In our previous blog, we completed the compliance cycle with tax authority audits. However, that’s not the end of the challenges businesses face in remaining compliant in the countries where they have VAT obligations. VAT rules and regulations change as do a business’s supply chains – these need to be carefully reviewed and appropriate action taken so that the business remains complaint.

Changes in supply chain

Supply chains develop over time for a variety of reasons: changes are made to improve efficiency, provide a better customer experience in delivery times or because of entry into new markets. Sometimes, these changes are instigated by the business seeking optimisation, whereas others are forced by external changes such as Brexit forcing businesses trading between the UK and EU to alter supply chains following the UK’s exit from the EU.

Whatever the reason for the change, it’s essential to review the impact on the VAT position of the business. This involves determining the VAT obligations that arise from the new transactions – which we covered in our previous blog. An early warning system of impending supply chain changes is required so they can be reviewed before the new transactions commence. Key to this is awareness of the importance of VAT within the business; the supply chain changes cannot be reviewed if the finance team is not aware of them.

Also, it’s not possible to undo a transaction once it’s taken place so the business must deal with the consequences even if they are adverse. Proactive action can ensure that the business goes into the new supply chain prepared and aware of all the consequences.

There are different ways to structure a supply chain to achieve the same commercial aim; they can have differing VAT implications so consideration of the consequences should form part of the evaluation process to determine the appropriate strategy.

Changes in legislation

Whilst businesses can control some element of when their supply chains change, responding to changes in legislation is much more difficult.

The first step is to be aware of what has changed. Changes can happen on a pan-EU basis or in an individual Member State so a mechanism needs to be in place to identify changes as soon as they are announced. Often this will require external support, especially if there are obligations in multiple territories.

Once the change has been identified, the next step is to determine the impact on the business. Some changes will have minimal impact whereas others will require proactive action to be compliant with the new rules. Significant changes may require a redesign of the supply chain. An action plan with clear responsibilities and timescales should be put in place to manage the necessary changes.

Managing new mandates

The EU has seen the introduction of numerous new mandates over recent years, often in respect of continuous transaction controls (CTCs), and this is set to continue as Member States seek to reduce the VAT gap.

The latest information published by the European Commission is for 2019 where the VAT gap was €134 billion. Whilst this showed a reduction from the previous year, it still represents 10.3% expressed as a share of the VAT Total Tax Liability.

Governments need to generate revenue in a post-pandemic world and addressing the VAT gap provides one solution without imposing additional tax burdens as it involves collecting tax that should already have been charged. Based on current trends, it will take 13 years to eradicate the gap so new initiatives are needed, hence the increase in CTCs.

Managing these new mandates will be a critical challenge for business in the coming years as they are introduced in more Member States. A clear strategy is essential to avoid becoming overwhelmed by disparate local requirements.

Over this series of blogs, we’ve looked at the key aspects of ensuring ongoing VAT compliance. Once the necessary processes and controls are in place, businesses can focus on trade knowing that VAT compliance is assured. However, maintaining VAT compliance is a continuous process which should be constantly reviewed to maximise efficiency and minimise risk.

The EU e-Commerce VAT Package is nearly six months old and businesses should have submitted their first Union One Stop Shop (OSS) return by the end of October 2021. Union OSS provides a welcome simplification to the requirement to be registered for VAT in multiple Member States when making intra-EU B2C supplies of goods and services.

Whilst a simplification, there are several conditions that need to be met on an ongoing basis to continues its use. The European Commission produced a number of guides on the application of Union OSS prior to its introduction which provided guidance on its operation. However, there are still several questions about how Union OSS interacts with other compliance obligations in place for e-commerce sellers around the EU.

Union OSS – interaction with Intrastat

Intrastat is the EU’s mechanism to provide details of intra-EU trade in the absence of customs borders. It’s made up of two components: dispatches declarations submitted in the Member State where the transport starts and arrivals declarations in the Member State of delivery.

E-commerce businesses selling intra-EU goods have long had to comply with Intrastat obligations when they exceeded the reporting thresholds. For lots of businesses an obligation arose in the Member State from where the goods are dispatched given that goods were delivered to multiple other EU countries, so thresholds were often exceeded.

In addition, larger e-commerce sellers also had obligations to submit arrivals declarations in the country of delivery of the goods even though they were not the purchaser of the goods. The very largest may also have had obligations to submit dispatches declarations in the Member State of their customer because of returned goods.

There is no mention of Intrastat in any of the European Commission’s guides about OSS so no guidance is provided on how it will apply when a business adopts Union OSS. Furthermore, many Member States do not currently seem to have a finalised position on the interaction with Union OSS.

The position in the Member State of dispatch of the goods seems clear but there are potentially complexities when goods are dispatched from more than one Member State especially if there is no VAT registration in that country. Whilst this is unlikely, there are circumstances where no VAT registration is required or even allowed.

The real complexity is with regards to Intrastat arrivals declarations. The principle of Union OSS is that no VAT registration is required in the Member State of the customer for intra-EU supplies. There may be other reasons for a VAT registration there but for many e-commerce sellers, they will not have to be registered in the Member State of delivery.

This raises the question of whether arrivals declarations are required in those territories. Some Intrastat authorities have provided guidance and those that have are taking different routes. Some are clear it is not required for arrivals when using Union OSS whilst others still require declarations to be made even though there is no local VAT registration in place.

We continue to monitor the situation and will update further as more information is available.

Unions OSS and other declarations

E-commerce sellers of goods can have other compliance and tax obligations in the countries to which they deliver goods. These include meeting local country rules with regards to environmental taxes. For example in Romania there is a requirement for e-commerce sellers to submit Environmental Fund returns even if the business has opted to use Union OSS. This creates complexity as the Romanian VAT number is normally used to file the returns. A separate registration seems to be possible to ensure compliance with the environmental regulations.

There is also potentially an issue in Hungary with the retail tax that is payable by businesses with a turnover in excess of HUF 500 million. There is still a liability to pay the tax even if there is no VAT registration because of Union OSS. Affected businesses will need to ensure that they remain compliant.

Teething problems can be expected with any new regime but there is an argument that some of these should have been predicted and clear guidance provided, especially for Intrastat. It is clear that some authorities have not considered the matter at all prior to Union OSS’s introduction. We will continue to monitor the situation and provide further updates when more information is available.

Upcoming Submission Deadline for Polish Claims Report

The Polish Financial Ombudsman Office (Rzecznik Finansowy), like other regulatory bodies such as the Italian IVASS, requires insurance companies to submit various reports about their activities. One of these is the Claims Report.

According to the Act on the Consideration of Complaints by Financial Market Entities and on the Financial Ombudsman (Act of 5 August 2015) a report titled “Handling of complaints and the number of cases” is due within 45 days of the reporting period ending.

Subsequently, the deadline for the 2023 reporting year is 15 February 2024. This report must be submitted through the Polish Financial Ombudsman Office’s website.

The regulation determines the scope of the financial market entities, including domestic insurance companies, branch offices and foreign insurance companies.

The form and instructions for producing this report are published on the ombudsman’s website during the first week of January.

3) Information on the value of claims submitted in lawsuits and amounts awarded by final court judgments to clients during the reporting period

Poland: Withholding tax not due on insurance income

Withholding tax (“WHT”) is an income tax, not an insurance premium tax, and is governed by the Polish Corporate Income Tax Law (CIT Law). However, in the case of foreign insurers that are operating business in Poland on a Freedom of Services (FoS) basis, it could be an important element of the taxable base calculation for the Financial Ombudsman Charge (“FOC”).

In this blog, we will explain why the judgement of the Polish Administrative Supreme Court on the application of withholding tax is relevant from the perspective of IPT and FOC.

The Financial Ombudsman confirmed to Sovos that FOC is owed on the full premium amount as stated in the policy documents, with no deductions. This implies that even if the foreign insurer receives a reduced premium after deducting WHT, FOC will still be due on the whole amount of the premium.

The WHT was applied to insurance services because the Polish Tax Office considered insurance contracts to be “performance of a similar nature” to a guarantee under CIT Article 21(1)(2a) and so wanted to deduct WHT from the premium amount paid to a foreign insurer.

The Provincial Administrative Court in Wrocław in its decision on 24 August 2023 concluded that a contract whose content corresponds to the essentialia negotii (“essential elements”) of an insurance contract is not a “performance of a similar nature”. Therefore, Polish policyholders are not obliged to withhold income tax at source on insurance premium income.

This decision also determines that payments made by the Polish policyholder for intermediate insurance services, generally referred to as brokerage services, do not constitute payment for “performance of a similar nature.” As a result, the policyholder company is not required to deduct withholding tax on brokerage fees.

Poland: Transitioning from the Insurer Ombudsman Charge (IOC) to the Financial Ombudsman Charge (FOC)

The first annual FOC return is complete, and the first payment for the newly imposed Polish Financial Ombudsman Charge (FOC) has been made. The Ombudsman Office implemented the new charge in 2023, with an effective date of 1 January 2023. The first settlement was due on 31 March 2023.

Sovos obtained knowledge during the settlement process on how to proceed with the settlement of this new charge and what the transitional procedures are for transitioning from IOC to FOC. In this blog update, we summarise what we learnt during this process.

This is what we learnt about the process:

Some questions remained:

Poland: New Ombudsman Charge introduced for 2023

Although Poland still lacks an Insurance Premium Tax (IPT) system, there are various other taxes and fees in the country. The Insurance Ombudsman Charge (IOC) implemented in 2014 is one of the most well-known parafiscal charges. As of January 2023, the Financial Ombudsman Charge (FOC) replaces the Insurer Ombudsman Charge regulation.

There are differences and similarities between the new Financial Ombudsman Charge (FOC) and the previous Insurer Ombudsman Charge (IOC). We have also noticed some anomalies which we will discuss.

How are FOC and IOC similar?

Both IOC and FOC are parafiscal charges that should be paid to the Ombudsman Office. Payment is still in PLN with a payment threshold of PLN 16.00.

As in the case of IOC, the FOC is declared online and with NIL report submission requirement.

Similarly to the IOC, the FOC is applicable to Domestic (DOM insurers) and foreign insurers writing business in Poland on a freedom of services (FOS) basis (FOS insurers). FOC rates for DOM and FOS insurers are different as was the case with the IOC regime.

The tax point date is the same for the IOC and the FOC and it is the date when the cash is received.

What is different about the Financial Ombudsman Charge?

Anomalies around the Ombudsman Charges in Poland

Sovos contacted the Ombudsman office to clarify some questions raised around anomalies with the Financial Ombudsman Charge. We have received responses so please get in touch if you would like to learn more.

Currently, Poland doesn’t have an IPT. Instead, there is a parafiscal tax called Insurance Ombudsman Contribution (IOC). It is currently charged at a rate of 0.02% and was effective from 1 January 2020 for all insurance companies operating under Freedom of Services (FOS) in Poland.

IOC applies to all 18 classes of non-life insurance. It is applicable to all insurance companies either selling insurance in Poland or collecting premiums from Polish persons. Prior to its origination date of 1 February 2014, it only applied to domestic insurers or foreign insurers with Polish branches.

The basis for IOC is the premium that must be paid to the insurer to obtain the insurance cover.

Poland: Insurance Ombudsman Contribution Reporting

Reporting for IOC can be tricky because of the different name and numbering system for quarterly declarations. For Example: Quarter I (Quarter 1) of the current year covers October, November and December of the previous year. The quarterly submission is due 90 days from the reporting period. In this example, Q1’s declaration must be filed by 31 March of the current year.

All the payments made throughout the year are considered prepayments or advance payments. For instance, the liabilities that arose in Q1 2021 are declared in the Q2 2021 tax period as an advanced payment for Q2 2021.

The Annual Report is due by 30 June of the following year. This report is submitted to the Insurance Ombudsman summarising the actual premiums received in the previous year (i.e., for 2020, a report is submitted by 30 June 2021 summarising the total amount of premiums received by the insurer in 2020).

The Insurance Ombudsman then determines its funding requirements, and an adjustment is made based on the difference between the insurer’s share of the market percentage multiplied by the funding requirements and the previously made payments for the reporting year.

The Ombudsman’s adjustment may result in the tax authorities requiring additional funds or providing a refund. Either result is communicated by the authorities through Annual Settlement Letters that usually arrive by the end of October.

Insurers are obligated to keep records of insurance contracts and the documents required for tax declaration for five years from the contract’s expiry date.

If the taxpayer doesn’t declare and remit the tax in accordance with the regulations, the relevant authority may demand delayed interest and require an assessment of the tax. In such cases, the court can award a penalty fee and/or imprisonment of the company’s management for up to three years, as per the fiscal penalty code from 10 September 1999.

For any insurance company operating under FOS in Poland, understanding the details of the Insurance Ombudsman Contribution and the reporting requirements are key to ensuring compliance.

In our previous blog, we looked at the challenges that businesses face in submitting VAT and other declarations on an ongoing basis. However, the compliance cycle doesn’t end there as tax authorities will carry out audits for a variety of reasons to validate declarations.

Why do tax authorities carry out audits?

When VAT returns consisted of only numbers, audits were carried out to obtain more information about the business activities taking place behind those numbers. The increased amounts of transaction data provided to tax authorities via SAF-T, local listings and continuous transaction controls (CTCs) means this is changing. Audits are still carried out even with the additional VAT information, mainly to determine that VAT declarations accurately reflect the activities of the business.

Whilst the frequency of audits varies considerably between Member States, it is common across the EU for an audit to be carried out if the business requests a repayment of VAT. In some countries, this will happen whenever a repayment is requested, whereas others will take a more risk-based approach and only audit if the repayment is higher than expected from a business that regularly receives repayments.

Speed is of the essence for audits as cashflow is impacted until the repayment is made. This needs to be at the forefront of whoever is managing the audit but careful consideration of the questions being asked by the tax authority and responses being made by the business remains essential.

Preparing for an audit

Audits can either be done in-person or via correspondence although In-person audits are currently less common due to Covid-19. The audit is normally carried out via correspondence if the taxpayer is not established in the country of registration, which in some countries requires a local advisor.

This leads to a key question: whether to handle the audit in-house or bring in external expertise. Whilst managing an audit in-house will save fees, it is essential to consider the consequences of the audit. An external advisor could be brought in at a later stage but they may be hampered by responses provided to the tax authority at the outset of the audit. Proper consideration should be given to utilising specialist external advisors, especially if there is a significant amount of VAT or complex issues are involved.

The priority for any audit is to successfully resolve it as quickly as possible with no detrimental impact to the business. This will minimise the amount of management time, fees and exposure to penalties or interest.

Managing the audit process

Many audits will start with the tax authority asking some specific questions – this could be about the business generally or about specific transactions. The questions are asked for a reason so businesses need to consider why they’re being asked to determine how to respond and minimise the risk of problems later in the audit.

Managing deadlines is important as failure to do so can have detrimental effects. Some tax authorities impose very short deadlines so prompt attention is required. It may be possible to agree an extension, but this is not always the case. Providing clear unambiguous answers and supporting documentation is essential to obtain the desired outcome.

Once the audit has been concluded, any corrective action needs to be taken. In the ideal situation, nothing must be done and the business can continue to trade successfully. If an adverse decision or payment request has been issued by the tax authority, consideration needs to be given as to whether to appeal the decision; again, strict deadlines must be met.

Even without such a decision, the audit may have highlighted areas where work is required to avoid problems arising in the future. An action plan should be created with clear responsibilities and deadlines.

Once all work has been done, the business can return to the normal compliance cycle of submitting VAT returns and other declarations. An ongoing challenge is making sure the business successfully manages changes in their VAT position, and we will be looking at this in our final blog in this series.

As we inch closer to the implementation date of 1 January 2022 for Norway’s new digitized VAT return, let’s take a second look at the details.

Norway announced its intentions to introduce a new digital VAT return in late 2020, with an intended launch date of 1 January 2022. With this update comes the removal of box numbers, which will be replaced by a dynamic list of specifications. The report will also repurpose the Norwegian Standard Tax Codes from the SAF-T financial file to provide more detailed reporting and flexibility. It’s important to note that the obligation to submit a SAF-T file will not change with the introduction of this new VAT return.

This change is for the VAT return only – with the SAF-T codes being re-used and re-purposed to provide additional information. Businesses must still comply with the Norwegian SAF-T mandate where applicable and must also submit this new digital VAT return. With the new VAT return, the Norwegian Tax Administration (Skatteetaten) seeks to simplify reporting, better administration, and improved compliance.

Details on technical specifications

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

Submission method

Norway is encouraging direct ERP submission of the VAT return where possible. However, the tax authorities have announced that manual population via the portal will still be available.

Login and authentication of the end user or system is carried out via the ID porten system. Originally, Norway didn’t allow for XML upload; however, the tax authorities have recently updated their guidance to ensure that XML upload will be accepted. Changing numbers or notes in the uploaded XML file will not be possible, but it will be possible to upload attachments.

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

Please note that Norway is not allowing for any grace period for the submission of this newly designed return.

What’s next?

In addition to the new VAT return, Norway has also announced plans to implement a sales and purchase report by 2024. The proposal is currently in the mandatory public consultation phase, which ends on 26 November 2021.

Romania Issues Last-Minute Amendments to B2B E-invoicing Regulations

After the implementation of Romania’s new B2B e-invoicing regulations, effective January 2024, the country introduced Government Emergency Order No. 115/2023 with last-minute amendments.

We can summarise the key amendments from the new legislation in three categories:

1. Exemptions from the e-reporting and e-invoicing mandate are clarified

2. New five-calendar-day deadline to report e-invoices from July 2024

From July 2024 onwards, the requirement to issue e-invoices for transactions between established entities persists. The amendment states that in the event of a taxpayer’s failure to generate an electronic invoice, they are obligated to submit it to the RO e-Factura platform within five calendar days.

3. Penalties for businesses in the scope of e-invoicing

From July 2024, established entities that fail to comply with the issuance and receipt of e-invoices will receive a fine equal to 15% of the total invoice amount.

Additionally, those who fail to report the invoice which was not issued and automatically transmitted to the RO e-Factura within the additional five calendar days will be fined:

Romania Publishes Draft Legislation For B2B E-invoicing Mandate

The Romanian Ministry of Finance has published draft legislation proposing new budgetary measures, among which is the implementation of the highly anticipated electronic invoicing mandate.

Even though the draft legislation maintains the January 2024 roll-out date previously approved by the EU Council, it proposes an invoice reporting system to operate in the first six months with the electronic invoicing system (RO e-factura) being fully implemented in July 2024.

Additionally, a three-month grace period – from January 2024 to March 2024 – is foreseen where penalties are not imposed.

Romania’s new B2B e-invoicing mandate timeline:

The first phase of implementation where taxpayers report invoices to the RO e-factura system – instead of issuing the invoices directly through that system – is an addition of the draft law.

This reporting obligation is a transitional measure to help businesses prepare and adapt their systems to the new e-invoicing requirements. Between January and June 2024, the draft legislation also foresees an obligation for the supplier to send the cleared invoice out-of-band to the buyer whenever the latter is not registered with the RO e-factura system.

The scope of the new B2B draft mandate applies to all B2B transactions carried out by established or VAT-registered suppliers deemed to take place in Romania.

Looking to better understand e-invoicing regulations ahead of Romania’s mandate? Our guide can help.

Romania Authorised to Implement Mandatory B2B E-Invoicing

The EU Council has approved the proposal from the EU Commission to authorise Romania to introduce mandatory e-invoicing starting from January 2024. The decision was adopted on 25 July and published in the Official Journal of the EU on 27 July.

Romania’s e-invoicing journey

Romania has been progressing towards implementing a continuous transaction controls (CTC) e-invoicing regime for some time now. The country introduced the e-invoicing requirement for B2B transactions of high-fiscal risk products in December 2021 and B2G transactions in May 2022, both implemented as of July 2022.

In addition to these requirements, Romania aims to make e-invoicing mandatory for all B2B transactions. To this end, the country applied to the European Commission on 14 January 2022, requesting authorisation for a special measure to derogate from articles 218 and 232 of Directive 2006/112/EC, which was granted on 25 July. This measure would allow for the introduction of mandatory electronic invoicing for all transactions carried out between taxable persons established in Romania.

Key takeaways from the derogation decision

What’s next?

The Romanian authorities will need to make the necessary amendments to local legislation to implement mandatory e-invoicing, following the derogation decision received by the EU Council.

The Romanian tax authority, ANAF, is expected to issue an order within 30 days from the date of the derogation which will define the scope and timeline for the implementation of the mandate. The order will provide more specific details about the upcoming mandate.

Considering the mandate could come into effect as early as January 2024, it’s crucial that taxpayers start preparing their systems for mandatory e-invoicing from now.

Romania Authorised to Implement Mandatory B2B E-Invoicing

Romania’s e-invoicing journey

Key takeaways from the derogation decision

What’s next?

The Romanian authorities will need to make the necessary amendments to local legislation to implement mandatory e-invoicing, following the derogation decision received by the EU Council.

Considering the mandate could come into effect as early as January 2024, it’s crucial that taxpayers start preparing their systems for mandatory e-invoicing from now.

Romania’s B2B E-invoicing Mandate for High-risk Products and E-transport System

With the most significant VAT gap in the EU (34.9% in 2019), Romania has been moving towards a CTC regime to improve and strengthen VAT collection while combating tax evasion.

The main features of this new e-invoicing system, e-Factura, are described further down in this blog. Here, we’ll take a closer look at the roll-out for B2B transactions and the definition of high-fiscal risk products, as well as the new e-transport system that was introduced through the Government Emergency Ordinance (GEO) no. 130/2021, published in the Official Gazette on 18 December.

What are high fiscal risk products?

According to GEO no. 120/2021 (the legislative act introducing the legal framework of e-Factura), the supplier and the recipient must both be registered with the e-Factura system. The recently published GEO no. 130/2021 establishes an exception for high fiscal risk products and ensures that taxpayers will use the e-Factura system regardless of whether the recipients are registered.

In line with the GEO no. 130/2021, the National Agency for Fiscal Administration has issued an order to clarify which products are considered high fiscal risk products.

High fiscal risk products are defined based on the nature of the products, marketing method, traceability of potential tax evasion and degree of taxation in those sectors. Detailed explanations, as well as product codes, can be found in the Annex of GEO no. 130/2021.

The enforcement timeline of this requirement means that businesses that supply these types of products must be ready to comply with the new Romanian e-Factura system as follows:

Looking ahead: introduction of an e-transport system

Another reform that shows the intention of the Romanian authorities to combat tax fraud and evasion is the introduction of an e-transport system.

Taxpayers will be required to declare the movement of goods from one location to another in advance. Once declared, the system will issue a unique number written on the transport documents. Authorities will then verify the declaration on the transport routes.

Moreover, it is stated in the justification letter that the e-transport system will interconnect with the Ministry of Finance’s current systems, Romanian e-invoice, and traffic control, much like similar initiatives in other countries, such as India, Turkey and Brazil.

The introduction of the e-transport system is still pending as the Ministry of Finance has not yet issued the order regarding the application procedure of the system. According to GEO 130/2021, the Ministry of Finance had 30 days to do so after GEO 130/2021 was published in the Official Gazette. However, the deadline expired on the 17 January, and no announcement has been made yet. Therefore, the details of the system are still unknown.

Take Action

E-Factura – Romania’s New E-invoicing System

In March 2020, Romania launched an e-invoicing pilot program, e-Factura, to streamline the collection of taxes to improve and strengthen the collection of VAT whilst combating tax evasion.

The decision to launch e-Factura was taken after closely monitoring the Italian e-invoicing model and analysing the economic impact and efficiencies that electronic invoicing has had for both B2G and B2B transactions in Italy.

E-Factura is to implement a new e-invoicing system for B2G transactions but also lays the foundation for the extension of the platform for further developments and provides the necessary know-how to develop an e-invoicing system in B2B.

In October, Government Emergency Ordinance (GEO) no. 120/2021 introduced the legal framework for implementing e-Factura, regulating the structure of the Romanian e-invoice process and creating the framework for achieving basic technical specifications of the e-invoice system.

Further documentation regulating the use and operation of e-Factura and technical documentation such as API specifications and draft e-invoice schemas have also been published.

According to published documentation, the B2B e-invoicing process is not expected to differ from the B2G e-invoicing process, whose framework and relevant requirements are defined to a clearer standard.

Taxpayers can expect the same requirements to apply to B2G and B2B e-invoicing. However, certain aspects for B2B e-invoicing must still be clarified, such as the authentication process and requirements for accessing and using the e-invoicing system through the API for taxpayers and their service providers.

Main features of e-Factura

The Romanian e-Factura went live as a voluntary system on 6 November 2021, just six months from the announcement of the Ministry of Finance of the roll-out of a new e-invoicing system and only one month after publication of enacting legislation. Suppliers in both B2B and B2G transactions may opt to use this new e-invoicing system and issue their e-invoices in the Romanian structured format through the new system.

The Romanian e-Factura is a clearance system where e-invoices are sent, cleared, and received through the central platform. The structured invoice is issued in XML format and sent to the central platform for validation. The validation checks relate to the compliance of the structured invoice with the schema requirements, the authenticity of the origin regarding the identity of the issuer who is authenticated in the system and the integrity of the invoice content after transmission. An XML invoice that passes validation and is signed by the Ministry of Finance is considered the legal invoice.

Final remarks

The initial implementation timeline must be – by international comparison – considered short for the roll-out of an extensive new CTC system. This could be explained by the fact that the roll-out of the voluntary system is not as disruptive as that of a mandatory system.

If, or when, a mandate is announced or relevant e-invoicing incentives are introduced, a longer implementation timeline is likely to follow to facilitate for taxpayers to comply with the new requirements in time.

Take Action

Need to ensure compliance with the latest Romania e-Factura requirements? Speak to our team.

Electronic invoicing is rapidly becoming a standard business process. Governments are pushing for the adoption of B2G invoicing to optimize the public procurement process and also to provide a boost to the adoption of e-invoicing between businesses.

Apart from countries that have introduced general e-invoicing mandates to improve fiscal controls – most of which have so far been in Latin America – countries in Europe and some in Asia are looking towards the PEPPOL framework to generate both business process and fiscal benefits through standardization.

PEPPOL was established to simplify interoperability, initially for public procurement transactions, but it is being built upon to encompass fiscal reporting or invoicing ‘clearance’ concepts as well.

B2G e-invoicing in Europe with PEPPOL

As part of harmonizing and digitizing public procurement processes within the EU, governments and other public bodies under Directive 2014/55/EU are required to be able to send and receive electronic invoices in accordance with the European Standard EN-16931.

All EU Member States’ public administrations had to be able to receive e-invoices at least for public procurement transactions either by November 2018 or by April 2019, with the possibility for Member States to extend the deadline by one extra year for sub-central authorities.

Several countries have taken the opportunity to generally mandate B2G electronic invoicing when implementing the Directive 2014/55/EU, so that both the public sector and private sector supplier will be obliged to send invoices electronically in B2G transactions.

Examples of countries that have introduced B2G mandatory e-invoicing are Sweden, Croatia, Estonia, Lithuania and Slovenia, and there is an upcoming mandate in Portugal that will come into force for all companies by January 2022. Finland is aiming for the same effect through a buyer-initiated mandate for the supplier to send e-invoices.

What is PEPPOL?

The PEPPOL project was initiated in 2008. One of its main objectives was standardization of the public procurement process in European governments. PEPPOL is a set of artifacts and specifications created to enable cross-border e-procurement, supported by a multi-lateral agreement structure which is owned and maintained by the OpenPEPPOL association.

PEPPOL aims to remove complexity around interoperability, as all parties that use PEPPOL will adhere to the same regulations and technical standards to exchange e-documents. Through the PEPPOL network, companies can exchange electronic procurement documents including e-Orders, e-Advance Shipping Notes, e-Invoices and e-Catalogues via access points based on what is known as a four-corner model – meaning that suppliers and buyers are represented by service providers that process data on their behalf.

While PEPPOL is known to have its initial focus in Europe, it is expanding beyond the EU to Asia and recently has also received more attention in the Americas. Singapore was the first country in Asia and the first outside Europe to establish a PEPPOL Authority, facilitating the framework on a national level, but was soon followed by other countries.

Currently, there are OpenPeppol members in 31 countries. In addition to countries in Europe, these include Australia, Canada, China, Japan, Mexico, New Zealand, Singapore and USA, with Japan being the newest addition.

Recent developments in B2G e-invoicing

As explained above, several EU Member States took the opportunity when transposing the Directive 2014/55/EU to make B2G e-invoicing mandatory.

What is next?

Developments in B2G e-invoicing can no longer be considered separate from B2B e-invoicing. After all, many companies supply goods or services to public authorities, and investments in complying with government customer requirements under schemes like PEPPOL will drive the use of these same standards and rules in the business-to-business sector.

This also means that initiatives towards business-to-business electronic invoicing as a way for tax administrations to receive VAT-relevant data in real-time or near-real-time are increasingly influenced by concepts from the public procurement world.

This spillover goes well beyond conceptual inspiration. In Italy, for example, support for mandatory e-invoicing for VAT control purposes in 2019 was built on a massive data processing platform that was initially designed to facilitate public procurement. France and Poland are far down the path of similar architectures for their continuous transaction controls plans.

As PEPPOL becomes more popular as a standard to make country-specific public procurement methodologies more easily accessible for suppliers abroad, its concepts will increasingly penetrate the broader worlds of electronic invoicing, electronic trade and fiscal compliance.

Ministry Publishes Draft Guideline on B2B E-Invoicing

The German Ministry of Finance (MoF) released a draft guideline on 13 June 2024, detailing the upcoming B2B e-invoicing mandate which will roll out on 1 January 2025.

Although the current law only obliges taxpayers to issue and receive e-invoices for domestic B2B transactions, the MoF plans to introduce an e-reporting system for invoice details at a later stage, with no set date.

German Parliament Passes the B2B e-Invoicing Mandate

The German parliament passed the Growth Opportunities Act (Wachstumschancengesetz – the Act) concerning various tax matters on 22 March 2024, including a nationwide B2B electronic invoicing mandate.

The Act was originally scheduled for a vote at the end of 2023, with enforcement planned for January 2024. However, the lack of consensus between the Bundestag and Bundesrat – lower and upper houses of the parliament, respectively – in various provisions of the Act delayed its finalisation.

The Mediation Committee of the Bundestag and Bundesrat concluded its negotiations about the Act on 21 February 2024, and the Bundestag approved the amended text on 23 February. The Bundesrat’s vote on 22 March completed the parliamentary process.

Mandatory receipt of e-invoices for domestic B2B transactions will be required for all businesses. Additionally, businesses will have the option to issue e-invoices that are compliant with the approved syntaxes based on CEN 16931 voluntarily, without the Buyer’s consent.

Following this parliamentary approval, the Act will be signed by the President and subsequently published in the official gazette.

Additional Information Released for Germany’s B2B E-Invoicing Plans

In October 2023, The Federal Ministry of Finance (MoF) released additional information regarding electronic invoicing, one of the proposed tax measures included in the Growth Opportunities Act.

If the MoF’s proposal, with the details provided in the preceding updates, becomes law, the following will be applicable:

Besides MoF clarifications, the upper house of the German Federal Parliament, Bundesrat, addressed the Act during its session on 20 October. While the Bundesrat supports the introduction of mandatory e-invoicing, it has proposed a two-year delay so the mandatory receipt of electronic invoices commences on 1 January 2027.

In the next steps of the process, the lower house of the Parliament, Bundestag, is expected to vote on the Growth Opportunities Act in mid-November. The upper house’s vote should take place in mid-December.

Federal Government Approves Mandatory B2B E-Invoicing and Extends Voluntary Phase

On 30 August, the German Federal Government approved the draft act known as the “Growth Opportunities Act,”. The act consists of several provisions on different tax matters, including the introduction of a nationwide B2B e-invoicing mandate.

The draft bill approved by the government does not change the previously communicated framework, however it extends the voluntary phase by one year. The voluntary phase will last until January 2027 for small companies with annual turnover of 800,000 EUR or less in 2025.

Next steps for the e-invoicing mandate

The Federal Parliament and the Federal Council are expected to give their approval to this reform by the end of 2023.

German Regulatory Changes For Mandatory E-invoicing

The German Federal Ministry of Finance (the Ministry) shared the draft “Growth Opportunities Act” with significant German business associations on 14 July 2023. This act introduces amendments to VAT law to implement mandatory e-invoicing, along with other national and international tax-related proposals.

Currently, issuing an electronic invoice requires the buyer’s consent. Proposed amendments will change this, with invoices for transactions between German resident taxpayers – known as domestic B2B transactions – required to be electronic.

The act also introduces a new definition for e-invoices. An electronic invoice is defined as an invoice issued, transmitted and received in a structured electronic format that enables electronic processing. An e-invoice must also comply with the eInvoicing standard of the European Committee for Standardization (CEN), EN 16931.

The Ministry previously shared its plan to roll out mandatory e-invoicing as of January 2025. This date remains the same in the amendment proposals, with transitional measures giving taxpayers some time and flexibility to comply with the new requirements:

Even though this act does not include any provisions for a transaction-based reporting system, it notes that such a reporting system for B2B sales will be introduced later.

European Council issues derogation decision

The European Council authorised Germany to introduce special measures regarding mandatory electronic invoicing with its decision dated 25 July 2023.

Germany received the derogation from the VAT Directive from 1 January 2025 to 31 December 2027 or, if an EU directive is adopted earlier than planned, until the national transposition of the VAT in the Digital Age (ViDA) directive into German law.

Germany Takes Another Step Towards CTC by Proposing an E-Invoicing Mandate

The German Federal Ministry of Finance sent a discussion proposal for the introduction of mandatory B2B e-invoicing in Germany on 17 April to significant German business associations.

The business associations are requested to provide their opinion on matters such as the following by 8 May:

The proposed e-invoicing mandate is a step toward implementing a real-time transaction-based reporting system for creating, verifying and forwarding e-invoices. This system is not part of the current proposal, but – as this is directly related to an e-invoice mandate – the ideas for such a system are laid out at a high level by the Ministry of Finance.

The final aims to provide a uniform electronic transaction-based reporting system for national and cross-border B2B transactions. The invoice exchange would be done via a central or private platform.

No verification of the full invoice content would be performed or interruption of forwarding of the invoice – however, the issuer’s platform would check (“Plausibilitätsprüfungen”) that all mandatory fields are present, whether structure and syntax are EN-compliant and so on.

The reporting of the invoice would be in real-time at the same time as the invoice is sent so that the supplier would not have to initiate two transactions.

The Ministry of Finance states the aim is for the new system to be aligned with ViDA but that Germany counts on having to use a derogation from the provisions of the VAT Directive to introduce the e-invoice mandate, should ViDA not be adopted in time.

While many have speculated around Germany going down the path of the Italian e-invoicing system, the message from the Ministry of Finance seems rather to be that the cues are taken from the French system, with the use of a centralised platform complemented with private service providers who serve to channel the invoices.

Need to discuss how Germany’s proposal to introduce continuous transaction controls could affect your business? Speak to our tax experts.

Germany Steps Closer to Introducing Continuous Transaction Controls

There’s been increased discussion among different institutions about the introduction of continuous transaction controls (CTCs) in Germany to combat tax fraud and boost the competitiveness of the German market in Europe.

Supporters of a CTC reform

Proponents of the introduction of CTCs in Germany include, among others: the parliamentary group of the business-friendly Free Democratic Party (FDP), the German Association for Electronic Invoicing (VeR) and an independent judiciary body, the German Bundesrechnungshof (Federal Audit Office).

Recently, we’ve seen this topic included in tax policy negotiations of the coalition partners that emerged from the recent German government elections (the Social Democratic Party (SPD), FDP, and the Green Party).

While the discussions remain at a conceptual level, the new potential coalition parties display political will for reform in this area.

Proposals on CTC reform

Specifically, the German Bundesrechnungshof proposed to the Ministry of Finance a real-time reporting system leveraging blockchain technology as an efficient system to combat VAT fraud. However, their proposal wasn’t accepted on the grounds that a cost-benefit analysis is required before such measures are proposed and implemented.

As part of a parliamentary process the FDP called for “an electronic reporting system comparable to the Italian SDI to be introduced nationwide as quickly as possible, for the creation and testing and forwarding of invoices”. The leading German industry association, the VeR, welcomed this proposal recognising its numerous advantages to companies and the German economy.

A VeR study on whether the Italian model can be used as a blueprint for Europe explains that although it doesn’t seem to have contributed significantly to reducing Italy’s VAT gap, the advantages of e-invoicing to companies and the Italian economy are convincing. It concludes that the Italian clearance system can serve as a model for the digitization of VAT in Germany, if not in Europe. In addition, the VeR experts offer their knowledge to develop such a CTC system in Germany.

Conclusion: Will Germany be the next EU country to introduce CTCs?

It seems that the idea of introducing a CTC system in Germany – following in the footsteps of fellow Member States like Italy, France and Poland – is gaining traction and might not be far from becoming reality if the coalition partners indeed manage to reach a coalition agreement to succeed the currently ruling party.

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Ensure VAT Compliance Within Global Supply Chains

Vat Services

Transforming global supply chains

From food distribution to automotive manufacturing and logistics, companies are distributing their supply chain activities around the world to reduce costs, expand into lucrative markets and launch new products faster.

165 countries worldwide levy a form of VAT. Each has its own set of rules for both compliance and reporting. From differences in local VAT legislation to evolving international VAT reporting trends, if you trade cross-border you’ll be subject to change. This may create new requirements for invoicing, VAT registrations and VAT reporting obligations.

Companies that ignore the importance of VAT compliance could easily erase the benefits of a global supply chain, disrupting operations and cash flow, and negatively impacting the bottom line in the process.

This is why VAT compliance needs to be a critical factor in supply chain planning.

Cross-Border Supply Chain Review and Transaction Mapping

A holistic view of your full business activity, mapped against the changing legislative, political and economic landscape, to deliver clarity to all functions within your business so you can trade with confidence.

Download our infographic for full details of our cross-border supply chain review and transaction mapping service.

Ensure global VAT compliance and minimise risk

VAT Reporting

Sovos’ VAT reporting meets extensive tax authority output requirements across both EU and non-EU jurisdictions including VAT returns, EC Sales and Purchase Lists, Intrastat Declarations, complex reports (including SAF-T) and other country specific declarations.

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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’re ready to handle VAT requirements in the markets you intend to dominate tomorrow.

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Benefits of Sovos solutions for supply chain VAT compliance

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Protect global supply chains

Guidance to help with your tax strategy to ensure VAT compliance and maximise the benefits of an efficient global supply chain.

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Ensure your supply chains are VAT compliant

Sovos provides the global expertise you need to manage regulatory requirements across all borders

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Guide

Understanding VAT Obligations: European Events

Global events are popular once again and conferences and exhibitions often create VAT registration obligations in different European Union Member States that your business operates in.

Navigating these complex place of supply rules can be challenging. Legislation varies country-to-country and the type of event you’re organising affects this. Download our helpful guide to understand what your VAT obligations are.

Place of Supply Rules

When determining where tax applies to an event, it’s important to consider the place of supply rules.

These can be confusing and hard to interpret. When organising events and conferences, there are two basic rules to think about:

Does the service being supplied fall under the general place of supply rules, in which case, if the supply is B2B, VAT is due where the customer is based. In this scenario if the customer is established outside the UK, then the customer has to account for VAT on behalf of the supplier in the country they are established in under the reverse charge rules in the EU or potentially equivalent if non-EU.
Does the supply fall under any of the exceptions to the main rule? The most common example being admission to conferences and events whereby VAT is due where the event is held.

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As you can see, VAT and events is a complex affair.

Admission to events, exhibitions and conferences in the EU is subject to VAT in the country where the event takes place. In addition to admission, other considerations include stand rental, local suppliers, sponsorship packages and catering services.

Our guide covers these topics:

VAT registration – where should I register and what VAT rules should I consider?
Event organisers – what VAT liabilities apply and how does it affect clients?
Online events – how do the rules differ for online events, both for B2B and B2C?
Hybrid events – are these taxed differently?
VAT reclaims – what claims are possible and what VAT can I recover?

Tour operators margin scheme (TOMS)

In addition to these common concerns, the Sovos Understanding VAT Obligations: European Events guide also explores TOMS – the tour operators margin scheme.

If a business buys in and sells services such as hotel accommodation, passenger transport or excursions to its clients/delegates in its own name, TOMS may well apply. The supply of services that fall under the scheme receive a different tax treatment to most supplies of services. They can require the undertaking of a complex calculation.

Also covered is a summary of non-EU events and how to apply VAT when hosting an event outside of the European Union.

For example, some non-EU countries will apply similar rules to the EU and a registration may be

Needed. However the issues will often be complex and require a business to carefully consider the organisation of the event at the outset. VAT recovery in non-EU countries will also vary and not all countries will allow refunds to overseas businesses.

Compliance peace of mind with a complete, global VAT Managed Service from Sovos

Whatever your VAT implications, Sovos has the expertise to help you navigate your global events and the complexities of cross-border VAT obligations. Our VAT Managed Services ease your compliance workload while mitigating risk wherever you operate today. In addition, we ensure you’re ready to handle the VAT requirements in the markets you intend to lead tomorrow.

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Talk to an expert.

Ask our VAT experts how Sovos VAT Managed Services can ease your compliance needs.

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Tax in Romania: All you need to know about Romania’s VAT regime

Romania introduces measures to digitally transform its tax administration and close the VAT gap

Seeking to close its VAT gap, the Romanian tax authorities have been discussing the idea of implementing measures to combat the country’s ever-increasing VAT gap. After years of discussion, the country announced its Standard Audit File for Tax (SAF-T) initiative which began in January 2022.

Have questions? Get in touch with a Sovos expert on tax in Romania

Tax in Romania: Romania’s SAF-T reforms

The Organisation for Economic Co-operation and Development (OECD) introduced SAF-T in 2005, and Romania joins a long line of European Member States adopting this form of tax legislation.

From 1 January 2022, companies in the General Directorate for the Administration of Large Taxpayers list must report their VAT electronically to the Romanian tax authorities. Transaction and accounting data must be reported through Declaratiei Informative D406 (SAF-T Romania).

This move is not uncommon and follows the trend being seen across the EU with tax administrations requiring increasingly granular data in real-time in Italy, Spain and Hungary paving the way for pre-populated VAT returns.

For more information see this overview about SAF-T in Romania.

Romania SAF-T quick facts

D406 must be submitted electronically in PDF format with an XML attachment and electronic signature. The combined file size must not exceed 500MB for it to be accepted at the portal.
Submission deadlines can be periodically, annually or on demand.
There is currently a six-month grace period from 1 January 2022.
Asset information is expected to be required annually, though no date has officially been announced.

Continuous transactions control (CTC) reforms

The ANAF, Romania’s tax authority, has introduced the RO e-Invoice system. It is optional in the first phase, aiming as a first step at the relationship between companies and the state (B2G) and as a second step, the B2B transactions with high-risk products.

The ultimate goal, as is often the case when a tax administration wants visibility of more data so they can take steps to close their national VAT gap, looks set to be a system that ‘clears’ each supplier invoice prior to it being sent to a buyer.

In this respect, as of 1 July 2022, suppliers will be obliged to use the RO e‑Invoice system in B2B transactions, including high fiscal risk products. Moreover, Romania wants to expand the implementation of e‑invoicing to a broader economy as a next step.

Finally, the Ministry of Finance has announced the introduction of a mandatory e-transport system for monitoring certain goods on the national territory from 1 July 2022. The transportation of high-fiscal risk products must be declared in the e-transport system a maximum of three calendar days before the start of the transport, in advance of the movement of goods from one location to another.

The system will generate a unique code (ITU code) following the declaration. This code must accompany the goods being transported in physical or electronic format with the transport document. Competent authorities will verify the declaration and the goods on the transport routes.

For more information see this overview about e-invoicing in Romania.

Romania CTC quick facts

E-invoices must be submitted in XML format.
Use of the RO e-Factura system will be mandatory for high-fiscal risk products in B2B transactions from 1 July 2022. High-risk fiscal products include:
- Vegetables, fruits, roots and edible tubers, other edible plants
- Alcoholic beverages
- New constructions
- Mineral products (natural mineral water, sand and gravel)
- Clothing and footwear
Suppliers of high fiscal risk products must use the RO e-Factura system even if their buyers are not registered with the system.
The transportation of high-fiscal risk products must be declared in the e-transport system.

Mandate rollout dates for SAF-T and CTCs

Romania SAF-T

September 2021: Voluntary test period began with D406T allowing taxpayers to become familiar with the data extraction and mapping requirements.

January 2022: Large taxpayers included in the Romanian tax authority’s list in early-2021 must comply with new SAF-T regulations.

1 July 2022: Large taxpayers added to the list in November 2021 must comply with the new SAF-T regulations.

1 January 2023: Medium taxpayers must begin submitting SAF-T data.

1 January 2025: Small taxpayers must begin submitting SAF-T data.

Romania CTC

March 2020: Pilot program launched.

November 2021: Voluntary participation of B2G scheme.

1 April 2022: Voluntary participation of suppliers in B2B transactions including high-fiscal risk products scheme.

1 July 2022: Mandatory e-invoicing for B2B suppliers of high-fiscal risk products and mandatory issuance of e-transport document for the transport of high fiscal risk products.

2023: Mandate expansion to other B2B flows expected.

INFOGRAPHIC

Romania’s SAF-T Requirements

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

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Romania CTC Requirements

Understand more about Romania’s CTCs including when businesses need to comply and how Sovos can help.

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How Sovos can help with tax in Romania

Need help to ensure your business stays compliant with the evolving VAT obligations in Romania?

Learn how Sovos’ solutions for Romania SAF-T reforms and e-invoicing VAT compliance can help companies stay compliant.

Infographic

France – Mandatory B2B
e-Invoicing 2024

Faced with a VAT gap of nearly €13 billion, France is introducing mandatory e-invoicing for business-to-business (B2B) transactions from 2024, as well as e-reporting of additional data types. Applying to all companies established or, for e-reporting, VAT-registered in France, this new mandate is complex. It will also require significant planning.

According to the ICC, businesses will need at least 12-18 months to prepare for such continuous transaction control (CTC) mandates so it’s clearly important to start planning now to prepare for the change.

This infographic provides answers to your pressing points surrounding the mandate including:

What your company needs to do to comply with the new mandate
When your business needs to comply by
Other key information surrounding the mandate requirements
How Sovos can help

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Mandate aim

The aim of the new mandate is to increase efficiency, cut costs and fight fraud via access to more transaction data. All B2B invoices will need to be transmitted through a central platform. This will be either directly or via registered service providers connected to the platform.

The new mandate will provide the French tax authority with access to all VAT relevant data related to B2C and B2B transactions, so it’s crucial to adjust your business systems and processes to avoid penalties and fines.

France is the latest country to adopt CTCs, as tax authorities across the world look to gain greater insight and close the VAT gap. The proposed requirements come into effect during the years 2024-2026.

France e-invoice and e-reporting rollout dates

July 2024: All companies, irrespective of size, must accept to receive e-invoices under the new rules. The largest 300 companies will be subject to the B2B e-invoice issuance mandate and wider e-reporting mandate. The e-invoicing mandate does not apply to B2C and cross-border invoices. However, there is an obligation to report those transactions so the tax administration has full visibility.

January 2025: Obligations will apply to a further 8,000 medium-sized companies.

January 2026: All remaining medium and small companies will be in scope of the mandate.

How Sovos can help

As France looks set to become the next country in Europe to introduce CTCs with its B2B e-invoicing and e-reporting mandate in 2024, it’s crucial that businesses prepare for and understand their new VAT obligations.

Sovos serves as a true one-stop-shop for managing all e-invoicing compliance obligations in France and across the globe. Sovos uniquely combines local excellence with a seamless, global customer experience.

Our scalable, end-to-end solution ensures e-invoicing and e-reporting compliance in not only France but also 60+ other countries.

Sovos is purpose built for modern tax – an evolving, complex landscape in which global tax authorities are requiring increased visibility and control into business processes, in many cases at the transaction level.

Tax authorities around the globe have embraced digitization to speed up revenue collection and reduce fraud while closing tax gaps. This is the catalyst for companies to move complete, connected and continuous tax compliance software into their digital financial core.

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Find out how Sovos can help you prepare for this e-invoicing mandate

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As country general manager, Elçim is responsible for all Sovos operations within Turkey and plays a key role in driving the strategy for the region. She thrives on success and fast growth having worked for companies including Oracle and Tech Mahindra.

Highly motivated, she strives for continued improvements not only for customers but also within Sovos, and for her team through collaboration and best practices. Elçim firmly believes that by removing the pain of tax compliance, companies can focus on their goals which in turn helps shareholders, local communities and the economy.

A natural leader, Elçim fosters key strategic relationships and has a strong teamwork ethos. She views challenges as algorithms and is always analysing and evaluating scenarios to achieve greater success.

In her first year with Gartner, Elçim was awarded the prestigious and rare Winner’s Circle and Eagle Award for outstanding sales achievements.

To relax, Elçim enjoys spending time with her husband, cooking with her daughters and collecting antique books. Curious by nature and with a passion for being outdoors, she loves to travel and explore different places and cultures. She is fluent in both English and French.

On 26 November, Black Friday presents another opportunity for retailers to drive e-commerce sales and boost revenue. Retailers will be working hard to prepare the best deals to entice shoppers, but do you know where you stand with VAT compliance in the EU?

In our latest webinar, learn how the new EU e-commerce VAT rules will apply to retail businesses ahead of this year’s annual shopping event. In addition, we’ll explain how this year B2C retailers can – for the first time in respect of goods – account for VAT on Black Friday sales in the EU using the VAT One Stop Shop (OSS) schemes. These schemes can greatly simplify VAT compliance by removing the need to register for VAT in multiple Member States.

Join Consulting Services Director Andy Spencer and Strategy Programs Director Anna Higgins in this webinar to learn:

Need more information? Sovos’ VAT managed service provides a full OSS service for your business. Let us handle the initial registration, monthly filling and any potential intermediary requirements. Click here to find out more.

The VAT Import One Stop Shop (IOSS)

Simplify EU VAT with IOSS in one single return

The Import One Stop Shop (IOSS) is here. Simplify your EU VAT compliance into a single VAT return – grow your sales in the EU, avoid fines and penalties and enhance the customer experience by removing unexpected fees for buyers.

Since its launch, we’ve been helping e-commerce businesses of all sizes make the switch to the new scheme. Our IOSS service provides you full access to our VAT compliance software solutions and a team of indirect tax specialists. Let us handle the initial registration, monthly filing and intermediary requirements so you can continue to focus on what you do best.

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What is IOSS?

Since July 2021, all goods imported into the EU, regardless of value, are subject to VAT. As of the same date, businesses selling imported goods valued at less than EUR 150 can now use IOSS to collect, declare and pay VAT to the local tax authorities in a single VAT return. IOSS simplifies your EU VAT compliance – unlock the full potential of the EU e-commerce market, maximise your cash flow, and provide an excellent customer service.

In order to obtain a registration, non- EU businesses need to appoint an intermediary. They can then obtain an IOSS VAT registration number in the Member State where the intermediary is established.

Full IOSS service

Let us handle the registration process, obtain a VAT number for your business and file the monthly IOSS returns. All included, no hidden fees.

We act as your IOSS Intermediary

Non-EU businesses can only register for the scheme through an intermediary. We can act as your intermediary for you.

What are the benefits?

Goods move through customs faster – IOSS calculates and accounts for VAT ahead of time instead of applying upon import
With an IOSS VAT registration number, the VAT is accounted for at the point of sale
Reduced charges for customs clearance – without an IOSS VAT registration, import VAT will be due when the goods are cleared in the EU and there are likely to be higher customs clearance costs

Quick Facts

The IOSS simplification is available to use now for any qualifying transactions
The scheme requires additional record-keeping: businesses must retain more detailed records of transactions than previously
IOSS VAT declarations are monthly
Businesses can correct previous IOSS VAT returns in the next one
Non-EU businesses may need to appoint an intermediary and obtain an IOSS VAT registration in the intermediary’s country of establishment in the EU

Depending on the nature of business activity/supply chains, non-EU retailers may need to report under the Union One Stop Shop (OSS) and non-Union OSS schemes.
Businesses need at least one ‘standard’ VAT registration and possibly more due to warehouses or similar if they are to use Union OSS. No other VAT registrations is needed for IOSS or non-Union OSS.

Penalties and Fines

Local tax authorities can issue penalties and fines to businesses if returns and payments are not submitted on time. In addition, repeated noncompliance can lead to a two-year exclusion from the scheme. Businesses would then need to register for VAT in all Member States where they import goods or have alternative arrangements in place to deal with the import VAT.

Businesses that want to use IOSS may require an intermediary. If an intermediary is required you can’t do it alone. Our comprehensive service handles all your registration, filing and intermediary requirements.

It’s time to get EU VAT compliance right with IOSS and Sovos

Our IOSS service gives you full access to our team of indirect tax specialists and VAT compliance software. Let us handle the initial registration, monthly filing and intermediary requirements so you can focus on what you do best.

How Tax Compliance Impacts Supply Chain Globalisation

Ebook

How Tax Compliance Impacts Supply Chain Globalisation: The VAT Effect in Europe and Beyond

VAT compliance throughout a global supply chain is paramount. It has never been more important to get right.

165 countries worldwide levy a form of VAT. Each has its own set of rules for both compliance and reporting.

Some governments are also now placing increased emphasis on indirect tax and changes to their tax regulations, with technology-enabled enforcement efforts.

Download this e-book for an in-depth look at the vital elements needed for today’s VAT compliance. There’s guidance to help with your tax strategy so you can maximise the benefits from an efficient global supply chain.

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Your VAT compliance strategy

Tax shouldn’t impede growth, and it doesn’t have to if you have a proactive tax compliance strategy. So to minimise risk, VAT needs to be a critical factor in supply chain planning.

In this e-book, we take a detailed look into crucial elements of VAT compliance, with clear explanations to inform your tax strategy and to also help you reap the full benefits of an efficient global supply chain. In detail, we look at:

What factors should you consider in VAT compliance planning? These include import VAT, local supply of goods, intra EU deliveries, chain transactions and triangulation, VAT reverse charge, in addition to zero-rated vs exempt goods.
What are the impacts of these types of tax and transactions? How these types of tax and transactions affect your business, when they apply, and what you need to do to avoid noncompliance.
What are the new and changed regulations and what do they mean for businesses? Many governments have dramatically changed their tax regulations, introducing continuous transaction controls (CTCs) and the Standard Audit File for Tax (SAF-T) so tax authorities can better detect errors in tax reporting, and also look for discrepancies.

The cost of getting it wrong

Failure to comply creates both risk and consequences for businesses such as:

Disrupting operations. Noncompliance can disrupt operations, putting supplier relationships and supply chain stability on the line. Consequently, goods may be delayed at customs borders goods may be delayed at customs borders if formalities are not complied with.
Delays in VAT refunds. Businesses could have their VAT refunds delayed, tying up significant sums of money that could instead be put toward paying suppliers or investing in innovations.
Fines and penalties. Errors can result in penalties or fines of up to 200% of VAT owed. This directly impacts the bottom line and also transforms VAT from a neutral to a hard cost.

The right technology for the job

VAT is becoming more complex and governments are digitizing indirect taxes. Therefore, businesses need to be armed with the right technology to simplify and streamline global tax obligations.

In the ever-changing legislative environment, businesses must also be able to maintain both control and visibility of their global tax obligations effectively. They need to use insights to predict what will change next.

With standardisation, automation and new levels of data, Sovos combines unparalleled regulatory expertise with technology that supports compliance by enabling:

Complete, continuous management of VAT determination and reporting, as well as business-to-government reporting in every country in which your business operates.
Comprehensive functional and geographic coverage of VAT reporting, CTCs, compliance archiving, and determination around the globe.
Integration with complex ERP, billing systems, POS, P2P and EDI systems as CTC and other VAT requirements create a much broader footprint on transactional and record-keeping systems.

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Portugal’s VAT Regime

Portugal pushes further ahead with VAT digitization

Back in 2019, Portugal passed a mini e-invoicing reform consolidating the country’s framework around SAF-T reporting and certified billing software.

Since then, a lot has happened: non-resident companies were brought into the scope of e-invoicing requirements, deadlines were postponed due to Covid, and new regulations have been published.

Get the information you need

Quick facts

Use of certified billing software is mandatory for the creation of all types of invoices (paper or electronic); this is understood to be the taxpayer’s ERP system. Since 2021, non-resident companies with a Portuguese VAT registration have also been obligated to issue invoices and other fiscally relevant documents via certified billing software.
A QR code should be included in all invoices issued through certified billing software. Technical specifications about the content and placement of the code in the invoice are available on the tax authority’s website.
A unique ID number (ATCUD) must be included in all invoices and fiscally relevant documents. The ATCUD is a number with the following format ‘ATCUD:Validation Code-Sequential number’.
Public entities must receive e-invoices whilst companies must send e-invoices since 1 July 2021. E-invoices must be issued electronically in the CIUS-PT format and transmitted to the public administration through one of the available web services.
A qualified electronic signature or seal, or the use of EDI with contracted security measures is mandatory for all electronic invoices from 1 January 2026.
Billing SAF-T has monthly submission requirements and must be completed with the normal VAT return by the 5^th (until the 8th during the year of 2023 due to a grace period) day of the month following the reporting period. The Billing SAF-T may be submitted via the e-fatura portal or through web services.
Accounting SAF-T: annual submission is mandatory from 2027 via the tax authority´s portal which will enable automatic pre-filling of the VAT IES´ Annexes.

Important dates

1 July 2021: Non-resident taxpayers required to use a certified billing software to issue invoices and other fiscally relevant documents.
Issuance of B2G e-invoices:
1 January 2021: Phased rollout of mandatory issuance of e-invoices in the CIUS-PT format for large suppliers of the public administration.
1 January 2022: QR code requirement implemented for invoices and other fiscally relevant documents issued through a certified billing software.
1 January 2023: Unique ID number (ATCUD) is mandatory on all paper and electronic invoices.
1 January 2023: Non-resident taxpayers required to submit Billing SAF-T monthly.
2026 fiscal year: Mandatory annual submission of accounting SAF-T for residents and non-residents (first submission occurs in 2027 regarding the fiscal year of 2026)
1 January 2025: Mandatory B2G E-invoicing extended to include small and medium-sized businesses.
1 January 2026: Qualified electronic signature/seal or EDI mandatory for electronic invoices.

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The Zakat, Tax and Customs Authority (ZATCA) announced the finalised rules for the Saudi Arabia e-invoicing system earlier this year, announcing plans for two main phases for the new e-invoicing system.

The first phase of the Saudi Arabia e-invoicing system is set to go live from 4 December 2021.

With the mandate just around the corner, we’ve highlighted the latest news on a reform that is still evolving.

The Detailed Guidelines

The latest documentation communicated on the requirements was the Detailed Guidelines, published in August 2021. The Detailed Guidelines provided clarity on the following topics:

Overview of readiness for the first phase

The first phase requirements are not as complex as the second phase requirements that will be enforced from 1 January 2023.

The ZATCA has been successful in providing taxpayers with the necessary information. The go live date is set to go ahead as planned and a delay is not currently expected.

Domestic B2B Invoices	2024	2025	2026	2027	2028
Paper Invoices	Allowed			Prohibited for large taxpayers	Prohibited for all
E-invoices in EN 16931 format	Allowed with Buyer’s consent	Allowed		Mandatory for large taxpayers	Mandatory for all
EDI invoice not EN 16931 format	Allowed with Buyer’s consent				Allowed if are interoperable with the CEN, if the required information can be extracted into CEN
Other invoices in e-form (e.g. PDF, JPEG)	Allowed with Buyer’s consent			Allowed if are interoperable with the CEN, if the required information can be extracted into CEN** Please note that exchange on EDI is permitted if the e-invoice aligns with European standards.

Changes in supply chain

Changes in legislation

Managing new mandates

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Union OSS – interaction with Intrastat

Unions OSS and other declarations

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Upcoming Submission Deadline for Polish Claims Report

Poland: Withholding tax not due on insurance income

Poland: Transitioning from the Insurer Ombudsman Charge (IOC) to the Financial Ombudsman Charge (FOC)

This is what we learnt about the process:

Some questions remained:

Poland: New Ombudsman Charge introduced for 2023

How are FOC and IOC similar?

What is different about the Financial Ombudsman Charge?

Anomalies around the Ombudsman Charges in Poland

Poland: Insurance Ombudsman Contribution Reporting

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Why do tax authorities carry out audits?

Preparing for an audit

Managing the audit process

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Details on technical specifications

Submission method

What’s next?

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Romania Issues Last-Minute Amendments to B2B E-invoicing Regulations

1. Exemptions from the e-reporting and e-invoicing mandate are clarified

2. New five-calendar-day deadline to report e-invoices from July 2024

3. Penalties for businesses in the scope of e-invoicing

Romania Publishes Draft Legislation For B2B E-invoicing Mandate

Romania’s new B2B e-invoicing mandate timeline:

Romania Authorised to Implement Mandatory B2B E-Invoicing

Romania’s e-invoicing journey

Key takeaways from the derogation decision

What’s next?

Romania Authorised to Implement Mandatory B2B E-Invoicing

Romania’s e-invoicing journey

Key takeaways from the derogation decision

What’s next?

Romania’s B2B E-invoicing Mandate for High-risk Products and E-transport System

What are high fiscal risk products?

Looking ahead: introduction of an e-transport system

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E-Factura – Romania’s New E-invoicing System

Main features of e-Factura

Final remarks

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B2G e-invoicing in Europe with PEPPOL

What is PEPPOL?

Recent developments in B2G e-invoicing

What is next?

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Ministry Publishes Draft Guideline on B2B E-Invoicing

German Parliament Passes the B2B e-Invoicing Mandate

Additional Information Released for Germany’s B2B E-Invoicing Plans

Federal Government Approves Mandatory B2B E-Invoicing and Extends Voluntary Phase

Next steps for the e-invoicing mandate

German Regulatory Changes For Mandatory E-invoicing

European Council issues derogation decision

Germany Takes Another Step Towards CTC by Proposing an E-Invoicing Mandate

Germany Steps Closer to Introducing Continuous Transaction Controls

Supporters of a CTC reform

Proposals on CTC reform

Conclusion: Will Germany be the next EU country to introduce CTCs?

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Ensure VAT Compliance Within Global Supply Chains

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Ensure global VAT compliance and minimise risk

VAT Reporting

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Benefits of Sovos solutions for supply chain VAT compliance

Monitor 60+ countries to track the diverse range of emerging legal frameworks and evolving specifications

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France – Mandatory B2B
e-Invoicing 2024