Update: 27 July 2023 by Edit Buliczka
The registration requirements for settling taxes in a country are similar – if not the same, usually involving the central tax administration or tax authority.
This, however, is not always the case and there are exceptions. For example, due to a recent change in Austria, the registration requirements for Insurance Premium Tax (IPT) in favour of third-country insurers have been modified.
Third-country insurers can register and settle IPT liabilities directly with the Austrian Tax Office under this legislation, which takes effect on 1 January 2024. Currently, IPT payable on insurance premiums with third-country insurers must be handled by an authorised representative or the policyholder.
In Austria, IPT is levied on the collected premium and Fire Brigade Tax (FBT) may also be due if the policy includes fire risks.
The Austrian Tax Office has not changed the law that governs FBT rules. The FBT legislation is simpler than the IPT law, with no special regulations for local, EU or EEA-based or third-country insurers. The FBT Law states: “if the insurer has no domicile (seat) in a contracting state of the Agreement on the European Economic Area, but an authorised representative has been appointed to accept the insurance premium, then the latter is liable for the tax.”
There’s a possibility the FBT laws were purposefully left unaltered because the term “insurer” may be understood in a way that covers third-country insurers. As a result, third-country insurers can already register directly with the Austrian Tax Office for FBT purposes.
Interestingly, in Austria, both IPT and FBT are controlled by the Central Tax Administration – commonly referred to as the Austrian Tax Office and there is just one taxID used for both IPT and FBT.
Contact our team of experts if you have any questions concerning the Austrian IPT Registration.
Update: 4 October 2022 by Dawn Rowlands
Registering for IPT across Europe is often complex and can raise several additional questions. This is particularly pertinent if your company has branches established in different territories: can we register our head office and file a single return for all branches via this registration? What about branches operating on a freedom of service (FoS) basis? What about domestic branches? Is it mandatory or optional to register branches?
Before we dive into these questions, let’s take a closer look at why branches are useful. Some insurers prefer to have a separate IPT registration for their branches, even if it’s not a mandatory requirement of the country. It’s often an easier method of handling IPT compliance for the country, based on the reports generated from internal accounting systems. For acquisitive insurance companies who may be using legacy systems, it’s simpler to have individual branch registrations rather than consolidating all branches into a single return filed via the head office.
For many territories, it’s not mandatory to have branches operating as it’s possible for EU domiciled companies to register and file taxes through their head office, operating under FoS across the European Union. However, this is territory dependent and some require branch registration, as we will explain later.
In addition to the registration of your head office operating on a FoS basis, it’s also possible to register branches in some territories. Each branch must also be authorised independently by the regulators in their country of domicile to operate on a FoS basis.
In some territories such as Spain, Portugal and Italy it’s not mandatory to have a branch as taxes can be filed via a company’s head office. However, if your company does operate branches in these territories it is mandatory to be registered separately to head office. This requires companies with multiple branches to have multiple registrations, each with their own independent tax identification number. The registrations are managed separately, and a tax return is required for each of them.
Country requirements are also subject to change. For example, in Austria it was previously mandatory for branches to be registered separately to their head office. This rule changed and branch registrations are no longer permitted, with all returns being filed through the FoS head office. Any existing branch registrations had to be deregistered with the Austrian tax authorities.
A domestic branch is a branch of a company whose headquarters are located in a different country to where the branch is domiciled, and where the registration is required. For example, your head office could be in Germany, you write insurance business liable to IPT in Italy and you have an established branch domiciled in Italy – the Italian branch will be considered as your domestic branch.
If your company has branches and wishes to register for IPT in the country where your branch is domiciled, some tax authorities insist the domestic branch has a separate registration to its head office. This applies in Hungary, Germany, Italy, Portugal, Slovakia, and Spain.
In some instances, domestic branches will have different tax points to those operating under FoS.
If a branch or head office operating in the territory is operating noncompliantly, this will directly impact all parts of the business operating in the territory, and the fines will be levied accordingly.
Want to learn more about branches and IPT registration? Speak to Sovos’ tax experts today.
Portugal’s state budget entered into force on 27 June 2022 after protracted negotiations. The budget contained an interesting provision: the obligation to present invoice details to the tax authorities was extended to all VAT-registered taxpayers including non-resident taxpayers, who had long been exempt from this obligation.
VAT-registered non-residents now have three options for communicating invoice details:
In practice, the Billing SAF-T file is the least onerous option for taxpayers. It is worth discussing the contents of this file, which is submitted separately from Portugal’s Accounting SAF-T file.
Portugal was the first country in the world to adopt SAF-T, and its requirements are based on the original OECD 1.0 schema. The current schema for the Billing SAF-T is set out in Portaria no. 302/2016 consisting of a specified header, master files, and source documents.
Master files can include customer and/or supplier tables, product tables, and tax tables. Source documents can include sales and purchase invoices, documentation on movements of goods, and payment information, as applicable. For the most part, information in the schema is conditionally required, meaning most fields only need to be submitted if the relevant data exists in a taxpayer’s source system.
Importantly, the Billing SAF-T file must be generated by “certified billing systems,” as designated by the tax authorities, a requirement unique to Portugal. As of 2021 this requirement extends to non-resident taxpayers as well, a strong indicator that they would eventually be required to submit Billing SAF-T.
Although the Billing SAF-T only has four sections, it is nevertheless a complex file to generate. Portaria no. 302/2016 containing guidance on fields and definitions is over 100 pages long in the official gazette. Taxpayers must be able to generate required fields within their source systems and must know what conditionally required data they are able to provide.
The latest state budget has adjusted the monthly deadline for submitting Billing SAF-T. The deadline is now the fifth day of the month following the reporting period, previously taxpayers could submit by the twelfth day of the month following the reporting period.
For these reasons, the introduction of this obligation to non-resident taxpayers represents a significant burden. Existing and potential non-resident taxpayers in Portugal should immediately familiarise themselves with the Billing SAF-T requirement and ensure they are using certified billing software to remain compliant.
Need to ensure compliance with Portugal’s Billing SAF-T requirements? Get in touch with our tax experts.
Continuing our IPT prepayment series, we take a look at Italy’s requirements. In previous articles we have looked at Belgium, Austria, and Hungary.
All insurers authorised to write business under the Italian regime have a legal obligation to make an advance annual payment for the following year. Refer to this blog for a general overview for IPT in Italy.
The amount of prepayment is calculated as a percentage of the total IPT and Anti-Racket contribution made in the previous year, deducting any IPT paid in respect of Motor Third-Party Liability business. The IPT prepayment rates increased from 85% for tax year 2020 to 90% for 2021 and 100% for tax year 2022 onwards.
All insurers writing non-life insurance risks in Italy need to pay 100% of their 2021 tax bill in November 2022 as a 2023 prepayment, in anticipation of their future tax liabilities. Once settled, the prepayment can be offset against IPT liabilities (excluding Motor third-party liabilities) arising from February 2023, when the January 2023 tax liabilities are due. Businesses can use excess prepayment to offset tax liabilities in the next period or offset against the next prepayment.
Prepayment is due by 16 November each year. No prepayment is required if the insurance company deregistered for IPT purposes prior to the prepayment deadline. Penalties and interest for late payments are strictly applied by the Italian tax authorities. They are time sensitive and calculated daily and payable alongside tax liabilities/prepayments.
Where the prepayment for the year is not fully utilised, balances can be carried forward to offset against future liabilities or used towards next year’s prepayments. If a company is no longer writing business in Italy and doesn’t expect further premiums to be received, they should formally file for a reclaim of any prepayment credits. Recovery is made through a formal reclaim and takes significant time (a few years) for the authorities to process and return the funds.
Although prepayment shouldn’t represent an additional cost to insurance transactions, it can pose some cash flow considerations for insurers. It’s Important to note prepayment is due on a historical basis and cannot be settled based on an estimate of future tax liabilities. The legal obligation to pay the prepayment doesn’t cease, even if the insurance company foresees termination of their insurance risks in Italy. This creates issues for insurance companies winding down their Italian exposures, starting underwriting Italian risks through EU based subsidiaries, or when closing the business.
Most UK insurers changed their company structure due to Brexit. A special application for transferring the prepayment credit needs to be made to the Italian tax authorities for mergers or portfolio transfers and a response or approval from the tax office can take significant time.
When an insurer is exiting Italy, be it due to Brexit or any other reason, being aware of their current and ongoing prepayment obligations is key to minimising unnecessary pain in the future.
Get in touch with our tax experts today for advice on how to navigate this often confusing IPT procedure in Italy. Questions about IPT in general? Read this guide to IPT compliance.
Brazil is known for its highly complex continuous transaction controls (CTC) e-invoicing system. As well as keeping up with daily legislative changes in its 26 states and the Federal District, the country has over 5,000 municipalities with different standards for e-invoicing.
The tax levied on consumption of services (ISSQN – Imposto Sobre Serviços de Qualquer Natureza) lies under the competence of the municipalities. Each municipality has authority over the format and technical standard of the services e-invoice (NFS-e – nota fiscal de serviço eletrônica). This poses a significant compliance challenge, as e-invoicing is mandatory for nearly all taxpayers in the country.
However, important steps have been taken towards changing this scenario. An agreement (Convênio NFS-e) recently signed by the Brazilian Federal Revenue Agency (RFB), the National Confederation of Municipalities (CNM), and other relevant entities, has established the National System of the NFS-e with a countrywide unified standard for the services e-invoice.
The SNNFS-e introduces a unified standard layout for the issuance of the NFS-e, as well as a national repository of all e-documents generated within the system. Adhesion to the system is voluntary for municipalities. Since the bill proposed to regulate this issue (PLP 521/2018) has been static in Congress since 2019, the agreement was designed to allow municipalities to voluntarily adopt the national standard, which then becomes mandatory for taxpayers.
The system will allow issuance of the NFS-e in a national standard, through the web portal, mobile app or API (application programming interface). It also creates the National Data Environment (ADN), the NFS-e unified repository.
The SNNFS-e offers several service modules and municipalities can choose which ones to adopt. The ADN is the only mandatory module, as it ensures the integrity and availability of information contained in the documents issued is in the unified standard. Additionally, the ADN allows adhering municipalities to distribute issued NFS-e among themselves and taxpayers.
Once the agreement is signed, the municipality must activate the system within a certain deadline, which hasn’t been established. Activation involves configuring system parameters and amending municipal legislation to reflect the national system requirements. Only after complete activation will taxpayers be able to issue invoices based on the unified standard.
Technical documentation of the NFS-e has also been released, but these are not the definitive specifications, which are still to be approved by the National Standard Electronic Service Invoice Management Committee (CGNFS).
The NFS-e national standard provides substantial simplification of taxpayers’ e-invoicing obligations. With a standard layout, compliance with multiple formats can be drastically reduced. The document format for issuance of the standard NFS-e is XML and it must be digitally signed.
Another benefit is that one of the available modules allows taxpayers to pay the ISSQN owed in several municipalities at once, using one single document (Guia Única de Recolhimento) issued by the system.
Although municipalities may choose to keep their current NFS-e issuance system, they must still adhere to the communication deadlines, layout, and security standards of the national NFS-e. They must also ensure transmission of all issued documents to the national data environment. This ensures that taxpayers will only be required to issue the NFS-e in one standard layout.
The first phase of production started on 23 July 2022 with five pilot municipalities. Transmission will be available through different methods, with gradual implementation. According to the initial implementation schedule of the National Confederation of Municipalities, API transmission is set to happen from mid-October 2022 or later, depending on the stability of the other transmission methods. Further development of this schedule can be expected in the coming months.
São Paulo, Salvador, and Florianópolis are among the many municipalities that have already signed the agreement. The success of this national NFS-e standard relies on significant adoption by municipalities, so taxpayers must ready themselves to comply as this takes place across the country.
Need to ensure compliance with the latest e-invoicing requirements? Get in touch with our tax experts.
Update: 17 April 2025 by Edit Buliczka
Starting in 2025, new prepayment rules will apply to the Extra Profit Tax on Insurance Premium Tax (EPTIPT). The current structure of two prepayments—due in May and November—will be replaced by a single prepayment, which must be made by 10 December 2025.
In addition to the revised payment schedule, the calculation methodology has also changed. The prepayment amount will now be based on the actual premium collected between January and November 2025, rather than the previous year’s figures.
Insurers may reduce the prepayment amount by 30% of the nominal increase in the value of their government securities portfolio during the same period, as stipulated by the new rules.
Any overpaid prepayment remains reclaimable after the final EPTIPT settlement, which is due following the second instalment—after 31 July 2026.
While this change simplifies the reporting process by reducing the number of prepayment declarations, it also imposes a tighter timeframe. Insurers will have only 10 calendar days to aggregate 11 months’ worth of premium data and assess whether a reduction can be applied. This will likely require additional administrative effort and careful financial planning from the insurers.
Update: 20 May 2024 by Edit Buliczka
In January 2024, the Hungarian government modified the prepayment system for the extra profit tax on insurance premium tax (EPTIPT). These amended rules are first applicable at the end of May 2024, when the 2024 EPTIPT prepayment becomes due.
According to the new rules, the EPTIPT prepayment must be paid in two installments: one in May and another in November.
Both prepayments are based on installments paid for the 2023 final settlement. As a result, the prepayment, due by 31 May 2024, corresponds to the first installment of the 2023 EPTIPT settlement (paid in January 2024). The second installment of the prepayment, due by 15 November 2024, should be equal to the second installment of the final 2023 settlement (payable in July 2024).
Looking for guidance on meeting your IPT obligations? Sovos can help.
Update: 20 September 2022 by Edit Buliczka
It’s time to return to Insurance Premium Tax (IPT) prepayments – a continuation of our blog series on this important IPT topic. You can find the first entry in our blog series here.
IPT is declared and settled differently throughout Europe. Monthly, quarterly, or biannual declarations – the frequency varies across Member States – and some jurisdictions request prepayments to ensure the liabilities due from insurance companies are collected in good stead.
Hungary is one country where legislation states prepayments are required. However, the prepayment obligation is a new requirement, introduced alongside the so called ‘extra profit tax’ or supplemental IPT, which is payable on an annual basis. No prepayment is required in relation to the ‘normal’ insurance premium tax paid monthly.
Prepayments are defined as a tax payment credit made to a tax authority before the payment is actually incurred.
This prepayment tax will be deducted to cover the tax liabilities until the total credit is used, then current liabilities must be paid by the basis applied in each “jurisdiction“.
You can learn more about IPT prepayments in our blog.
Before the introduction of extra profit tax, or supplemental IPT, prepayment for IPT in Hungary wasn’t a requirement. The ‘normal’ IPT is paid monthly with no prepayment obligation and there is no need to submit an annual return.
In Hungary the prepayment concept is used for taxes where there is an annual declaration obligation, such as in the case of corporation tax.
Regarding IPT, the prepayment obligation was introduced with the extra profit tax regime. Extra profit tax or supplemental IPT is an annual tax. This might be the reason for the introduction of the prepayment obligation for this tax type.
Supplemental IPT prepayment is due on 30 November 2022 regarding 2022 (bi)annual supplemental IPT, while for 2023 the prepayment is due by 31 May 2023.
Based on the original concept, the basis of the prepayment for 2022 was the premium collected during the period between July 2021 and June 2022, applying the rates applicable for 2022. However, this was modified shortly after the issuance of the Government Decree of 197/2022 on extra profit taxes.
This adjustment most likely occurred as the original concept would have generated a substantial overpayment since the base period to calculate 2022 prepayment is one year and the supplemental tax is due only for the second half of 2022. According to the updated rules the basis of the 2022 prepayment remained the same but the applicable rates were changed from 2022 rates to the rates normally applicable for 2023. The 2023 rates are half of the 2022 rates, decreasing the prepayment amount by reducing the rate instead of changing the base period from one year to half year.
Regarding 2023, the calculation of the prepayment is equal to the supplemental tax paid for 2022 in January 2023.
The tax office confirmed that any overpayment regarding the extra profit tax/supplemental IPT can be offset against the ’normal’ IPT and vice versa. This is because the extra profit tax has the same tax code (number 200) and is payable to the same bank account as the IPT.
For example, if the prepayment for 2022 is higher than the 2022 extra profit tax there will be an overpayment on the 200 tax account at the end of January. This overpayment can be offset against the January 2023 IPT liabilities which are payable by 20 February 2023. Or if the insurance company has an IPT overpayment at the end of November 2022, this overpayment can be used to cover the extra profit tax/supplemental IPT prepayment obligation.
Get in touch with our tax experts today for advice on how to navigate this often confusing IPT procedure.
Update: 8 March 2023 by Kelly Muniz
Spain launches public consultation for B2B mandatory e-invoicing
The Ministry of Economic Affairs and Digital Transformation (Ministerio de Asuntos Económicos y Transformación Digital) has launched a public consultation on the upcoming B2B e-invoicing mandate.
The mandate will enable citizens to participate in elaborating norms before its development. This public consultation is carried out through the web portal of the competent department and all interested parties have until 22 March 2023 to send feedback.
Based on the feedback received, the government will develop and approve the regulatory framework that is needed according to the law adopting mandatory B2B e-invoicing which was published on 29 September 2022.
The public consultation consists of 32 specific questions on seven different areas that the regulatory framework will address. These areas are:
You can find the official text of the public consultation here.
Looking for more information on e-invoicing in Spain? Speak to a member of our expert team. For more information about VAT compliance in Spain read this page.
Update: 16 September 2022 by Victor Duarte
The Congress of Spain has approved the Law for the Creation and Growth of Companies, and it is expected to be published in the Official Gazette (BOE) in the following days.
This Law also amends Law 56/2007 on Measures to Promote Information to adopt the mandatory electronic invoice issuance requirement for all entrepreneurs and professionals in their commercial relationships.
According to this Law, all entrepreneurs and professionals must issue, send, and receive electronic invoices in their business relationships with other entrepreneurs and professionals. Additionally, the recipient and the sender of electronic invoices must provide information on the status of the invoices.
The main rules of the Law related to e-invoicing establishes that:
The process for accreditation of interconnection and interoperability of the platforms will be determined by the regulations at a later stage.
The law establishes that companies providing the supply of certain services to final consumers must issue and send electronic invoices in their relations with individuals who agree to receive them or who have explicitly requested them. This obligation affects companies supplying telecommunication services, financial services, water, gas, and electricity services among other sectors and activities prescribed in Article 2.2 of Law 56/2007.
These companies must provide access to the necessary programs so that users can read, copy, download and print the electronic invoice for free without having to go to other sources to obtain the necessary applications. They must also enable simple and free procedures so users can revoke the consent given to the receipt of electronic invoices at any time.
Companies within scope that refrain from offering users the possibility to receive electronic invoices will be sanctioned with a warning or a fine of up to 10,000 euros.
The Government will develop provisions of this Law in accordance with the regulations, and within the scope of its powers. Therefore, the Ministries of Economic Affairs and Digital Transformation and of Finance and Public Administration will determine the information and technical requirements to be included in the electronic invoice to verify the payment dates and obtain the payment periods.
It is also necessary to establish the minimum interoperability requirements between the providers of electronic invoice technology solutions, and the security, control, and standardisation requirements of the devices and computer systems that generate the documents.
The Government will have 6 months from the publication of this Law in the Official Gazette to approve the regulatory framework.
The provisions regarding mandatory B2B electronic invoicing will be effective according to their annual turnover:
This means that the B2B e-invoicing obligation could be effective for large taxable persons by the first quarter of 2024.
It is important to highlight that the entry into force of the B2B e-invoicing obligation is subject to obtaining the community exception to articles 218 and 232 of the VAT Directive. This exception is less difficult to obtain the previously as has been granted to other Member States such as Italy, France, and Poland to allow them to adopt the mandatory e-invoicing regime in their jurisdictions.
Need to ensure compliance with the latest e-invoicing requirements in Spain? Get in touch with our tax experts.
In the next edition of our series of blogs in Insurance Premium Tax (IPT) prepayments, we look at a less familiar regime to many, the Austrian IPT Prepayment.
Those who are well versed in the IPT sphere will be perplexed at this blog, as they most likely will never have paid a prepayment in Austria.
This is because the prepayment is only due in the event of the November tax period being paid late. Due to the elongated deadline of Austrian IPT and Fire Brigade Tax (FBT) this rarely happens in practice. As a reminder, the tax payment in Austria must be made by the 15th day (due date) of the second consecutive month (i.e January 2022 period due 15 March 2022).
But what if the November deadline isn’t paid in full by the 15 December? A special advance payment of 1/12 of the sum of the calculated tax amounts of the last 12 tax return periods must be made. This special advance payment is credited against a subsequent self-calculation for the declaration period of November.
With respect to IPT, FBT and Vehicle Insurance Tax (VIT), the rules are as follows:
Insurers should be aware that whilst tax payments are paid monthly, the return is due on an annual basis, the deadline being 30 April. The return(s) includes the tax ID, name of the insurer, tax amount on a per month basis, and the amount paid in tax for the year in question thus far.
For FBT liabilities the amount is split evenly between the insured and the insurer. So, for a risk with 100% fire portion and €100.00 premium, in addition to the €11.00 IPT amount the insured would also pay €4.00 FBT. The remaining €4.00 of FBT would be from the insurer.
From an exemptions perspective there is quite an exhaustive list in Austria. Some of which are export credit, cross-border cargo, reinsurance, and livestock (If the insured amount doesn’t exceed €3.650, as well as insurance of livestock with a small livestock insurance association).
Keeping abreast of changes in IPT compliance requirements in Austria and across the EU can be challenging. Our team of experts can guide you through the details and ensure you are on the right compliance path.
Many countries have recently started their continuous transaction controls (CTC) journey by introducing mandatory e-invoicing or e-reporting systems. We see more of this trend in the European Union as the recent reports on the VAT in the Digital Age Initiative discuss that the best policy choice would be to introduce an EU-wide CTC e-invoicing system covering both intra-EU and domestic transactions.
However, the efforts to fight tax fraud aren’t limited to mandatory e-invoicing or e-reporting systems. Many governments prefer to look beyond and introduce another tool that gives them greater insight into their economy: e-transport documents. When introducing e-transport systems, we see that one country differs from other EU Member States with the early adoption of an e-transport system – Hungary.
The Electronic Public Road Transportation Control System or Elektronikus Közúti Áruforgalom Ellenőrző Rendszer (EKAER) has been in place in Hungary since 2015. Operated by the Hungarian tax authority, the EKAER is intended to monitor compliance with tax obligations arising from the transportation of goods on public roads in the national territory.
The system was initially introduced to monitor the movement of all goods in the national territory. However, after several letters from the EU Commission asking Hungary to bring their system in line with the EU regulations, the scope of the system was narrowed down to the so-called risky products in January 2021. The risky products are defined in 51/2014. (XII. 31.) NGM decree, which consists of foodstuffs or other risky products (such as flowers, all kinds of natural sands, different types of minerals, etc.).
According to 13/2020. (XII. 23.) decree on the operation of the Electronic Road Traffic Control System, Hungarian taxpayers are required to report specific data regarding the transport of risky products by using the EKAER system before the transportation of goods begins. It’s also important to mention that it’s necessary to be registered in the EKAER system and provide a risk guarantee for certain types of transport unless there is an exemption in the law.
Taxpayers are obliged to report the transport of risky goods in XML format to the EKAER system. This information includes data regarding the sender, the recipient, and the goods. Moreover, businesses must also report additional specified data to the tax authority based on the transport type (domestic, intra-community acquisitions and intra-community supplies).
Following the report by the taxpayer, the EKAER system generates an EKAER number, an identification number assigned to a product unit. This number will be valid for 15 days; therefore, the delivery of goods must be performed within this period. Businesses must communicate the EKAER number to the carrier, and it should accompany transported goods.
Although no future changes are foreseen for the EKAER system, different countries worldwide continue to introduce e-transport requirements similar to the EKAER system. Taxpayers must ensure that their transport processes are flexible and compatible with changes that the tax authorities are introducing to stay compliant.
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 Mai Nguyen, senior compliance services representative who explained why it’s so important for insurers to get IPT filing right and shared her top three tips for submitting IPT liabilities.
I’m a senior compliance services representative – specialising in IPT at Sovos. I joined the company over four years ago and I deal with a diverse portfolio of 30+ clients, helping them with the entire cycle of IPT submission.
My team reviews data provided by our clients, creates a summary of tax due and confirms IPT and parafiscal liabilities due for a specific period. My day-to-day tasks include approving the IPT liabilities to be declared correctly and compliantly and authorising payments to be made on behalf of our clients.
My role is to oversee the day-to-day operational management whilst ensuring all compliance requirements are met consistently. I also work closely with clients to answering their queries to ensure their IPT submissions meet the strict regulations set by global tax offices.
The IPT filing process varies from one territory to another and it’s crucial for insurers to follow it accurately and compliantly. There are many elements that need to be considered in this process:
IPT filings can be made online in Portugal, Spain, Ireland, Finland and Germany. This filing method is becoming a common trend and is likely to be introduced in other jurisdictions.
In Portugal a data file must be uploaded to a web portal which requires detailed information for each policy such as NIF number (policyholder Tax ID), postcode, country code and territoriality.
In Spain the IPT portal determines the declaration period for each transaction, tax payment or any interest payment due. The portal links the payments due directly to the bank account, meaning the payment is made by direct debit.
IPT filings can be made by post or in person. With any method, it’s important to make sure that deadlines are met to avoid unnecessary penalties.
The consequence of noncompliance is not only the penalty or interest regimes imposed by tax offices but also the indirect costs to insurers which are more significant. These can include the cost for correcting the mistake, as well as additional associate or representative costs. Noncompliance could also have an adverse impact on the insurer’s reputation.
To avoid the unnecessary consequence of noncompliance when submitting IPT liabilities, here are my three top tips:
It can be very challenging for insurers to ensure that IPT is declared accurately and compliantly while adhering to the latest rules and regulations. Here at Sovos, our dedicated IPT Compliance Services team is equipped with in-depth expertise and the most up-to-date changes to help insurers meet all IPT requirements to make submissions efficient and compliant.
All IPT compliance information can be found through Sovos’ blogs, webinars, tax alerts, LinkedIn, Twitter and newsletters.
Have questions about IPT compliance? Speak to our tax experts or download our e-book, Indirect Tax Rules for Insurance Across the World.
On 30 August 2022, the Ministry of Finance published draft legislation amending the Regulation on the use of the National e-Invoice System (KSeF). The purpose of the draft amendment is to adapt KSeF’s terms of use to the specific conditions that apply to the local government units and the VAT groups that will operate as a new type of VAT taxpayer from 1 January 2023.
The concept of VAT groups was introduced in Poland in October 2021. VAT groups are a legal form of cooperation, a type of taxable entity that exists solely for VAT purposes. On joining a VAT group, a group member becomes part of a new separate VAT taxpayer possessing one Polish tax identification number (NIP).
The regulation on the use of KSeF didn’t take into consideration the uniqueness of the legal nature of the VAT group, as well as the VAT settlements in the local government units. Based on current regulation, the governmental units are treated as a single VAT taxpayer, using one NIP number.
Similarly, in the case of VAT groups, separate VAT taxpayers who create one new taxpayer (a VAT group) use one NIP number. The proposed changes resulted from the ongoing public consultations that took place in December 2021. Additionally, the change was also requested in May 2022 by the Union of Polish Metropolises.
The draft law provides the possibility to grant additional limited rights for the local government units and members of VAT groups. Moreover, local government units and VAT groups will be able to grant administrative rights, to manage permissions in KSeF, to a natural person who is their representative.
Thanks to such delegated rights, there will be an option to manage authorisations for the local government unit and for the entity that is a member of a VAT group. Moreover, it is significant that a person with such authorisation will not have simultaneous access to invoices in other units within the local government or within other members of a VAT group.
For local government units and VAT groups, granting or withdrawing authorisation to the natural person must be performed electronically. It’s not possible to submit a paper form to notify the competent tax authority.
As mentioned, the proposed amendments are in response to concerns that were raised by the impacted entities. However, they don’t meet all the needs of local government units and VAT groups. For instance, the question of how to assign an inbound electronic invoice to a particular internal unit or member of a VAT group remains open. This is because invoices contain only the data of the taxpayer, which in this case is the local government unit or a VAT group, and not data of the internal unit or member of a VAT group.
The regulation will enter into force 14 days after the date of publication. However, provisions that apply to VAT group members will be effective from 1 January 2023.
Want to ensure compliance with the latest e-invoicing requirements in Poland? Get in touch with our tax experts. For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.
For the UK and other non-EU businesses it’s vital to determine the importer of the goods into the EU as this will impact the VAT treatment.
For goods under €150 there are simplified options such as the Import One Stop Shop (IOSS) or special arrangements through the postal operator. However, when supplying goods over €150, businesses need to consider how they want to import the goods.
One option is for businesses to deliver on a Delivered Duty Paid (DDP) basis and be the importer of the goods into the EU. This improves the customer experience for B2C transactions but creates a liability to be registered in the county of import and to charge local VAT, along with additional compliance requirements. If goods are moved from that country to other EU countries, then depending on the supply chain, the One Stop Shop (OSS) could be used to avoid further VAT registration requirements.
Due to increased compliance costs many businesses have chosen not to be the importer and pass this obligation to the end customer. If a business chooses this route, options are still available.
The business could simply place the full obligation on the customer., The customer would be sent a payment request for the VAT and any duty by the carrier before delivery., There could also be a handling fee passed on to the customer. Once paid the goods would be delivered This approach doesn’t provide the best customer experience.
This is why many businesses have opted for a ’landed cost method’ offered by many couriers. The customer is still the importer on the import documentation, but the business collects the VAT and duty from the customer at the time of sale and settles the carrier’s invoice on their behalf. In theory, this avoids the need for the business to register in the EU and still offers the customer a seamless experience. However, this raises the question: is the customer actually the importer?
Some tax authorities are beginning to take a different view of arrangements for goods with a value above €150 where goods are imported directly into the Member State of delivery. A law change on 1 July 2021 included the concept “where the supplier intervenes indirectly in the transport or dispatch of the goods”. This is to counter arrangements that allowed the seller to argue they were not distance selling but making a local sale, so only had to account for VAT in the Member State of dispatch of the goods.
Following the law change some tax authorities are arguing this concept means if a seller sells to a private individual in their country and the seller arranges for the goods to be delivered from a non-EU country and customs cleared in their EU Member State, the place of supply is the Member State as the supplier has indirectly intervened in the transport.
As a result, the supplier must register and account for VAT in the Member State even if the customer is the importer of the goods. This argument could result in double taxation and can create additional compliance obligations along with tax authority audits – all of which add additional costs and time for businesses.
It’s important that businesses adopting a method where the customer is the importer put correct arrangements in place. This includes ensuring website terms and conditions reflect the fact the customer is the importer and giving the company the power to appoint a customs declarant on their behalf. It’s also important that customs documentation is completed correctly. Avoiding terms such as DDP on the website is also key as this implies that the business is the importer.
For help with EU import queries or if your company needs VAT compliance assistance get in touch to speak with one of our tax experts.
It’s time to return to Insurance Premium Tax (IPT) prepayments – a continuation of our blog series on this important IPT topic. You can find the first entry in our blog series here.
Throughout Europe’s different countries and jurisdictions, IPT is declared and settled in different ways. Monthly, quarterly, biannually – this varies across Member States – and some jurisdictions request prepayments to ensure the liabilities due from insurance companies are collected in good stead.
Belgium is one country that states within its legislation that IPT prepayments are required.
You can learn more about IPT prepayments in this blog however for those who missed our coverage on the topic, prepayments can be defined as a tax payment credit made to a tax authority before the payment is actually incurred.
This prepayment tax will be deducted to cover the tax liabilities until the total credit is used up and then current liabilities must be paid by the basis applied in each jurisdiction.
Each jurisdiction uses a different method to apply prepayments and we explain how this is legislated in Belgium.
The prepayment is due no later than 15 December each year. The tax base for the prepayment will be the amount paid in November of the current year, that is based on the tax liabilities of the October period.
It’s important to follow the state on the Belgium tax law in order to pay and submit the return within the deadline because when the tax hasn’t been paid within the deadlines set out previously, penalties will automatically be due to the Belgium tax authority from the day the payment should have been made.
The previous prepayment will be deducted during the next tax period (December, January, February and March) correspondingly submitted in January, February, March and April.
What happens if an insurance company paid the prepayment but during the three first months, the insurance company has not used that credit, perhaps because no policies were subscribed and therefore no submission or payment was due?
In these cases, the entire, or part of the prepayment is still pending to be deducted and a formal reclaim should be requested to the tax authority in order to obtain the unused prepayment.
Although this appears to be a simple process, not following the rules or not processing the returns, payments, or refunds within the correct deadlines can see the insurance company receive penalties or obtaining the refund for the unused prepayment could be prevented.
Speak to our team today for advice on how to navigate this often confusing tax procedure.
The Colombian tax authority (DIAN) continues to invest in the expansion of its CTC (continuous transaction controls) system. The latest update proposes an expansion of the scope of documents covered by the e-invoicing mandate.
In this article we’ll address the newly published Draft Resolution 000000 of 19-08-2022. This advances important changes for taxpayers covered by mandatory e-invoicing rules.
These draft changes include a new obligation to issue equivalent documents (documentos equivalentes) in electronic format, a schedule for its implementation, updated technical documentation and other significant developments, all of which require taxpayers to ready themselves to comply.
Amongst many proposed changes, the draft resolution’s main purpose is to regulate the electronic issuance of the equivalent document.
These documents correspond to the sales invoice under Colombian law, but cover specific types of transactions and are regulated in the draft resolution, as follows:
This means that all taxpayers subject to the Colombian e-invoicing mandate who issue one of these equivalent documents will be required to do so in an electronic format, according to the Technical Annex of the Electronic Equivalent Document version 1.0 (Anexo técnico del Documento Equivalente Electrónico), introduced by the draft.
Additionally, the draft provides an initial regulation of the electronic documents of the invoicing system (documentos electrónicos del sistema de facturación). These are documents that aid control by the tax and customs authority, to support tax or customs declarations and/or to support the procedures carried out before DIAN, under the provisions of subsection 1 of article 616-1 of the Tax Statute.
Finally, the technical specifications of the system’s main electronic invoice, the sales e-invoice, is updated to version 1.9 (Anexo técnico de la Factura Electrónica de Venta version 1.9).
The obligation to issue the equivalent document in electronic format will be implemented gradually, according to the type of equivalent document. It starts on 1 March 2023 and will cover all equivalent documents on 1 July 2023.
Early voluntary implementation will also be possible, once the functionality is available in DIAN’s system. Until the deadlines for the electronic implementation of the equivalent document are fulfilled, these must continue to be issued in accordance with Resolution No. 000042 of 2020.
The draft also sets a schedule for implementation of the electronic documents of the invoicing system, during the taxable years of 2023 and 2024. These documents will be further regulated in the six months following the validity of the official resolution, as well as the adoption of its technical annex, which hasn’t been presented with the draft resolution.
Lastly, the proposal establishes the deadline for implementation of the Technical Annex of the electronic sales invoice version 1.9 by taxpayers. This will be at least three months following its official publication.
The draft resolution, once officially published, will derogate DIAN Resolution No. 000042 of 2020 in all provisions that are contrary to it, except those related to equivalent documents, which will remain in force until the DIAN establishes their electronic implementation.
Taxpayers can also expect new legislation regulating the remaining electronic documents of the invoicing system, in the months following the official publication of this draft resolution.
Until then, companies should prepare for the significant upcoming changes and adjust their businesses processes to comply with the new Colombian mandate.
Need help with evolving e-invoicing requirements in Colombia? Get in touch with our tax experts about how Sovos can help your business meet your VAT compliance obligations.
It seems such a short time since HMRC sent a reminder letter in March 2022 recalling the upcoming changes to the UK’s customs systems and explaining what to do to prepare for these changes.
With the deadline rapidly approaching, here’s a brief recap.
The Customs Handling of Import and Export Freight (CHIEF) system, which is now nearly 30 years old (it was introduced in 1994), will close in two phases:
The Customs Declaration Service will serve as the UK’s single customs platform, with all businesses needing to declare all imported and exported goods through the Customs Declaration Service (CDS) after 31 March 2023.
As mentioned on the HMRC website, the Customs Declaration Service toolkit gives traders access to the many benefits of the upcoming changes. In summary:
To be able to use CDS and import goods into the UK from 1 October 2022 and to export from 1 April 2023, businesses are required to have the following:
Want to know more about how changes to the UK’s customs systems will impact your business and its compliance? Contact us to find out more.
The Dutch government issued an updated Policy Statement for Insurance Premium Tax (IPT) on 12 May 2022. The first of its kind since February 2017, the update is intended to replace the 2017 version in full. While the majority of the content remained consistent, there were notable details pertaining to Netherlands storage insurance and ‘own transport’ insurance. These changes will be effective from 13 May 2023.
The change extends the scope of storage insurance that can still be regarded as goods in transit insurance, increasing from storage of up to one month to three months. It may even be possible to show goods in transit insurance applies for storage greater than three months, but the onus is on the insurer to prove an absolutely necessary connection between storage and transport.
It’s general market practice in the EU to consider storage of up to 60 days as being part of the goods in transit coverage, making the Dutch approach more flexible in this regard. Any goods stored beyond the 60 days are treated as a property risk, taxable where the goods are located and not where the policyholder has their establishment.
It’s useful to consider this change from the perspective of both IPT rate application and location of risk. In terms of the former, the IPT exemption applicable to all goods in transit insurance in the Netherlands widens this exemption to policies involving longer periods of storage.
Regarding location of risk, the relevant provisions in EU Directive 2009/138/EC determine that in the case of goods in commercial transit risks, the risk location (and therefore the country entitled to levy IPT and/or associated levies) is the policyholder’s establishment to which the contract relates. Where storage insurance does not constitute goods in commercial transit, the risk location is the location of the property itself.
As a result, goods stored in the Netherlands for more than three months as part of a transport policy will generally be taxable there, even where the policyholder’s establishment is elsewhere. Whereas goods stored in the Netherlands for less than three months will not be taxable in the country (unless the policyholder’s establishment is also in the Netherlands).
The other key takeaway from the Policy Statement was on the subject of ‘own transport’. This is defined as transport ‘where no transport company is contracted, but commercial transport is involved’, confirming the exemption for transport insurance is equally applicable to scenarios where companies arrange for the transportation of commercial goods for their own benefit. As such, the exemption is not restricted to third-party contractors utilised for the transport.
The Policy Statement also states the exemption applies to:
However, the exemption does not apply to insurance of own goods which, although transported are not for the sole purpose of transferring it to another place of destination. This could include the tools of a contractor that are stored in his delivery van.
The changes outlined above are relatively minor given they relate solely to goods in transit business. One more fundamental change that had been mooted as a possibility was for the Netherlands to introduce stricter rules on the application of IPT to non-EEA risks, as we saw in Germany at the end of 2020.
The scope of the changes in Germany caused considerable confusion in the market at the time so it’s possible the Dutch government has put any potential plans on hold for now. This will be an interesting issue to monitor as countries seek out alternative ways to generate tax income.
Want to understand more about how these changes affect your business? Get in touch with our team of experts to see how Sovos can help ease your IPT compliance burden.
Update: 14 February 2023 by Andrés Landerretche
As of February 2023, new rules came into force in Colombia. These are for the issuance threshold of equivalent documents generated by Point of Sale (P.O.S.) systems.
As a result, a ticket issued by cash registers with P.O.S. systems (tickets de máquinas registradoras con sistemas P.O.S.) must not exceed the maximum amount of five Tax Value Units (UVT), without including the amount of tax for each sale or service provision operation.
For sales operations and the provision of services exceeding this amount – excluding taxes – taxpayers must issue an electronic sales invoice as part of the country’s e-invoicing mandate.
It is important to note that the equivalent documents generated by cash registers with a P.O.S. system do not entitle the purchaser to discountable sales tax (VAT) or costs and deductions in income and complementary taxes.
However, purchasers may request that the seller issue a sales invoice when they have the right to request deductible taxes, costs, and deductions. In this case, the supplier must issue an electronic sales invoice.
The Colombian tax authority (DIAN) officialised the implementation of the five UVT thresholds for tickets generated through P.O.S. systems through Resolution 1092, published on 1 July 2022.
The Resolution implemented the phased roll-out of this mandate, following the calendar below:
Every 1 January from the taxable year 2024, taxpayers obliged to issue a sales invoice that choose to issue the equivalent document, called a ticket for a cash register with a P.O.S. system, must adjust the value of the applicable UVT to comply with the limitation of five UVT in the issuance of each ticket.
Speak with a member of our expert team for further clarification of e-invoicing in Colombia.
Update: 23 August 2022 by Kelly Muniz
The Colombian tax authority (DIAN) has concentrated heavily on expanding its electronic invoicing regime over recent years. The DIAN introduced the first schedule for mandatory implementation of e-invoicing in the country in 2018, and, since then, the system has gradually encompassed more transactions and taxpayers.
In this article, we’ll look at the two latest new mandates in Colombian e-invoicing:
These new obligations have significant impact and require adjustments by taxpayers. These changes also represent a substantial expansion of Colombia’s e-invoicing to include entirely new transactions under its scope.
The Colombian tax authority has created a new e-document type, the support document for acquisitions from subjects not obliged to issue e-invoices. This support document and its corrective notes were introduced by Resolution 167 of 2021. It expands the e-invoicing scope to ensure more transactions fall within the mandate and allows support for tax deductions.
Taxpayers obliged to generate this e-document are those under the country’s e-invoicing regime. It includes those subject to income and complementary tax payments and responsible for VAT when purchasing goods and/or services from suppliers not obliged to issue e-invoices or equivalent documents and require support for costs and deductions in the mentioned tax declarations. To generate the support document, the taxpayer must be authorised by the DIAN as an electronic issuer.
The support document and its corrective notes must be generated in XML format and contain a CUDS: unique support document code (código único del documento soporte). This alphanumeric code allows it to be unequivocally identified. After generation, the e-documents must be transmitted for clearance by the DIAN either in real-time or, at the latest, on the last calendar day of the week, for accumulated operations with the same supplier carried out during that same week.
Having been postponed from its original implementation date, the generation of the acquisitions support document became mandatory on 1 August 2022.
According to this mandate, cash register tickets generated through POS systems (tickets de máquinas registradoras con sistemas P.O.S.) may be issued by subjects obliged to invoice, provided that the sale of the good and/or the provision of the service recorded therein doesn’t exceed five (5) UVT (tax value unit) for each document, excluding taxes.
This means that, for operations covering sales of goods and/or provision of services exceeding the amount of five (5) UVT, taxpayers under the country’s e-invoicing mandate must issue an electronic sales invoice. The purchaser of goods and/or services below the threshold may still require the issuance of a sales invoice, in which case the supplier must provide it.
The threshold was de facto introduced in 2021 by Law 2155, but it was only in July 2022 that the DIAN established a phased roll-out of the mandate, through Resolution 1092, following the calendar below:
While the generation of the support document for acquisitions is already srequired, taxpayers must start preparing to comply with the new threshold for e-invoice issuance in place of POS tickets. Sovos can help your company adjust to e-invoicing and ensure compliance with Colombia’s new mandates.
Contact our team of experts today to ensure your company is complying with Colombia’s e-invoicing mandates.
Update: 30 November 2022 by Charles Riordan
Romania SAF-T Filing declarations are changing. The draft order extending the grace period for SAF-T will not be implemented. The President of ANAF has confirmed that decision.
The extension originally supported large taxpayers who have had to submit SAF-T since 1 January 2022. ANAF now states that large taxpayers have, on the whole, complied with the original deadlines. This renders the extension “not appropriate.”
ANAF will follow an unofficial policy of leniency for SAF-T submissions. According to a spokesperson, the agency will first give notifications to delinquent taxpayers. Next, they will issue warnings. Fines are a last resort.
The initial six-month grace period for SAF-T hasn’t been formally extended, but it remains in force. Taxpayers will not receive penalties for late or missed filings while the grace period exists.
The grace period applies for six months after the obligation to file SAF-T arises. This obligation begins:
Still have questions about SAF-T Filing Declarations in Romania? Speak to our tax experts or see this overview about VAT Compliance in Romania.
Update: 18 August 2022 by Charles Riordan
On 1 August 2022, the Romanian National Agency for Fiscal Administration (ANAF) published a draft order extending the current grace period for Standard Audit File for Tax (SAF-T) declarations from six months to twelve months. The order will take effect upon approval and publication in the Official Gazette. At the time of writing, approval and publication are expected shortly.
The Romanian tax authority initially granted the grace period due to the complexity of the country’s SAF-T filing. The SAF-T must include available data from master files, source documents, general ledger entries, and, on a separate cadence, data related to fixed assets and inventory. Because of this complexity, ANAF instituted a six-month grace period, during which taxpayers would not be penalised for late or incorrect filings. The ANAF also implemented SAF-T in phases, with the large taxpayers obliged to file before mid-sized and small taxpayers.
ANAF has acknowledged, however, that even large taxpayers have struggled to meet the technical requirements of the SAF-T declaration. Therefore, with the initial six-month grace period set to expire, ANAF proposes to extend it to alleviate the burden on filers.
The grace period, as before, takes effect from the date a taxpayer is obliged to submit the SAF-T declaration. The obligation for different categories of taxpayers begins:
This means that taxpayers who are obliged to file SAF-T in 2022 will now have grace periods extending into 2023 (e.g. 1 January 2023 for “large taxpayers” who were categorised as such in 2021; 1 July 2023 for “large taxpayers” who were only categorised as such in 2022).
The language of the amendment doesn’t limit the twelve-month grace period to large taxpayers, so it is presumed that the grace period will apply to other taxpayers as well. This amendment would extend the grace period for medium taxpayers into 2024 and all others into 2026. Further clarifications on this point may be released in the future.
The rollout of SAF-T in Romania has been eventful, with multiple revisions to both the schema itself and taxpayer obligations. Taxpayers doing business in Romania must ensure that they stay abreast of the latest developments with this declaration, as there will undoubtedly be more to come.
Need to comply with the latest changes in Romanian SAF-T? Speak to our team. Follow us on LinkedIn and Twitter to keep up-to-date with the latest regulatory news and updates.
In Italy, the discipline of transfer pricing states that in intra-group transactions between entities from different countries, where one is resident in Italy, transactions must take place on an arm’s length basis. In other words, transactions are based on freely competitive prices and under comparable circumstances.
Companies carefully treat the transfer pricing adjustments from a corporate income tax perspective. However, less attention is paid from a VAT perspective.
It’s worth mentioning that in most cases, the transfer price adjustments are profitability adjustments (rather than price) of the transactions carried out between associated companies.
However, treating the transfer pricing adjustments as outside the scope of VAT might cause problems in case of a tax authority audit and re-qualification of the transactions.
The issue of transfer pricing adjustments for VAT purposes is not expressly regulated by the Italian legislator, other EU Member State legislators or from an EU VAT legislative point of view. In the absence of an ad hoc provision, reference is made to EU and local legislation, and private and public rulings on a case-by-case analysis.
Regarding public rulings, Italian tax authorities published several responses in 2021.
With the last response to ruling no. 884 of 30 December 2021, inspired by EU Commission Working Paper n. 923 and VAT Expert Group document n. 071, Italian tax authorities clarified that to establish whether transfer pricing adjustments represent the consideration for a transaction relevant for VAT:
In the 30 December 2021 ruling (no. 884), Italian tax authorities confirmed the adjustments in question were outside the scope of VAT following the transfer pricing adjustments. It stated for subsidiaries “the recognition of an extra cost aimed at lowering their operating margin“, wasn’t “directly related to the original supplies of finished products“.
The same outcome didn’t apply to ruling no. 529 of August 6, 2021.
In this case, at the time of the sale of the goods, the seller applied a provisional price.
That provisional price was then subject to adjustment on a quarterly basis, through the so-called “Profit True Up“. The result could consist either of a claim by the transferor against the transferee or, conversely, transferor’s debt.
In this specific case, Italian tax authorities found a “direct link between the sums determined in the final balance and the supplies” and concluded by determining the relevance of the transfer price adjustments made by the taxpayer for VAT purposes.
Whether or not your business is operating in Italy, the above shows how important the potential VAT implications of transfer pricing adjustments are and the confusion for businesses on how to proceed in different scenarios.
At Sovos we’ve seen more local tax authority audits focused on clarifying if the treatment is valid from a corporate income tax and a VAT perspective.
After a review of the contracts and agreements between the companies and subsidiaries involved, it’s essential to understand whether the transfer pricing adjustments are:
Speak to our team if you have questions about the latest approach from a VAT perspective on transfer pricing adjustments in Italy, the EU and the UK and the potential solutions to mitigate any risk of audit and penalties.