory on 1 January 2022 but there have been many changes and additions to its requirements.

Taxpayers in scope of the Carta Porte

Section 2.7.7 of the Miscellaneous Tax Resolution (RMF) 2023 regulates the Carta Porte Supplement which specifies that the following must issue a CFDI of Income to which they must incorporate the Carta Porte supplement:

• Taxpayers, intermediaries or transport agents dedicated to the transport service of general and specialised cargo, who circulate by land, rail, air, or navigate by sea.
• Those who provide the parcel and courier service, of towing cranes, towing and salvage cranes and deposit of
• Those who provide transport of funds and values or dangerous materials and waste, among other services that involve the transportation of goods or merchandise.

Owners of goods transporting its own assets via its own transport methods in national territory, including the use of towing cranes and vehicles for the transport of funds and values, can provide proof of transport through the printed or digital representation of the CFDI of Transfer issued by themselves, to which they must incorporate the Carta Porte supplement.

Transport of imported goods

For those within the scope mentioned above, the RMF indicates that the carrier must prove the legal stay and/or possession of foreign goods and merchandise during their transport in national territory. This can be done using the CFDI of Income or Transfer as appropriate, to which the Carta Porte supplement is incorporated if the CFDI contains the import request number.

Types of transport in scope of the Carta Porte

The current RMF includes a specific section for Maritime Transport and Motor Transport, which also establishes the rules for exported goods.

It also establishes specific rules for:

• The provision of dedicated services
• The provision of services for the transport of funds and values
• The provision of services for the transportation of goods by carriers who are resident abroad and without permanent establishment in the national territory

Exceptions to the Carta Porte obligation

The exceptions are applicable to:

• Taxpayers who provide land transport services of general and specialised cargo when the transportdoes not imply transit through any stretch of federal jurisdiction.
• Owners of goods transporting their own assets, when the transport does not imply transit through any stretch of federal jurisdiction.

These taxpayers must prove transport with the printed or digital representation of either the CFDI of Income or Transfer as appropriate without Carta Porte. The CFDI must include the product and service key according to the CFDI Filling Instructions to which the Carta Porte supplement is incorporated. Transport of medicines is not included in this exception, among others.

There is also an exception for the provision of parcel or courier services and consolidated transport of goods, following the corresponding rules.

Looking for a helping hand with VAT compliance in Mexico? Contact our team of experts.

Update: 15 June 2021 by Ramón Frias

Understanding Mexico’s Carta Porte Supplement

On 1 May 2021, the Mexican tax administration (SAT) released one of the most important updates to the electronic invoicing system of the country since 2017.

The update was about the new Bill of Lading Supplement (locally known as Suplemento de Carta Porte) that should be added as an annex to the electronic invoice (CFDI) of Transfer (CFDI de Traslado) or to the CFDI of Revenues (CFDI de Ingresos) that are issued for hauling services.

This supplement is based on the provisions of Articles 29 and 29-A of the Fiscal Code of Mexico, and the rule 2.7.1.9 of the Miscellaneous Fiscal Resolution. The articles of the tax code grant the tax administration the power to define the documents to be used for supporting the legal transportation goods inside that country via specific rules. The mentioned rule describes the specific requirements of the Supplement of Carta Porte.

Why has Mexico introduced the Carta Porte supplement?

Latin American countries have a serious problem with tax evasion, usually made possible by smuggling goods without paying the corresponding taxes. According to the information provided by the SAT, 60% of the goods transported in Mexico have an illegal origin.

Therefore, the purpose of enforcing the use of the Carta Porte supplement, whether as an annex to the CFDI of Transfers or the CFDI of Revenues, is to ensure the traceability of the products moved inside the Mexican territory by requiring the provision of additional information about the origin, location, precise destination and routes of transport of the products transferred by roads, rail, water or air in Mexico.

Once this change comes into effect, transporters of goods by road, rail, water or air must have a copy of the Supplement of Carta Porte in the vehicle that proves lawful compliance with this mandate.

Who is required to issue the Carta Porte supplement?

• The owner of goods transporting its own assets:When the owner is moving assets from one location to another without making a sale (i.e. from a warehouse to retail store) or when such owner is shipping the goods on consignment. The same obligation to issue the Carta Porte supplement applies when the seller ships the goods to their customer using their own means of transport or when they are shipping those goods for export. In those cases the Carta Porte supplement will come as part of the CFDI of Transfers.
• The intermediaries and agents of transport:These agents of transport are known in Mexico as ‘Agentes de Carga’ and they act as intermediaries between the owners of the goods and the hauling companies controlling the logistics, legal documentation and other issues necessary for the delivery of products. In these cases, they will be required to issue the Carta Porte supplement as part of a CFDI of Transfers. The same obligation applies to those that provide intermediation services on behalf of the owner of the goods being transported.
• The hauling companies:When they supply services of transportation of goods by whichever means: water, air, road or rail. The suppliers of transportation services should issue a CFDI of Revenues with the Carta Porte supplement.

When will the supplement become mandatory and when should it be issued?

• The new Carta Porte supplement became effective on 1 June 2021, but its use will become mandatory 120 days counted from that effective date (30 September 2021). The Carta Porte supplement, whether as part of a CFDI of Transfer or a CFDI of Revenues, should be issued by any of the three parties indicated above, before the transportation of goods begins.
• The transporter of the product should have with him a copy of the digital CFDI of Transfer or the CFDI of Revenues, properly validated with the SAT via the corresponding authorised provider of certification services (PAC). The tax and transportation authorities will enact random verification checks on the roads, airports, waterways, train stations, and other transportation means, to ensure compliance with this mandate.

The Carta Porte as a supplement of the CFDI of Transfers or the CFDI of Revenues

As we know, the new regulations require the Carta Porte supplement to be added to the CFDI of Transfers or to the CFDI of Revenues, depending on who is transporting the goods.

The Carta Porte supplement will be added to the CFDI of Transfers when the transport of goods is made by the owner (i.e. internal distributions between warehouses and stores, consignment, etc.) or when the seller assumes the shipment of the products to the purchaser.

The Carta Porte supplement will also be added to CFDI of Transfers when the shipping of the goods is made by an intermediary or by an agent of transport as explained before. In such cases the current regulations provide that the CFDI should have zero as a value of the products and the RFC key to be used is the generic key established for transactions carried out with the public. In the field for description, the object of the transfer should be specified.

When the Carta Porte supplement is issued as part of the CFDI of Revenues (CFDI de Ingresos) as a result of the goods being transported by a haulage company, the haulage company should issue the CFDI of Revenues with the Carta Porte supplement. However, different to the previous case where the CFDI had a value of zero, the value to be included in the CFDI of Revenues will be the price of transportation services charged by the haulage company to the client.

It is important to mention that Carta Porte supplement does not substitute other documents necessary to prove the legitimate origin or ownership of products. Other additional documents will be required for this purpose.

Documents accompanying the Carta Porte supplement

While the Carta Porte supplement provides clear information about the transportation of goods being transferred, that document alone does not prove the lawful status of the goods being hauled. That status should be proven by whoever is providing the transportation, with the corresponding documents proving the origin of those hauled products, such as import documents, CFDI of Pagos, registrations and licenses etc.

In the case of transportation of petroleum products, the lawful status of the product will be proven with the printed representation of the supplement established for that type of products (the Complemento de Hidrocarburos y Petroliferos).

Structure of the Carta Porte supplement

According to the technical documentation released by the SAT, the information provided via the Carta Porte supplement will be conveyed via a number of fields (around 215) that will contain optional and mandatory information about the product being transported, type of packaging used, weight, quantity, insurance, the permit of transportation provided to the hauling company by the Secretary of Public transportation, plate and registration of the motor vehicle used, driver, as well as information about the recipient of the products being transported within Mexico.

The information of those fields will be filled via direct input by the taxpayers or in some cases via the specific choices available in a set of catalogs established by the SAT.

Such catalogs can be grouped as follows:

• Catalog of transport: Contains the keys for choosing the means of transport used to move the goods (01 transport by land, 02 Maritime transport, etc.)
• Catalog of station: Describes the place from where merchandise was shipped
• Catalog of waterways ports, airports and train stations: Lists all the ports, airports and stations across Mexico
• Catalog of units of measurements and packaging: Informs the choices about the type of container and the measurements related to the goods being transported.
• Catalog of products and services: Indicates the different codes used to identify the products being transported.
• Catalog of dangerous materials: Lists the options to describe and identify the products considered dangerous, when they are being transported.

Other catalogs included in this supplement are those related to the type of transport and trailers used to transfer the products by land, packaging, the types of permits, the municipalities, neighborhoods, and locations, among others.

Penalties and sanctions

Once the use of the Carta Porte supplement becomes mandatory, noncompliance with this requirement will have several immediate consequences for the violators.

• Seizure of Hauled Goods:The Authority of Roads and Transportation enacts random verification checks of the goods being hauled on public roads in Mexico. If the vehicles transporting goods do not have the proper documentation proving the lawful transportation and origin of those goods, the authority will proceed to seize them until they comply with these requirements.
• Fines:both the haulage company and the owner of the goods will be subject to fines by the SAT. In this case, the sanctions will be applied in proportion to the severity of the infraction. Most of the infractions are contained in Articles 84 and 85 of the Federal Fiscal Code and in Annex 5 of the Miscellaneous Fiscal Resolution. In addition to this, the transportation authority may suspend or cancel the driving permissions of the haulage company.
• Non-Deductible VAT:When the CFDI of Revenues does not have the corresponding Carta Porte supplement, the VAT charged by the hauling company will not be deductible for the owner of the goods being transported.

Additional clarifications about the scope of the Carta Porte supplement:

When the SAT released the new Miscellaneous Fiscal Resolution for 2021 there were several doubts about the scope of this mandate. This was because for the case of land transportation, the rule established that the use of the supplement would be required only when the goods were transported via federal roads. That original release of the Miscellaneous Fiscal Resolution also established compliance with this mandate would be required to owners of national goods that are part of their assets when they haul those assets in Mexico.

To remove those misunderstandings and limitations, the SAT has recently released a new modification specifying that the mandate will be required for all movement of goods, regardless of the road used. The new resolution also excluded the reference to “national goods that are part of their assets”, so that it is clear now that it applies to any goods being transferred, regardless of its origin.

Take Action

Contact us to discuss your LATAM VAT compliance needs.

The General Authority of Zakat and Tax’s (GAZT) previously published draft rules on ‘Controls, Requirements, Technical Specifications and Procedural Rules for Implementing the Provisions of the E-Invoicing Regulation’ aimed to define technical and procedural requirements and controls for the upcoming e-invoicing mandate. GAZT recently finalized and published the draft e-invoicing rules in Saudi Arabia.

Meanwhile, the name of the tax authority has changed due to the merger of the General Authority of Zakat and Tax (GAZT) and the General Authority of Customs to form the Zakat, Tax and Customs Authority (ZATCA).

The finalised rules include a change to the go live date of the second phase from 1 June 2022 to 1 January 2023. They revealed the time limit to report B2C (simplified) invoices to the tax authority´s platform for the second phase.

According to the final rules, the Saudi Arabia e-invoicing system will have two main phases.

Saudi Arabia E-Invoicing System: The First Phase

The first phase begins on 4 December 2021 and requires all resident taxpayers to generate, amend and store e-invoices and electronic notes (credit and debit notes).

The final rules state businesses must generate e-invoices and their associated notes in a structured electronic format. Data in PDF or Word format are therefore not e-invoices. The first phase does not require a specific electronic format. However, such invoices and notes must contain all necessary information. The first phase requires B2C invoices to include a QR code.

There are a number of prohibited functionalities for e-invoicing solutions for the first phase:

• Uncontrolled access
• Tampering of invoices and logs
• Multiple invoice sequences

Saudi Arabia E-Invoicing System: The Second Phase

The second phase will bring the additional requirement for taxpayers to transmit e-invoices in addition to electronic notes to the ZATCA.

The final rules state the second phase will begin 1 January 2023 and will be rolled-out in different stages. A clearance regime is prescribed for B2B invoices while B2C invoices must be reported to the tax authority platform within 24 hours of issuance.

As a result of the second phase requirements, the Saudi e-invoicing system will be classified as a CTC e-invoicing system from 1 January 2023. All e-invoices must be issued in UBL based XML format. Tax invoices can be distributed in XML or PDF/A-3 (with embedded XML) format. Taxpayers must distribute simplified invoices (i.e. B2C) in paper form.

In the second phase, a compliant e-invoicing solution must have the following features:

• Generation of a Universally Unique Identifier (UUID) in addition to the invoice sequential number
• Tamper-resistant invoice counter that increments for each invoice and electronic note issued
• Contain some functionalities which enable taxpayers to save e-invoices and electronic notes and archive them in internal and external archive
• Generation of a cryptographic stamp for each e-invoice or electronic note
• Generating a hash for each generated e-invoice or electronic note
• Generation of a QR code

The second stage will furthermore bring additional prohibited functionalities for e-invoicing solutions on top of requirements mentioned in the first phase:

• Time change
• Export of stamping key

What’s next for Saudi Arabia’s e-invoicing system?

After publishing the final rules, the ZATCA is organising workshops to inform relevant stakeholders in the industry.

Some of the details remain unclear at this point, however the Saudi authorities have been very successful in communicating the long-term goals of the implementation of its e-invoicing system, as well as making clear documentation available and providing opportunities for feedback on the documentation published for each phase. We expect provision of the necessary guidance within the near future.

It’s been more than a few years since Romania first toyed with the idea of introducing a SAF-T obligation to combat its ever-growing VAT gap. Year after year, businesses wondered what the status of this new tax mandate was, with the ANAF continuously promising to give details soon. Well, the time is now.

What is SAF-T?

The Organization for Economic Co-operation and Development (OECD) introduced the Standard Audit File for Tax (SAF-T) in 2005. The goal of the SAF-T digital VAT return is to provide auditors access to reliable accounting data in an easily readable format. Companies can export information from their accounting systems (invoices, payments, general ledger journals in addition to master files).

As a result, audits should be more efficient and effective based on the standardized format set by the OECD. As countries can require a different format for capturing data, no two country implementations of SAF-T are exactly the same.

How is Romania implementing their SAF-T?

From 1 January 2022, the new Romania SAF-T mandate comes into effect for large taxpayers. The digital VAT return submissions are via XML with over 800 fields.

It appears Romania is looking to follow the format prescribed by the OECD (SAF-T OECD Scheme version 2.0 – OECD standard format). The technical specifications have been released and can be found on the ANAF portal.

The documents which are available include:

• SAF-T_Romania_SchemaDefinitionCodes.xlsx – describes in a tabular organization format the structure of the SAF-T scheme for Romania SAF-T tax reporting
• Romanian_SAF-T_Financial_Schema.xsd – describes the SAF-T scheme to be used in Romania for SAF-T reporting. The description format is XML Scheme Definition (XSD) and is useful for companies that develop applications for automatic generation of SAF-T reports
• Annex SAF-T – Structura_D.docx – contains the annex of the declaration and describes all validation rules in ANAF’s own format
• SAF-T OECD Scheme version 2.0 – standard OECD format

Now that the specifications are available, Romania will soon move into the testing phase of implementation; where taxpayers can take advantage of submitting test data to the ANAF. This is in order to become familiar with the process, understand the requirements, and if necessary, adjust their ERP systems. As a result, this should ensure full compliance for January. Details on how to participate in the test phase are forthcoming and will be available on the portal once finalized.

What’s next?

Sources close to the Romania SAF-T implementation project indicated the hope is to eliminate certain declarations. To possibly provide pre-filled returns based on SAF-T information once the project is in full swing. This would align with the pre-population trend that is slowly making its way across the EU; with Italy, Spain, and Hungary paving the way for pre-populated VAT returns.

The Turkish Revenue Administration (TRA) has published updated guidelines on the cancellation and objection of e-fatura and e-arsiv invoice. Two different guidelines are updated: guidelines on the notification of cancellation and objection of e-fatura and guidelines on the notification of cancellation and objection of e-arsiv.

The updated guidelines inform taxable persons about the new procedures for objection against an issued e-fatura and e-arsiv invoice. And how this must be notified to the TRA. Due to changes in the objection procedure, the e-arsiv schema has also changed. There has not yet been a change in the e-fatura schema, however it could also change in the near future. The updated guidelines state that the TRA platform can be used to notify the TRA about objection requests made against an issued e-fatura and e-arsiv invoice.

Why are the updated guidelines important?

From July 2021, electronically issued documents won’t be mentioned in the so called ‘BA and BS forms’. The BA and BS forms are generated to periodically report issued or received invoices when a total invoice amount is 5.000 TRY or more. All limited liability and joint stock companies are obliged to create and submit the forms to the TRA even if they don’t have any invoices to report.

The TRA recently published a new provision stating that electronically issued documents will not be shown in BA and BS forms and instead will be reported directly to the TRA in the clearance (e-fatura) and reporting(e-arsiv) process. Considering that the TRA receives the invoice data for electronically issued invoices in real-time, relieving taxpayers from reporting invoices through BA and BS forms creates a more efficient system in which the relevant data will be collected only once from taxpayers.

At its current stage, e-documents won’t be mentioned in these forms. However, in order for the TRA to have accurate invoice data about each taxpayer, it needs to be notified which are the final invoices and disregard any objected or cancelled documents when evaluating taxpayer data.

Although the cancellation process is already performed through the TRA platform for basic e-fatura and e-arsiv, objection requests are made externally (through a notary, registered letter or registered e-mail system), meaning the TRA does not have visibility of all objections. There could therefore be a risk that the TRA considers a cancelled document (due to objection) as issued which could result in discrepancies between the taxpayer records and the data that the TRA considers relevant for tax collection.

Therefore, taxpayers must now notify the TRA about objection requests to avoid any discrepancies between their records and BA and BS forms. The final goal of this application is that the BA and BS forms will be completely auto populated by the TRA in future.

How will the new process work?

According to the Turkish Commercial Code, any objections or cancellation requests must be made within eight days. Suppliers and buyers can raise an objection request which must be made externally (through a notary, registered letter or registered e-mail system) and registered in the TRA system.

For e-arsiv application, there are two ways for suppliers to notify the TRA about the objection request. They can either use the e-arsiv schema (automated) or register the request in the TRA portal. Buyers can see this request on the TRA platform and may respond, although they are not obliged to. Because e-self-employment receipts are also reported through e-arsiv application, the same objection rules apply.

For e-fatura, since there is no change in the schema, it is not possible for suppliers or buyers to notify the TRA using e-fatura schema. Currently, they can only notify the TRA about e-fatura objections through the TRA platform. Taxpayers can also respond to objection requests only through the platform.

What’s next?

The TRA has taken a step towards the digitalization of cancellation and objection requests. However, there is still not an automated way to perform these actions. Before the digitized objection process becomes reality in the country, the authorities must take a more sophisticated approach towards automating the process as well as introducing or amending applicable legislation.