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

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

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

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

VAT digital reporting obligations and e-invoicing – an overview

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

Digital reporting requirements for domestic transactions will remain optional:

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

“Transmission” will not be regulated:

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

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

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

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

VAT Digitization in Eastern Europe

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

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

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

Get the ebook

Who should read this ebook?

Written by tax experts and regulatory specialists

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

The challenge of VAT digitization in Eastern Europe

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

Take a look at what's inside:

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

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

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

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

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

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

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

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

Romania – A sneak peak

There are three requirements for taxpayers in Romania:

Mandatory e-invoicing for B2G transactions
Mandatory e-invoicing for high-risk products
Electronic transport mandate

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

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

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

Looking for more VAT compliance resources?

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

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

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

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

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

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

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

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

Problems encountered with Fire Brigade Tax rate increase in Slovenia

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

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

Slovenia’s new tax return

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

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

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

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

Telephone number information on tax return

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

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

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

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

Conflicting information about Slovenia’s new Fire Brigade Tax return

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

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

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

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

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

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

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

Next steps with Slovenia’s new tax return

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

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

Need help with Fire Brigade Tax requirements in Slovenia?

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

Little by little, we are witnessing how countries in Africa are starting to follow e-invoicing and continuous transaction control trends implemented by many other countries around the globe.

Each country in the continent is developing their own variation of a tax digitisation system. Currently there is no compliance standardisation, with requirements differing in each jurisdiction but local trends are emerging.

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

E-invoicing in Africa: Nigeria, Kenya, Egypt, Uganda and Tunisia

Another type of fiscal digitization process gaining popularity is e-invoicing mandates. This type of framework is on the legislative agenda for several national tax authorities, including Nigeria, Kenya, Egypt and Uganda. In this blog we explain the key features of these systems.

Nigeria e-invoicing: CTC invoice reporting under evolution and cross-border e-invoicing

Nigeria has a CTC e-reporting system. Taxpayers report invoice transactions electronically to the tax authority through the Automated Tax Administration System (ATAS), established for electronic VAT compliance purposes.

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

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

In September 2024 the Federal Inland Revenue Service (FIRS) announced plans to implement a CTC clearance system introducing mandatory e-invoice through a new digital platform called FIRS Merchant Buyer Solution (FIRSMBS e-invoice). The new system is set to streamline invoice management in line with the Tax Administration and Enforcement Act of 2007. The initiative benefits B2B, B2C and B2G transaction by facilitating real-time transaction validation and e-invoice issuance, receipt and storage. E-invoices must be created in JSON or XML format, be digitally signed, and include specified data.

The national e-invoice system is designed in compliance with global best practices and utilises BIS Billing 3.0 UBL for seamless e-invoice exchange across platforms.

An e-invoicing pilot phase is planned to launch in the second half of 2025, starting with large taxpayers. Insights gained from the pilot phase will guide the broader implementation of the e-invoicing solution to other taxpayer groups. At this stage no further roll-out schedule has been published.

Kenya e-invoicing: cash register controls through TIMS/eTIMS

E-invoicing and e-reporting of invoice data to the Kenya Revenue Authority (KRA) became mandatory through the VAT (Electronic Tax Invoice) Regulations in 2020.

Initially, VAT-registered taxpayers were required to transmit individual invoice data in near real-time to the KRA using e-tax registers under the Tax Invoice Management System (TIMS). In 2023, KRA launched a new technology, the Electronic Tax Invoice Management System (eTIMS), to help with real-time electronic transfer of invoices to KRA. eTIMS can be accessed via electronic and digital devices, such as computers and mobile phone apps.

As of March 2024, both VAT-registered and unregistered persons need to be compliant with the eTIMS framework. Where a taxpayer already is TIMS compliant, there is no requirement to register for eTIMS, but they are required to ensure all sales invoices are TIMS/eTIMS compliant.

Businesses are prohibited from claiming all expenditures not supported by a TIMS/eTIMS-generated invoice and may receive a penalty of two times the tax due.

Uganda e-invoicing: Electronic Fiscal Receipting and Invoicing System

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

Egypt e-invoicing: CTC clearance

Egypt introduced a mandatory CTC clearance e-invoicing framework through a gradual roll-out plan that took place between November 2020 and 31 December 2022. Following completion of the roll-out phase, the CTC system now encompasses all businesses established in Egypt.

Sending e-invoices to the system on the same day of issuance is mandatory. B2G e-invoicing is mandatory regardless of company size. E-invoices must be created in JSON or XML format and contain the issuer’s electronic signature and a unified code for the goods or service.

Starting 1 July 2023, taxpayers who do not issue electronic tax invoices will be prevented from dealing with the Customs Authority and the customs system, whether in import or export.

The CTC regime was extended to also cover B2C transactions from 1 July 2022 and is being rolled out in phases. B2C receipts must be reported in real time. Phase 6 was rolled out in January 2025.

Foreign businesses conducting B2B sales into Egypt must validate their buyers’ Tax ID and Unique Identification Number (UIN) through a digital system. The compliance deadline, initially set for November 2024, was extended to 1 December 2024.

Tunisia e-invoicing: El-fatoura

Tunisia is a pioneer for e-invoicing with its system known as “el-fatoura”. Since 2016, the electronic issuing of invoices has been regulated in the Finance Law, and e-invoicing is mandatory for larger taxpayers.

The Tunisian e-invoicing regime operates under a CTC framework, which requires invoices to be registered through the Tunisie TradeNet (TTN) platform. E-invoices are issued using the XML format, and copies of validated and digitally signed e-invoices are sent to the Ministry of Finance.

Africa’s future e-invoicing landscape

We can expect more African countries to introduce similar e-invoicing systems in the near future given the growth in jurisdictions applying mandatory e-invoicing and e-reporting and the common agenda set by African Union that also refers to tax control and traceability.

Several African countries, including Angola, Botswana, Malawi, and Morocco have announced plans to implement e-invoicing systems, aiming to replace traditional electronic fiscal devices. However, in most of these cases, detailed information regarding the specific e-invoicing models to be adopted and their implementation timelines have yet to be published. The countries that follow will likely learn from the pioneers and early adopters, leading to a more uniform development of tax digitization in Africa.

For more updates on developments in Africa and other countries, subscribe to our Regulatory Analysis page.

Part IV of V – Ryan Ostilly, vice president of product and GTM strategy EMEA & APAC, Sovos

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

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

Ryan Ostilly: IT teams will have to work hard to ensure their core finance and transactional tax systems have the enhanced capability to extract, transform, remit and consume real-time data with all tax jurisdictions across their global footprint, in compliance with an ever-changing myriad of legal and procedural requirements. With the pace of disruption accelerating, governments are rewriting the rules on taxpayer control and engagement, forcing direct connection and intimacy with the data itself.

I fear that in a growing number of cases, the owners of the data may be functional departments. The IT department will need to evolve its role in this relationship, viewing the government as a critical business partner – one with whom they must always be connected, continuous and complete.

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

Ryan Ostilly: In this modern era of government-initiated tax transformation, the successful IT department will pursue a proactive strategy that prioritizes a connected, continuous and complete framework for government mandates and Continuous Transaction Controls (CTCs). These three principles are:

Connected – Architect a simplified integration and vendor strategy. Reduce exposure to multiple integrations and heavy projects when adopting new jurisdictions or implementing changes.

Continuous – Partner with regulatory and legal experts on a regular basis. Review upcoming mandates and assess the impact on your current and future business requirements.

Complete – Think beyond technical aspects and schemas. Partner with tax subject matter experts when translating and validating mandate requirements, as these outputs will define the financial and tax position of your company with the tax authorities in real time.

New bookkeeping law – Lov om bogføring

On 19 May 2022, the Danish Parliament passed a new bookkeeping law – Lov om bogføring – introducing requirements for companies to use a digital bookkeeping system.

Section 16 of the Law requires many Danish companies to use a digital bookkeeping system and make their bookings electronically. The final deadline is yet to be announced but is expected to be July 2024, with the Danish Business Authority announcing they will give businesses enough time to comply with the e-bookkeeping requirements.

Scope of Denmark’s bookkeeping law

The subjective scope of the digital bookkeeping requirements covers all companies in Denmark that are liable for accounting according to section 3(1) of the Financial Statements Act. Moreover, other companies whose net turnover exceeds DKK 300,000 in two consecutive income years are subject to digital bookkeeping requirements. Finally, the rules cover bookkeepers and others who carry out bookkeeping for other companies.

These companies will be required to record company transactions and store records in a digital bookkeeping system. Companies can use a digital bookkeeping system registered with the Danish Business Authority, Erhvervsstyrelsen, or any other bookkeeping system. However, companies who choose the latter option must ensure their systems meet the requirements according to Law for digital bookkeeping systems.

Potential e-invoicing mandate and PEPPOL

While the new bookkeeping law doesn’t introduce any mandatory e-invoicing or continuous transaction controls (CTC) obligations for businesses, it is envisaged that the digital bookkeeping systems must support continuous registration of the company’s transactions and the automation of administrative processes. This includes automatic transmission and receipt of e-invoices.

This requirement was further detailed in the draft executive order on requirements for standard digital bookkeeping systems, which outlines that the taxpayers:

Moreover, the new bookkeeping law authorised the Minister for Industry, Business, and Financial Affairs to introduce rules:

(a) that require companies to record their transactions regarding purchases and sales with e-invoices as documentation of the transactions,

(b) on transmission of records by digital bookkeeping systems to a public receiving point through the shared public digital infrastructure for the exchange of e-documents and the storage of such records.

What’s next for Denmark?

Although Denmark’s e-invoicing journey is still in the early phases, it seems that the new bookkeeping law and requirements for digital bookkeeping systems lay the foundation for a future e-invoicing mandate to be duly introduced by the Minister for Industry, Business, and Financial Affairs.

It will be interesting to see how and when Denmark’s plans for e-invoicing will take shape and be affected by the upcoming results from the EU Commission on the VAT in the Digital Age project.

Need help for E-invoicing in Denmark?

If you have any question about Denmark’s new bookkeeping law or e-invoicing requirements in Denmark, please reach out to us: Speak to our tax experts. Refer to this guide for a comprehensive overview about e-invoicing in general.

Making Tax Digital – Filing VAT Returns through Online VAT Account to become redundant

From Tuesday 1 November 2022, businesses filing VAT returns in the UK will no longer be able to submit via an existing online VAT account unless HMRC has agreed to an exemption from Making Tax Digital (MTD). Businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023.

By law, all VAT-registered businesses must now sign up to Making Tax Digital and use compatible software for keeping VAT records and filing returns. HMRC has advised that from January 2023, any VAT registered businesses that fail to sign up for MTD and file returns through MTD-compatible software will incur .

Making Tax Digital’s aim is to help businesses get tax right first time by reducing errors, making it easier for them to manage their tax affairs by going digital, and consequently helping them to grow. More than 1.8 million businesses are already benefitting from the service, and more than 19 million returns have been successfully submitted through Making Tax Digital compatible software so far.

How to sign up to Making Tax Digital

If a business hasn’t already signed up to Making Tax Digital or started using compatible software, they must follow these steps now:

Small businesses

If your turnover is under the VAT threshold of £85,000 and you haven’t signed up to Making Tax Digital in time to file your next return by 7 November 2022, you can still use your existing VAT online account for that return only.

New businesses

New businesses not yet registered for VAT will be automatically signed up for Making Tax Digital while registering for VAT through HMRC’s new VAT Registration Service (VRS). Registering on the VRS provides a quicker VAT registration and improved security. It also helps new businesses fully comply with MTD requirements from day one, subject to using the correct software.

Making Tax Digital for VAT – Expansion

Beginning in April 2022, the requirements for Making Tax Digital (MTD) for VAT will be expanded to all VAT registered businesses. MTD for VAT has been mandatory for all companies with annual turnover above the VAT registration threshold of £85,000 since April 2019. As a result, this year’s expansion is expected to impact smaller businesses whose turnover is below the threshold but who are nonetheless registered for UK VAT.

UK’s Making Tax Digital – 1 April Brings End to Soft Landing Period

Since April 2019, the UK has required the submission of VAT returns and the storage of VAT records to be completed in accordance with the requirements of its Making Tax Digital (MTD) regulations.

One of these requirements is that data transfer between software programs be achieved through ‘digital links.’ This requirement was initially waived during a ’soft landing’ period which is set to expire on 1 April 2021. As a result, to remain complaint with MTD requirements, businesses must ensure they can meet the digital link requirement.

What are the basic requirements of MTD?

Under MTD, businesses must digitally file VAT returns using ‘functional compatible software’ which can connect to HMRC’s API. Additionally, businesses must use software to keep digital records of specified VAT related documents.

What is a digital link and when is it required?

A digital link is required whenever a business is using multiple pieces of software to store and transmit its VAT records and returns pursuant to MTD requirements. For example, if a business stores its VAT records in its accounting program but then submits its VAT return using an approved piece of bridging software, the data must be transferred between the accounting and bridging software via a digital link.

A digital link occurs when a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications without the need for or involvement of any manual intervention.

The key to this requirement is that once data has been entered into a business’s software there shouldn’t be any manual intervention in transferring it to another program. This means that data cannot be manually transcribed from one program into another. Additionally, using a ‘cut and paste’ feature to transfer data doesn’t constitute a digital link.

For example, manually typing or copying information from one spreadsheet into another doesn’t count as a digital link but connecting the two spreadsheets using a linking formula does.

The digital links requirement will apply to all businesses subject to MTD rules, however businesses that fulfill certain requirements can request an extension to delay the requirement.

1 April 2019 –Business with annual turnover of £85,000 and over became liable to follow Making Tax Digital rule for VAT

1 April 2022 – Taxpayers with turnover under £85,000 will be required to comply with making tax digital (MTD)

Need help with Making Tax Digital (MTD)?

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

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

Eric Lefebvre: Centralization is the key, but there is a process that needs to be followed to execute correctly. At the outset, centralization needs to start with business processes, practices, tools and standardization on data push/pull technologies across the organization. Next, IT needs to consider data based on SLA-based needs. Starting with:

Once this has been solidified, IT can then focus on operational data, which contains:

IT departments need to focus on availability of data by adding multiple replicated sources of that data. Location of data is another critical need driven by mandates mostly shifting to keeping data local, as we are seeing in countries such as Saudi Arabia and many other East Asian nations. IT departments need to ensure that satellite data stores can be provided, which are critical to countries with those specifications. Centralization of processes and tools for delivery of data is step one. For step two, data needs to be split, moving away from storing data for years in a single data store, making it impossible to move/replicate and make it available.

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

Eric Lefebvre: As organizations make the move to a centralized approach, they need to be aware that the blast radius of “failure” affects more than a single country. To combat this, IT organizations need to have strong procedures and plans in place that help to both avoid these situations and quickly limit the damage if a problem does occur. I view it as three distinct focus areas:

Change control procedures. Strengthen impact controls not just for code changes or operational updates, but also include regulatory changes and configuration changes.
Testing procedures. Step away from just regional scope testing and incorporate global end-to-end synthetic testing, starting from the edge service to all the backend servers and back.
Incident management. Pivot from backend monitoring to a central monitoring and outage single pane view, supported by a global operations center in a follow the sun style model.

A recent preliminary ruling request to the European Court of Justice, Case C-664/21, NEC PLUS ULTRA COSMETICS, has re-emphasised the importance of collecting documentation when carrying out a zero-rated supply in the EU. The 2017 NEC PLUS ULTRA COSMETICS case involved a company established in Switzerland selling cosmetics products under the Ex Works clause from their warehouse in Slovenia to business customers established in Romania and Croatia. Ex Works (EXW) is an Incoterms rule, a set of definitions outlining the responsibilities of buyers and sellers in international transactions. With Ex Works the transport obligations, costs and risks are the buyer’s responsibility.

The tax administration of the Republic of Slovenia inspected NEC PLUS ULTRA COSMETICS and requested evidence and supporting documentation relating to these supplies to verify that goods had been transported to another EU Member State.

NEC PLUS ULTRA COSMETICS provided copies of the invoices and of the ‘Convention relative au contrat de transport international de marchansises par route’ (CMR) consignment notes. The company failed to provide the evidence requested by tax officers to prove the right to tax exempt the supplies to their customers (delivery notes and other documents mentioned in the CMRs).

The company clarified that the reason for the late submission was that the Hamburg office responsible for supplies to Croatia ceased its activities in August 2018, making it more difficult to find the documents asked for by the tax officers.

Consequently, the Slovenian tax authorities provided the company with an additional VAT assessment notice and ordered it to pay the relevant amount.

What documents do you need to keep for supplies carried out after 2020?

In the implementation of the Quick Fix related to the proof of transport in 2020, the European Commission has clarified that where the supplier arranges transportation of the goods, it must be in possession of either:

List A

List B

If the acquirer is responsible for transport of goods (i.e. under the Ex Works clause), they must provide the vendor with a written statement by the 10th of the month following the date of supply that the goods have been transported by the acquirer or on the acquirer’s behalf. The written statement must include the following:

How to ensure VAT compliance

If you don’t feel reassured by your customer, change the agreement and Incoterms clause before the supply takes place.

Need help with VAT compliance?

Still have questions about VAT exempt supplies and the Incoterms Ex Works clause? Speak to our tax experts.

Part II of V – Oscar Caicedo, Vice president of product management for VAT Americas, Sovos

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

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

1. Business Process Architecture – As regulatory entities become more advanced, it is important to look at the overall functional business process, not only the technical mechanism to report. Many business processes were solidified much before current capabilities were readily available. It is important to revisit the business process to be able to determine the best technical path forward.

2. Source of Truth – With the complex environment IT departments must navigate, you need to redefine the expectations of data/process source of truth. Back-end system ecosystems were not built with current compliance/regulatory needs in mind. In mature markets, where governments continue to advance technical capabilities, it is critical to have a clear strategy to protect against source-of-truth risks. Otherwise, local regulatory entities tend to become the ultimate source of truth.

3. Data Aggregation/Reconciliation – A lack of clarity on the source of truth for each functional business process can lead to major risks. Registering data in real time with local regulators was the initial challenge. The current challenge is ensuring all systems involved are maintained in sync and are always fully harmonized. IT departments must recognize it is now a must-have to navigate the current environment.

4. Master Data – Data in back-end systems was already complicated enough to support in a centralized manner. Once real-time regulatory needs were introduced, the data issue got exponentially larger. Data structures, data libraries and extraction programs are all attempts to solve the problem, but normally these attempts fail due to gaps in understanding what is mandatory vs. optional. Clear guidance on the local needs is critical before deciding on a technical strategy.

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

Oscar Caicedo: I would prioritize a clear regulatory understanding of the markets/geographies in which you operate. This seems obvious, but it is not always the case. Ninety-nine percent of the time when I speak with a large multinational organization, they are not clear on the needs of the local market. Efforts to centralize or take a cohesive approach fail because key IT decision makers didn’t understand the regulation.

In addition, you need to focus on business processes and the data requirements to make them successful and solve the problem end to end. The challenge does not end with registering data. The problem ends when you have the proper visibility, maintenance, support, reconciliation and intelligence to be fully prepared.

Don’t take chances. The regulatory environment is very dynamic, so it is important to ensure the proper testing of all business scenarios needed to operate. Failure to have clear testing scripts can lead to surprises in production environments, which can carry large implications for the operation.

Finally, consolidate as much as possible. This means simplifying end points, communication protocols, data structures, etc. This will allow for a more efficient way to manage the mandated processes in the different jurisdictions.

What is the current situation for insurance for businesses?

Until the Covid-19 pandemic in March 2020, the view was that businesses provide insurance such as Employers’ Liability during normal day-to-day operations. Employers’ Liability insurance is compulsory, protecting a company’s employees and workplace visitors for accidents where a claim needs to be settled.

Following the Covid-19 pandemic, the definition of a workplace has changed. It’s no longer solely an office or factory, now a workplace is likely to include an employee’s home.

Although the world has gotten used to Covid-19, it is something we’ll all have to live with for the foreseeable future. Therefore, all employers have had to consider what future working arrangements they need to have in place based on the type of business.

Companies primarily office-based before the pandemic have taken the opportunity to discuss these future arrangements with employees. Many have adopted hybrid working which includes a combination of office and home working where possible. It does seem very unlikely that in the short-term there will be a move for people to return to working in the office full-time.

How could this change in working arrangements affect the insurance businesses’ needs?

Companies will need to consider the events they will need insurance for and how this will impact their current insurance policies.

This means that while they’ll still need mandatory insurance, such as Employers’ Liability, some requirements will likely have a greater impact on the insurance coverage and premiums moving forward.

This could include regular home Health and Safety checks to ensure employees’ working environment meets the company’s rules and regulations. Insurers could require all employers to provide evidence that their employees have passed annual health and safety tests to ensure ongoing compliance. Having this information on file ready to present to insurers if an accident happens at home to an employee during their working day would provide comfort to businesses for future claims that they won’t be rejected.

It’s also worth pointing out that the working day has changed for many, from a strict ‘9 to 5’ to more flexible arrangements to accommodate childcare and other responsibilities. This change in working hours should be taken into consideration by employers and insurers for accident claims that in pre-Covid times would have been outside regular working hours.

The other types of insurance policies likely to be affected by changes in working arrangements are:

What are the next steps for companies?

Businesses should review all their current insurance policies to ensure they have the necessary coverages in place to protect against these changes in working arrangements. The implications of not getting insurance coverages right could be serious for the company. If this isn’t something they’re looking at already, they should start the process sooner rather than later to avoid potential future problems for themselves and their employees.

Talk to our experts

Your business partner changes the rules on you mid-stream and your ability to conduct business with them is now contingent on changing your entire reporting structure to meet their new demands.

Oh yeah, I should also mention the time frame to meet these demands is extremely tight and if you don’t, you can forget about doing business in their region until you get it right. And if at any point moving forward you fail to live up to these standards, they can fine you or shut you down.

Sound farfetched? It isn’t. It’s exactly what is playing out in major economic markets from Brazil to Italy and parts of Asia and Africa. You see, governments have caught up to businesses when it comes to technology, and in many ways, they have moved past them when it comes to digitization.

What does this mean for you?

It means that governments have now taken on a more proactive approach to reviewing financial transactions and are demanding real-time reporting. As part of that, they have implemented real-time enforcement to ensure that it’s meeting the proper mandated specifications. To accomplish this, they have taken up permanent residence within your data stack. And make no mistake, when it comes to e-invoicing, they are calling the shots.

A bit of background.

Governments throughout the world are implementing mandated e-invoicing for its ability to facilitate compliance and track fraud quickly and efficiently. After the fact reporting, which had been the norm until now, was more difficult to enforce and took lengthy and costly audits to recoup what was rightfully owed. Many organizations didn’t take the penalties seriously and would simply set aside some money to deal with these inconveniences as they emerged.

This approach resulted in a tax gap that is continuing to grow. In 2019, the VAT gap of the European Union’s 28 member states was over 134.4 billion euros for all member states combined. This had become unsustainable and unacceptable to many governments and thus a new technology that focused on digitization was made to ensure that all legally owed revenue was being collected timely and in full. Failure to comply would lead to faster and more impactful enforcement measures.

This trend is growing rapidly with countries across the globe adopting new mandates and methodologies for tracking and enforcing the rules. In the next five years nearly every country that employs the VAT system of taxation is expected to update their systems to some degree.

Make no mistake. Due to the demands for real-time information, this is an IT problem, not a tax issue. For multinational companies that do business in dozens of countries, there could be some painful moments along the way if they don’t plan early and develop a sound strategy for each of the locations in which they have operations.

Here is my advice for meeting government mandates and ensuring operations continue uninterrupted.

IT should focus on the end goal: implementing a centralized approach to managing these government mandated e-invoicing laws to ensure a globally consistent approach to all digital filings. I can’t overstate the importance of implementation synergies as requirements increase and expand. This is only going to get more complex as time goes on.

And perhaps most importantly, don’t be afraid to ask for help. This is complicated stuff that is changing by the day. This is not the time or the issue to try going it on your own.

Meet the Expert is our series of blogs where we share more about the team behind our innovative software and insurance premium tax (IPT) compliance services.

As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about regulatory changes and developments in global tax regimes to support you in your tax compliance.

We spoke with Sean Burton, senior compliance services representative who explained Slovakia’s specific IPT reporting requirements and shared some of his top tips to ensure compliance.

Can you tell me about your role and what it involves (day to day and more strategic responsibility)?

I’m a senior compliance services representative for IPT at Sovos. I joined the company just over three years ago and have mainly worked with clients writing global insurance programmes, exposing me to a wide range of scenarios within IPT.

My day-to-day role now involves overseeing the review and return preparation process for associates and representatives’ data, ensuring accurate submissions are prepared in a timely manner. The final step in this sequence is for me to sign off the final returns and pass them to our client money team. Outside of this work I deal with client queries, assisting with more complex annual reporting requirements and submission of the Slovakian IPT returns.

Can you tell us about Slovakia’s specific IPT reporting requirements?

The IPT tax regime in Slovakia took over from the previous Non-Life Insurance Levy tax on 1 January 2019. Any policies incepted on or after this date are subject to the IPT tax as opposed to the old levy.

This offers insurers greater flexibility with their tax points in comparison to other territories, allowing the insurer to pay taxes either upfront or spread across multiple returns in installments. The main point here is once a specific tax point has been selected, the insurer must use it for the next eight submission periods. After this they can change the tax point should they wish.

Slovakian IPT is submitted electronically via an online tax portal. The submission and payment are due at the end of each quarter.

What are some of the issues insurers face with IPT in Slovakia?

As with most territories that have moved to online filings, the Slovakia tax authorities now require more specific information for each policy. As a result, Sovos now requests an additional field in our data template so that we can report this accurately.

E/R – Issuance of a premium/renewals: grouped on the tax return by class of business. It’s important to note that an overall negative position for a specific business class is not permissible and will be rejected in the Slovakian Tax Portal.

S – Supplementary premium: the case whereby a premium or part thereof, is increased, reduced or cancelled. These premiums are reported within Box 19 on the Slovakian IPT return, where the total can be either positive or negative.

C – Correction of error: In the case of a correction of error a supplementary declaration must be submitted for the appropriate period affected.

This can be a problem for insurers who haven’t previously collated this information and it’s not part of their current internal booking systems, which can take time to update.

Another issue for insurers writing policies with a long duration over a number of years is that whilst the IPT regime took over from the old Non-life insurance levy (NLIL), NLIL can still be due if the policy incepted prior to 2019. Therefore, it’s important for insurers to be aware of this distinction and ensure both taxes are paid accurately.

What are your top tips for Slovakian IPT reporting compliance?

My top tip for IPT reporting in Slovakia would be to collect as much detailed policy information as possible to complete the separate sections of the IPT return compliantly.

This will also help insurers be organised for any further updates to Slovakian reporting in the future. Requesting detailed policy information is a trend we’re seeing across all territories and insurers need to be prepared for this.

How can Sovos help insurers with IPT in Slovakia?

Firstly, at Sovos we have a good connection with local associates in Slovakia. This means we can keep our finger on the pulse with any IPT related legislative changes that arise in Slovakia.

Secondly, the online submission process requires each box to be manually inputted with information such as premium tax amounts, contact information and tax point selection. Leaving this process in our hands will certainly save insurers valuable time.

Get in touch with our experts

France is implementing a decentralised continuous transaction control (CTC) system where domestic B2B e-invoicing constitutes the foundation of the system, adding e-reporting requirements for data relating to B2C and cross-border B2B transactions (sales and purchases).

Under this upcoming regime, data or invoices can be directly sent to the Invoicing Public Portal ‘PPF’ (Portail Public de Facturation, so far known as Chorus Pro) or to a Partner Dematerialization Platform ‘PDP’ (Plateformes de Dématerialisation Partenaires). In addition, there are also Dematerializing Operators (Operateurs de dématérialisation) that are connected to either the PPF or a PDP.

New details on requirements for portals and obtaining PDP status

The Ministry of Economy published Decree No. 2022-1299 and Order of 7 October 2022 on the generalisation of e-invoicing in transactions between taxable persons for VAT and the transmission of transaction data (together known as ‘new legislation’), providing long-awaited details for PDP operators and PPF.

The new legislation introduces rules concerning the application process for PDP operators. Although French establishment isn’t required, PDP operators must fulfill a number of requirements, such as operating their IT systems in the EU.

France is implementing a model where third-party service providers are authorised to transmit invoices between the transacting parties. With the mandatory use of the PPF or PDPs for exchanging e-invoices, trading parties cannot exchange invoices between them directly. Therefore, PDPs must be able to receive and send invoices in structured formats, whether the ones supported by the PPF (CII, UBL, or FACTUR-X) or any other required by their clients. Also, to ensure interoperability, PDPs are expected to connect with at least one other PDP. Besides this requirement, it’s stated by the new decree that PDPs must be able to send e-invoices to PDPs chosen by their recipients which implies a complete interoperability between PDPs.

Transitional period for submitting PDF invoices

It was previously announced that taxpayers could submit PDF invoices for a transitional period. The new legislation outlines the transitional period as until the end of 2027. During this period PDPs and PPF must be able to convert the PDF into one of the structured formats.

New details on e-invoicing and e-reporting in France

The new legislation also provides information about the content of e-invoices, which has new mandatory fields, and the content of transaction and payment data to be transmitted to the tax authority.

It also announced frequencies and dates of data transmission. Deadlines for transaction and payment data transmission are based on the tax regimes of taxpayers. For example, taxpayers subject to the normal monthly regime should transmit payment data within ten days after the end of the month.

With the aim of having traceability over documents, the lifecycle statuses of the domestic B2B e-invoices are exchanged between the parties and transmitted to the PPF. Lifecycle statuses that are mandatory (“Deposited”, “Rejected”, “Refused” and “Payment Received”) are listed in the new legislation.

Further details regarding the Central Directory, which consists of data to properly identify the recipient of the e-invoice and its platform, are provided within the Order.

The road ahead for service providers

PDP operator candidates can apply for registration as of Spring 2023 (precise date still to be confirmed), instead of September 2023 as previously set. From January 2024, a six-month test run is expected to be conducted for enterprises and PDPs before the implementation in July 2024.

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Judgment in the Netherlands and Lloyd’s Position on Space Insurance

There have been a couple of key developments in the space insurance landscape in recent months from an IPT perspective.

The Netherlands’ judgment on space insurance

In October 2023, a District Court in the Netherlands passed judgment on its view of the compliant IPT treatment of space insurance. Whilst this only affects the Netherlands at present, it is one of the first countries to make a judgment in this context.

In the case, the insurance covered the reduced commercial book value of satellites launched into orbit. From a location of risk perspective, the court deemed that the risk resided in the Netherlands on the basis that this was the location of the establishment of the policyholder.

In light of this finding, the court considered the possible applicability of the IPT exemption that exists in the Netherlands for transport insurance. The court held that this exemption only applied to the coverage up until the point that a satellite was separated from the rocket being used to launch it into orbit. After this point, it viewed that it was no longer being transported as the in-orbit movement was incidental to the actual coverage.

Lloyd’s perspective on space insurance

In December 2023, Lloyd’s published its position on the treatment of space insurance, in part following its own work on the subject and in part as a response to the findings of the Dutch court. It confirmed its general agreement with the decision in the Netherlands.

More broadly, it confirmed its view that any separately apportioned insurance of the launch risk should benefit from international goods in transit IPT exemptions that may apply depending on the country. In-orbit risks will not benefit from these exemptions, however.

Nevertheless, if the risk location is a country with a more widely applicable space insurance IPT exemption (e.g. the UK), then that exemption could potentially still apply to in-orbit risks.

Although neither of these developments are legally binding across the European Economic Area, they will inevitably influence market practice.

If you have questions about your approach to the premium taxation of space insurance, speak with an expert.

The Current Standing of Space Insurance

Space insurance and the application of IPT on these policies has been a talking point in recent months. The main question? Location of risk.

This blog considers the background and explores the current state of space insurance.

What does space insurance cover?

Space insurance typically provides a broad range of coverage relating to spacecraft, such as satellites and rockets, but also covers the vehicle used for launching the spacecraft.

Although not an exhaustive list, some of the classes of insurance set at European Union (EU) level that we expect to be included are:

How do you tax Space Insurance?

Given the different elements of coverage possible, it is important to tax each element appropriately.

For example, the portion of the coverage related to damage to the spacecraft itself (including fire) may result in certain parafiscal charges due on property and fire insurance in some countries.

On the other hand, the portion of the coverage relating to the transport of the spacecraft may benefit from one of the exemptions that exists in many EU jurisdictions for goods in transit insurance.

It is worth noting that the United Kingdom has an IPT exemption relating to contracts of insurance for the operation of spacecraft within certain classes of business (including those classes identified above). The scope includes the operation of the spacecraft during launch, flight, orbit or re-entry, and the operation of the launch vehicle and any business interruption cover. This does not, however, extend to risks relating to spacecraft construction.

How do you determine Location of Risk?

There may be multiple risk locations depending on the specific coverages provided on the policy.

When parts of a spacecraft are manufactured and then subsequently assembled, for example, they are considered moveable property and, as such, would be taxable in the property’s location based on EU rules, if contained in a building there.

When transporting spacecraft ahead of launch, then it would be taxable in the location of the establishment of the policyholder to which the insurance contract relates. Similarly, risks covering the launch, ongoing operation of the spacecraft once in orbit, and during the de-commissioning stage should be expected to be taxed in the same way.

From discussions within the market, we are aware that the practice has generally been to treat space policies as wholly exempt from IPT and parafiscal charges. This is rather than taking the approach to look at each element of the policy to see if they should be taxed, and if so, then how should the location of risk rules be applied to determine the correct country or countries.

Despite this practice, the market is presently rethinking its approach to taxing these policies. This is to mitigate the risk of assessments from EU tax authorities claiming for unpaid taxes. Subject to any future legal rulings affecting the market, the likely outcome is that IPT and parafiscal charges are charged as outlined unless there is a specific exemption.

Need help with space insurance?

Still trying to figure out how to approach space insurance? Get in touch with our IPT experts today.

VAT Compliance for E-Commerce

Sell and trade within the EU with ease

Full Access to the EU Market

With half a billion consumers, the EU market represents huge growth options for e-commerce companies. Maximize this potential through a seamless B2C service with fast delivery and no unexpected customer VAT charges.

Sovos Compliance Services Portal for e-commerce allows easy access to all simplified EU VAT reporting schemes:

IOSS (Import One-Stop-Shop)

Simple customs clearance
VAT collected at point of purchase
Reclaim VAT on returned goods

Union OSS

Low-cost Compliance for intra-EU trade
Essential for anyone with >€10k intra-EU sales & all non-EU businesses holding stock in EU
Report EU B2C goods and services through a single VAT Return

Non-Union OSS

Compliance simplicity for digital services from outside the EU
Evolution of MOSS scheme
No intermediary needed

Stay ahead of current and future compliance obligations.

Sovos Compliance Services Portal for E-Commerce

Intermediary Service Supporting Global Businesses

Companies not established in the EU (unless established and supplying from Norway) are required to appoint an Intermediary to facilitate the reporting and payment of VAT under the IOSS scheme.

Sovos is set up to act as an Intermediary on behalf of your business. We will ensure that you reap the benefits of the simplification while safeguarding against the risk of penalties and expulsion for non-compliance.

Intermediaries assume joint responsibility for:

Reporting and payment of VAT under IOSS
Record keeping

Improve the Quality of Your Data

The Sovos Compliance Services Portal empowers you to take control of your sales data. Once you’ve mapped it into our portal, our tool allows you to run your own validation checks and correct any errors before our team of experts completes the filing. Our VAT Compliance for E-commerce solution gives you peace of mind that your data is secure and that your (I)OSS VAT return is accurate and reliable.

Stay Compliant and Mitigate Business Risks

Future proof your VAT compliance profile, ensure your goods are delivered in a timely manner to your customers and do not get stuck at the border. Sovos Compliance Services Portal is underpinned by the deep knowledge and expertise of our Compliance Services & Consulting teams.

Our solution means you can:

Take advantage of the benefits of (I)OSS schemes
Access support for trading complexity: multi-country warehousing, stores and B2B
Leverage a single provider for periodic and continuous ‘real-time’ reporting
Streamline your processes
Reduce risk of managing VAT Compliance manually

Managed services

Technology enabled VAT managed services

A blend of human expertise and software to ease your VAT compliance workload and reduce risk wherever you operate today while ensuring you can easily flex to handle VAT requirements in the markets you intend to dominate tomorrow.

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There are several countries within the European Union (EU) and European Economic Area (EEA) that have introduced a Fire Brigade Tax (FBT). Fire Brigade Tax is payable on certain premium amounts and usually in addition to Insurance Premium Tax (IPT).

Fire Brigade Tax, or the Fire Brigade Charge (FBC) or Fire Protection Fee (FPF) as it’s known in some territories, is levied on the proportion of the premium that covers fire risks. Fire Brigade Tax is calculated on the fire premium multiplied by the applicable Fire Brigade Tax rate, which seems straightforward but, as is often the case with IPT, some countries have made this calculation quite complex.

This blog summarises the challenges around Fire Brigade Tax calculation and what to consider when calculating Fire Brigade Tax, as well as including country specific rules. For further information about country specific Fire Brigade Tax rules read our blog posts about UK, Portugal and Slovenia.

How to calculate the fire proportion

Solvency II Directive 2009/138/EC doesn’t provide a definition of fire proportion.

The following approach is the most common way to determine the fire proportion of FBT regulations (e.g. Austria).

In Luxembourg the rule is as follows: where the fire and natural forces element cannot be separately identified, the 6% rate applies to 40% of the premium in case of household contents or 50% of the premium in case of non-household contents. This is based on guidance issued by the Luxembourg Tax Office.

In Belgium, the taxable premium for Security Fund for Fire and Explosion charge (Fire INAMI) is dependent on the type of risk covered. The fire proportion is determined by the Law on compulsory healthcare and compensation insurance. For example, for premiums covering terrorism risks the fire proportion is 35%, while for electricity risk it’s 10%. It‘s not possible to deviate from these dictated fire proportions.

In Austria the fire proportion rate can be determined by the insurer based on the covered risks.

An interesting example of Fire Brigade Tax calculation is Finland where the taxable basis of IPT is increased by the amount of calculated Fire Brigade Tax.

When calculating the fire proportion, it’s important to understand that Fire Brigade Tax is not only applicable for fire risks but is due on other risks too. Understanding what risks may trigger Fire Brigade Tax liability requires familiarising ourselves in the mappings of the covered risks.

Which class of businesses or risks could be impacted by Fire Brigade Tax?

The immediate answer is Class 8, Fire and Natural Forces. According to Annex I of the Solvency II Directive Class 8, Fire and natural forces covers “All damage to or loss of property (other than property included in classes 3, 4, 5, 6 and 7) due to fire, explosion, storm, natural forces other than storm, nuclear energy, land subsidence.”

And from this definition it’s not difficult to figure out what other classes may be impacted by Fire Brigade Tax. So, these are Class 3 Land Vehicles, Class 4 Railway rolling stock, Class 5 Aircraft, Class 6 Ships, Class 7 Goods in Transit and Class 9 Other Damage to Property.

From a risks point of view, Fire Brigade Tax is usually charged on theft, hail and frost damages on top of the fire, storms or land subsidence.

Up-to date knowledge of the Fire Brigade Tax rates is required to calculate Fire Brigade Tax. Plus, you also need to know how the settlement is working, that is where to declare Fire Brigade Tax, what form should be used and the payment method etc.

Fire Brigade Tax rates

Staying up to date with Fire Brigade Tax rates is even more important. In our ever-changing world tax rates increase and decrease constantly depending on the climate and politics.

In some countries there are no separate Fire Brigade Tax regimes as such, but if fire is covered by the premium, then the applicable Insurance Premium Tax rate is higher. Examples include France and Greece. In Greece if the premium covers fire risks a higher IPT rate of 20% is applicable.

There are countries (Iceland), where, broadly speaking, Insurance Premium Tax applies only if fire is covered.

And lastly, there are countries where separate Fire Brigade Tax regimes exist and Fire Brigade Tax is calculated on the fire proportion and the applicable Fire Brigade Tax rate is applied. Examples include Austria, Germany and Luxembourg.

The Fire Brigade Tax rates discussed so far are in territories where the taxable premium rate model is used. However, there are Fire Brigade Tax regimes using other rate models too, like the sum insured. This is the case in Liechtenstein where Fire Brigade Tax is calculated based on the value of the property.

Within the frame of this topic, it’s also worth mentioning that Fire Brigade Tax can be insurer borne, insured borne or both. In Austria for example, 4% of the Fire Brigade Tax is insured borne and is invoiced to the policyholder as an addition to the premium and the other 4% is insurer borne and is deducted from the collected premium.

Fire Brigade Tax settlement process

Completing the Fire Brigade Tax obligation requires submitting the tax declaration and paying the corresponding tax. These two processes can be referred to as settlement.

The variety of Fire Brigade Tax settlement processes is colourful. Differences exist in:

For compliant tax settlement, it’s vital that understanding and interpretation of Insurance Premium Tax regulation is up-to-date and accurate.

VAT digital reporting obligations and e-invoicing – an overview

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

Digital reporting requirements for domestic transactions will remain optional:

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

“Transmission” will not be regulated:

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

VAT Digitization in Eastern Europe

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Written by tax experts and regulatory specialists

The challenge of VAT digitization in Eastern Europe

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Regional tax knowledge

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

Romania – A sneak peak

There are three requirements for taxpayers in Romania:

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

Looking for more VAT compliance resources?

Annual Report: Trends 13th Edition 2022

E-book: Managed Services for VAT Compliance

Webinar: A Practical Guide to VAT Compliance with JD Sports

SAF-T: An Introduction to the International Standard

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Problems encountered with Fire Brigade Tax rate increase in Slovenia

Slovenia’s new tax return

Telephone number information on tax return

Conflicting information about Slovenia’s new Fire Brigade Tax return

Next steps with Slovenia’s new tax return

Need help with Fire Brigade Tax requirements in Slovenia?

E-invoicing in Africa: Nigeria, Kenya, Egypt, Uganda and Tunisia

Nigeria e-invoicing: CTC invoice reporting under evolution and cross-border e-invoicing

Kenya e-invoicing: cash register controls through TIMS/eTIMS

Uganda e-invoicing: Electronic Fiscal Receipting and Invoicing System

Egypt e-invoicing: CTC clearance

Tunisia e-invoicing: El-fatoura

Africa’s future e-invoicing landscape

Take Action

New bookkeeping law – Lov om bogføring

Scope of Denmark’s bookkeeping law

Potential e-invoicing mandate and PEPPOL

What’s next for Denmark?

Need help for E-invoicing in Denmark?

Making Tax Digital – Filing VAT Returns through Online VAT Account to become redundant

How to sign up to Making Tax Digital

Small businesses

New businesses

Making Tax Digital for VAT – Expansion

UK’s Making Tax Digital – 1 April Brings End to Soft Landing Period

What are the basic requirements of MTD?

What is a digital link and when is it required?

Need help with Making Tax Digital (MTD)?

What documents do you need to keep for supplies carried out after 2020?

List A

List B

How to ensure VAT compliance

Need help with VAT compliance?

Take Action

What is the current situation for insurance for businesses?

How could this change in working arrangements affect the insurance businesses’ needs?

What are the next steps for companies?

Talk to our experts

What does this mean for you?

A bit of background.

Here is my advice for meeting government mandates and ensuring operations continue uninterrupted.

Take Action

Can you tell me about your role and what it involves (day to day and more strategic responsibility)?

Can you tell us about Slovakia’s specific IPT reporting requirements?

What are some of the issues insurers face with IPT in Slovakia?

What are your top tips for Slovakian IPT reporting compliance?

How can Sovos help insurers with IPT in Slovakia?

Get in touch with our experts

New details on requirements for portals and obtaining PDP status

Transitional period for submitting PDF invoices

New details on e-invoicing and e-reporting in France

The road ahead for service providers

Talk to a tax expert