E-invoicing systems in the Middle East and North Africa are undergoing significant transformations, aiming to modernise the financial landscape and improve fiscal transparency. Recent updates have seen numerous countries implementing electronic invoicing solutions designed to streamline tax collection and reduce VAT fraud.
E-invoicing Trends in the Middle East
Saudi Arabia has made significant strides in e-invoicing, leading the way in the Middle East. The country has advanced to the second phase of its e-invoicing mandate where B2B invoices require clearance from the tax authority. As of November 2023, the Zakat, Tax and Customs Authority has announced eight waves of its Phase 2 integration – targeting taxpayers with varying annual turnover thresholds.
While Israel is not adopting a mandatory e-invoicing regime, the country is moving towards requiring taxpayers to submit their invoice data electronically. This move aims to tackle the issue of fictitious invoices. The Israeli invoicing model, a continuous transaction control (CTC) clearance system, is slated for a phased implementation starting in 2024.
The United Arab Emirates has also joined the movement, announcing its ‘e-billing system’ to implement mandatory e-invoicing for B2B transactions in phases.
In other jurisdictions in the region, Oman is poised to implement mandatory e-invoicing in 2024 and Bahrain has invited technology vendors to construct its central platform for an upcoming e-invoicing system. Lastly, Jordan is reported to be exploring the adoption of a mandatory e-invoicing regime.
E-invoicing Trends in North Africa
Egypt introduced a mandatory e-invoicing system for B2B transactions in 2020 with a phased roll-out schedule but, as of April 2023, all companies in Egypt are covered by this mandate. In addition to e-invoicing, there is an e-receipt system in Egypt for B2C transactions.
Tunisia’s mandatory e-invoicing system, which rolled out in 2016, covers B2G and some B2B transactions. Also, Morocco is expected to join the ranks of countries where mandatory e-invoicing applies.
With the VAT landscape in the Middle East and North Africa rapidly evolving, tax digitization regulations necessitate close and continuous monitoring.
Read our E-invoicing Guide for more in-depth information about electronic invoicing’s development and adoption, globally.
Update: 24 June 2020 by Selin Adler Ring
The concept of e-invoicing as a vehicle for increased tax control and cost reduction, continues to spread into new areas of the world. The number of countries adopting e-invoicing regimes are rising in the Middle East and North Africa as both governments and businesses by now are well-aware of the benefits. While some countries in these regions have already embraced e-invoicing, others are on their way to adopt Continuous Transaction Controls (CTC) systems. Even though the countries in these regions follow different approaches, the initial goal is the same: digital transformation of tax controls.
E-invoicing Trends in the Middle East
In the Middle East there are many moving pieces. The United Arab Emirates, Saudi Arabia, Oman and Qatar have already permitted e-invoicing. Following the introduction of VAT in January 2018, Saudi Arabia also started promoting a national electronic invoicing platform called ESAL. Oman and Qatar have yet to implement VAT but once they have, e-invoicing will be even more significant for these countries and they’ll take inspiration from other countries in the region that are moving towards CTC regimes.
In Jordan, the tax authority is conducting research to analyze CTC regimes in different countries, which is a strong signal that they too may very soon announce their intention to introduce a new CTC e-invoicing system.
Israel has recently revealed its new CTC regime plans and advised accounting software vendors to prepare for the upcoming CTC regime. After Israel’s adoption of a CTC regime, developments in the region will accelerate in a domino effect.
E-invoicing Trends in North Africa
Tunisia is a pioneer for e-invoicing. Since 2016, electronic issuing of invoices has been regulated in the Finance Law and e-invoicing is mandatory for larger taxpayers. The Tunisian e-invoicing regime requires e-invoices to be registered by a government appointed authority and therefore falls within the CTC framework.
Another country quickly moving towards a CTC framework is Egypt. The Egyptian Government has for some time been assessing best practices for CTC regimes. Finally, in April 2020, a decree mandating e-invoicing for all registered businesses was published in the country. However, the details of the e-invoicing system are yet to be disclosed. The technical controls and conditions to be adhered to and the stages of implementing the e-invoice system will be defined by the Egyptian Tax Authority.
Morocco has also been watching different e-invoicing systems. After Egypt’s e-invoicing initiatives, the Moroccan Government is a likely candidate to make a similar move towards mandating e-invoicing for taxpayers registered in the country.
It’s clear that e-invoicing, in all its shapes and versions, is a trend that is becoming increasingly popular across the Middle East and North Africa where the introduction of CTC regimes is expected in the coming years. Although there are likely to be similarities in the measures taken, each country has its own unique characteristics when it comes to taxation, tax control challenges and legal culture, and as a result diversity in each regime should be expected.
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Navigating Location of Risk can be quite daunting. This ebook is your compass, helping you sail smoothly to IPT compliance. With use cases and examples to follow, this ebook will help you successfully navigate one of the more complex elements of insurance premium tax.
This ebook will help you navigate Location of Risk and the rules that apply in the 27 member countries of the European Union (EU), the European Economic Area (EEA) and the UK.
It guides you through the countries where the rules apply, the legal framework that prompted the rules, examples of the criteria used to determine Location of Risk, local implementations that differ from the norm and how premium allocation works in practice.
Geopolitical background
Legal framework
Solvency II Directive 2009/138/EC, Article 13(13) including examples of the four criteria to determine Location of Risk
Solvency II Directive 2009/138/EC, Article 157(1)
Local implementation of Location of Risk rules – Switzerland, Liechtenstein, United Kingdom and Germany
Following the Solvency II Directive 2009/138/EC, Article 13(13) enables insurers to identify the correct Location of Risk. This directive, amongst other things, defines the four criteria to determine which territory the risk is deemed to be located in and where it should be taxed.
After identifying Location of Risk, Solvency II Directive 2009/138/EC, Article 157(1) outlines that the Member State can tax that premium.
Consider these three points when determining Location of Risk:
1
IPT is not harmonised
Consider local IPT law when determining Location of Risk
2
Risk determines the criterion
Assess the risk to know what criterion to use: e.g. property, vehicle, holiday or travel, other
3
Non-EU / EEA region
Local rules typically differ from EU/EEA Location of Risk rules
If you need more information, use our chat box to chat with our experts right away.
IPT is complex and getting it wrong can have serious implications.
At Sovos, we take care of the detail, giving you the peace of mind you need. We’re global tax compliance specialists and we solve tax for good. Our team of regulatory specialists monitor and interpret regulations around the world, so you don’t have to.
Whether it’s meeting the demands of specific country insurance premium tax declarations or providing dedicated fiscal representation and payment solutions: easing your IPT compliance burden is our business.
Sovos is a market leader for IPT compliance in Europe filing up to 30,000 tax returns annually valued at €600m+ for our insurance clients. We do this in over 100 countries and 19,000+ jurisdictions around the world.
Whether it’s meeting the demands of specific country IPT declarations or providing dedicated fiscal representation and payment solutions, our combined approach of people, skills and software can help you stay ahead of the constantly changing filing requirements.
For companies operating in Turkey, 2019 was an eventful year for tax regulatory change and in particular, e-invoicing reform. Since it was first introduced in 2012, the e-invoicing mandate has grown, and companies are having to adapt in order to comply with requirements in 2020 and beyond. Turkey’s digital transformation and e-invoicing landscape continues to evolve.
According to the General Communique on the Tax Procedure Law (General Communique), more taxpayers now need to comply with the mandatory e-invoicing framework. The General Communique published on 19 October 2019 covers other e-documents such as e-arşiv, e-delivery note, e-self-employment receipts, e-producer receipts, e-tickets, e-note of expenses, e-Insurance Commission Expense Documents, e-Insurance Policies, eDocument of Currency Exchange, and e-Bank Receipts.
The scope of e-invoicing
From 1 July 2020, taxpayers with a gross sales revenue of TL 5 million or above in fiscal years 2018 or 2019 must switch to the e-invoice system. Taxpayers who meet these requirements in 2020 or later, should switch to the e-invoice system at the beginning of the seventh month of the following accounting year.
Mandatory e-invoicing is not only based on the threshold
Turkey’s tax authority has set some sector-based parameters for businesses operating in Turkey. Companies licensed by the Turkish Energy Market Regulatory Authority, middlemen or fruits or vegetable traders, online service providers facilitating online trade, importers and dealers are some of the taxpayers also required to switch to e-invoices, irrespective of their turnover.
The scope of E-Arşiv invoice
E-arsiv fatura documents B2C transactions. But also in case the transacting counterparty is not registered with the TRA for e-invoicing. Similar to e-invoice, the e-arşiv invoice, became mandatory for intermediary service providers; online advertisers; and intermediary online advertisers who switched to the system from 1 January 2020.
Taxpayers not in scope for e-invoice and e-arşiv must issue e-arşiv invoices through the Turkish Revenue Administration´s portal. That is if the total amount of an invoice issued, including taxes, exceeds:
TL 5.000 for B2B
TL 30.000 for B2C transactions.
Turkey’s Government continues to tackle its VAT gap through digital transformation. By taking greater control of reporting and requiring more granular tax detail. So, businesses operating in Turkey need powerful e-invoicing strategies to comply with the growing demands for digital tax transformation.
With two weeks to go until the first mandatory phase of the Indian e-invoicing reform go live, the GST Council slammed the breaks. Or at least, bring it to a significant temporary standstill of 6 months. As a result, the India e-invoicing reform is now postponed until 1 October 2020
Following a long list of complaints — both from the private sector toward the GST Council, as well as from the GST Council vis-á-vis the IT infrastructure provider that powers the GST Network, Infosys — the council decided to revisit the 1 April go-live in a recent meeting held today, Saturday 14 March.
Delaying the first mandatory go-live of the e-invoicing reform with six months, from 1 April 2020 until 1 October 2020
Delaying the obligation for B2C invoices. Those issued by the largest taxpayers in India, with a threshold above Rs.500 Crore. This is to include a QR code, from 1 April 2020 until 1 October 2020
Excluding certain types of taxable persons from the scope of the e-invoicing reform
The obligation to generate QR codes. For example, insurance companies, banks, and other financial institutions. Also non-banking financial institutions, and passenger transportation services
Postponing the entry into force of the new GST returns until 1 October 2020
Calling the chairman of Infosys to attend the next three GST Council meetings. This is for the purpose of reporting status updates of technical and infrastructure improvements to the underlying IT platforms that are the foundation of the on-going GST control reforms
The decisions made in the 39th meeting of the GST Council will require either that the legislative framework (Notifications) published in early December be amended or entirely replaced with new ones to reflect the new reality. However, it wouldn’t be unreasonable to expect even further delays to the roll out of this reform. This given to the recent economic volatility triggered by the ongoing pandemic. Only once both global markets as well as the underlying technical platforms of the GST control reform seem to stabilize will the post-October timeline of the roll out be fully certain.
Anyone predicting Italy’s clearance model e-invoicing system, FatturaPA, would undergo further reform would be right. Agenzia delle Entrate – AdE, the Italian tax authority, has issued new technical specifications and schemas for Italian B2B and B2G e-invoices. But – what do these changes really mean? And what impact do they have on business processes?
Technical and content updates
Over recent weeks, three updates have been introduced:
A new version 1.6 of the FatturaPA B2B XML format
A new version 1.3 of the FatturaPA B2G XML format; and
A new version 1.8 of the technical specifications for the SDI platform.
The inclusion of withholding taxes (especially social contributions) is one of the new content requirements for the B2B and B2G XML formats. There are also 12 new document types (including self-billed invoices and integration documents) and a further 17 new nature of transactions options (such as reasons for exemptions and reverse charges).
These content updates now require Italian companies to have a deeper understanding of the Italian tax system. The changes impact the moment taxpayers classify their supplies: under the current model, Italian companies don’t have to worry about this until the submission of their VAT returns but under the new schema this classification will be performed in real-time. These updates are likely to impact business processes. They are a necessary next step in paving the way ahead of the upcoming introduction of pre-completed VAT returns, an initiative largely considered to eliminate administrative burden and make life easier for most Italian businesses.
In parallel, further changes resulting from the new versions of the FatturaPA formats have a technical impact on businesses, demanding IT implementation readiness. Among the technical updates are the inclusion of additional fields, length of content, permitted characters, shifting from optional to mandatory field fulfillment and vice-versa, and how often a field can be repeated.
The new technical specifications also introduced new validations that will be performed by the Sistema di Interscambio – SDI, the Italian government-platform responsible for clearance of e-invoices. Most of the new validations check the content of the e-invoice against document types and the indicated nature of the transactions and require taxpayers to eventually be able to understand, process and react accordingly to new errors.
Implementation deadlines
The SDI platform will start processing B2B invoices in the new FatturaPA format from 4 May 2020, but the AdE will enforce use of the new schema on 1 October 2020, triggering new validations and errors only after this date as per the Provvedimento from 28 February 2020. Different deadlines apply to B2G invoices, unless of course the AdE publishes new transition rules for these invoices before that date. The enforcement of the new schema for B2G invoices is set to begin on 1 May 2020.
In practice, the effect of these deadlines mean that while the schemas for B2B and B2G invoices are indeed the same from a technical perspective, taxpayers will must be ready for different deadlines and be prepared to work with two different invoice schemas from 1 May until 4 May.
Important update
On 12 March (after this blog was posted), AdE has republished version 1.3 of the FatturaPA B2G technical specifications. Although the version number remains the same, the republished version states a new effective date for the new B2G schema: 4 May. With enforcement of the B2G schema on 4 May, the SDI platform will be able to process both B2G and B2B schemas simultaneously, and not on different dates, as informed previously.
In Turkey, the Revenue Administration (TRA) published the long-awaited e-Delivery Note Application Manual. The manual clarifies how the electronic delivery process will work in addition to answering frequently asked questions. It addresses the application as well as its scope and structure, outlines important scenarios and provides clarity for companies who are unclear about the adoption of e-delivery notes.
What is the e-delivery note application?
The e-delivery note is the electronic version of the “delivery note,” currently printed on paper. As a result, it allows the TRA to regularly monitor the movements of delivered merchandise in the electronic environment.
Electronic delivery has the same legal qualifications as the delivery note but is issued, forwarded, retained, and submitted digitally.
Who does the e-delivery note mandate affect?
According to the circular published by the TRA at the end of February, taxpayers in scope of the e-delivery note application are;
E-invoice taxpayers with a gross sales turnover of 25 million TL and above
Companies with an Energy Market Regulatory Authority (EPDK) license (including dealers) -PCT I
Motor vehicles (production, import, dealers) – PCT III
Mining license owners in addition to producers of mine based on their contracts with these people
Sugar manufacturers
Iron and steel manufacturers / HS Code72 / HS Code73
Users registered in the fertilizer tracking system
Taxpayers engaged in fruit and vegetable trade as brokers or merchants
Also, those who are found to be risky or at low levels of tax compliance as a result of the Administrative analysis
Taxpayers engaged in fruit and vegetable trade as brokers or merchants completed their transitions of January 1, 2020. Other taxpayers covered by the mandate must be ready by July 1, 2020.
Taxpayers deemed to be risky or at low levels of tax compliance by the TRA must complete their transition to the e-delivery note application within three months after being notified.
Other topics included in the e-delivery note application manual
Besides explaining the basic concepts, the manual also details the previously announced scenarios providing answers to many areas that were confusing for taxpayers.
The main scenarios are:
Delivery notes to be issued for the buyers not registered in the e-delivery note application
Export and logistic scenarios
Successive delivery
Issuing a printed delivery note
Various customers
In addition, other topics covered include:
Market registry system
Fuel oil sector
Transportation by pipelines
Sample and contract manufacturing processes
Full details on the Turkey E-Delivery Application Manual are available in Turkish from the TRA e-Document website.
A keystone of HMRC’s Making Tax Digital for VAT (MTD) regime is that the transfer and exchange of data between what HMRC define as “functional compatible software” must be digital whenever that data remains a component of the business’s digital records. This is to maintain a wholly digitally linked audit trail between systems.
Soft landing
When the MTD legislation was introduced, HMRC offered businesses a soft landing period of up to one year to incorporate digital links from the date they became obliged to adopt MTD. During this period, businesses wouldn’t be liable for non-compliance penalties. In practice, this meant:
Businesses required to apply MTD for VAT periods from 1 April 2019 must have digital links in place for the first VAT period starting on or after 1 April 2020 (i.e. soft landing ends 31 March 2020);
Businesses required to apply MTD for VAT periods from 1 October 2019 must have digital links set up for the first VAT period starting on or after 1 October 2020 (i.e. soft landing ends 30 September 2020).
A further lifeline
Due to feedback on the difficulty in applying the new rules, HMRC recently announced it would consider written requests for an extension on a discretionary case-by-case basis where there are genuine reasons for non-compliance (for example, those operating large corporate groups with disparate legacy systems). However, it’s clear an extension will only be granted in exceptional circumstances and businesses will need to have:
Approached HMRC as soon as they realised they wouldn’t meet the digital links requirement, and requested an application before expiry of their soft landing deadline
Provided a detailed explanation why the requirement can’t be met by that deadline
Provided details of software that can’t be digitally linked, along with a blueprint/process map showing how all systems are currently linked
Offer a calculated timeframe by which the digital link requirement should be met (which must be no later than 12 months beyond expiry of their soft landing period) and
Explained what actions, processes and controls will be set up to ensure data handled manually in the meantime will be transmitted accurately.
After review, HMRC will either reject the request or grant a written Direction extending that “soft landing” period by up to 12 months.
What might constitute a genuine reason:
A component part of one piece of software can’t import/export data from other software and it can’t be updated or replaced by the soft landing deadline
The business is in the course of updating or replacing its ERP and the expected implementation date is after the deadline.
What wouldn’t be considered a genuine reason:
Business leadership hasn’t signed-off system changes (unless this is for reasons such as those given above)
The cost of replacing/updating systems or components is deemed too expensive.
Key action points
Know when the soft landing period for digital links comes to an end. It could be as early as 1 April 2020
If digital links haven’t yet been set up to HMRC’s requirements, businesses should re-evaluate program requirements and timelines. Digital links do not include programs or processes that involve ‘cutting and pasting’ of data
If you don’t think the “soft landing” deadline will be met, then gather evidence to support an extension. Contact HMRC before the deadline. (HMRC recommend they contact their Customer Contact Manager initially if one has been assigned, or the MTD Specific Directions Team).
There’s no penalty for requesting an extension. The request can be withdrawn at any time. It’s important to continue working towards the digital link requirements in the meantime
Finally, ensure any commercial solutions that might be able to resolve system gaps have been explored.
The upcoming tax reform in Greece is expected to manifest itself in three continuous transaction control (CTC) initiatives.
The myDATA e-books initiative, which entails the real-time reporting of transaction and accounting data to the myDATA platform which will in turn populate a set of online ledgers maintained on the government portal;
Invoice clearance, which is clearly beneficial for the Greek Tax Authority although no roll-out date has been published yet; and
Online cash registers which will transmit sales data to the tax authority in real-time.
Earlier this month, new technical specifications were published for the online connection of cash registers with the government portal. From June 2020, all cash registers currently used in Greece must be updated to meet the new technical specifications (available in Greek) to be able to connect and transmit their transaction data to the government portal.
The technical specifications regulate two aspects:
The frequency of data transmission. The data will be reported in real-time and up to once per day in batch.
A QR code must be included in the receipts issued. Through a URL in the QR code, whose format and content are defined in the technical documentation, the tax authority can validate the receipts issued. The actual control process hasn’t been defined yet, but it’s understood that based on this QR code the tax authority will be able to compare the retail data from the cash register to the data registered on the myDATA platform.
These specifications are complementary to those published in late 2018, which mainly regulated the security and certification requirements of the new generation cash registers. This latest development is further proof that the Greek government is committed to moving forward with the CTC plans it initially outlined two years ago.
Certification of e-invoice service providers is an important first step and milestone ahead of the implementation of e-invoicing in Greece. The Greek Government has now defined the regulatory framework for e-invoice service providers, their obligations, and a set of requirements needed to certify their invoicing software. Find out what you need to know about the accreditation scheme for e-invoicing service providers in Greece.
Key details and parameters
Scope
E-invoice service providers are entities the taxpayer authorises to issue invoices on their behalf electronically for B2B in addition to B2C transactions. They’re responsible for issuing, the authenticity and integrity, and the transmission of transaction data to the tax authority in real-time. Other outsourced functions include e-invoice delivery to the buyer directly and archiving on behalf of the issuer.
Software requirements
The service provider’s software must meet a number of requirements. It must for example be able to guarantee integrity and authenticity of the invoice according to the SHA-1 algorithm, provide real-time connection with the customer’s software, and make the invoice available to the customer in electronic (or, upon request, in paper) form. Any software which meets these criteria recieves a “Suitability Permit”, which is valid for five years.
Service provider requirements
Service providers must be a Greek registered entity or permanently established in Greece. They must also meet certain technical, security and financial criteria and the invoice data must be stored within the EU. Other obligations also include making a user manual available to the customer; notifying the tax authority of each outsourcing contract they have entered into; and addressing privacy-related matters.
Transmission method and e-invoice format
The transmission method to the myDATA will be the myDATA REST API and the format of the e-invoice exchanged between the parties is based on the EN norm, as defined by law just a few days ago. The myDATA website will publish any details and further legislation.
Through this Decision, the Greek Government is introducing the long-awaited secondary legislation, as mandated in the budget law 2020 earlier this year. Precisely how these provisions will work together with the myDATA scheme, scheduled to be fully operational on 1 April 2020, is still to be defined by the authorities. However, Greece requires further legislation, as well as a formal derogation decision from Brussels. This is if the Greek government wishes to mandate e-invoicing in the country. As such a reform would deviate from principles laid out in the EU VAT Directive.
Two months after closing the public consultation on the myDATA scheme, the Greek tax authority, IAPR, has yet to share the feedback received from the industry on the proposed scheme or make any official announcement in this regard. However, local discussions indicate that, the IAPR may reintroduce its initial agenda proposed back in August 2018, which would mandate electronic invoicing based on a clearance model.
Following input from stakeholders, the IAPR is believed to have realised that mandatory e-invoicing in a clearance model will be required to achieve its sought-after goals of reducing administrative burdens on businesses and combatting tax fraud. An EU derogation from the VAT Directive will still be required, and the IAPR will have to follow the logistics and formalities of the derogation process including justifying its request to implement special measures that deviate from the freedom of choice of the Directive regarding the invoicing method.
First steps
A first natural step towards e-invoice clearance would be to formalise the definition of e-invoice service providers (SPs). The current role of SPs in the myDATA framework is to help taxpayers with data preparation, consolidation and transmission to the government portal. The scope of the SPs role could either remain the same, in which case little or no governmental oversight would be required, or it could expand and include functions that usually are at the core of government tax controls, such as clearing an invoice by various means.
The former function would resemble a clearance model similar to India, where an Application Service Provider, ASP, (non-regulated function) can perform various functions, such as verifying the Invoice Reference Number on the invoice, which under the Greek framework could correspond to verifying the relevant reference number under the myDATA scheme, called MARK. The more expanded role would be a regulated function subject to government control and eligibility criteria that are usually restrictive. The SP would then act in its capacity of a government agency, similar to a PAC in Mexico which performs the government outsourced function of clearing the invoice. It remains to be seen which pathway Greece will take at this clearance cross-road.
Regarding the implementation timeline, the myDATA project is expected to be postponed by three months which would allow the authorities more time to complete the accreditation scheme for e-invoice SPs at the beginning of 2020. The new expected launch data for the myDATA scheme is 1 April 2020.
Greece made an important step to digitise its tax system and introduce an innovative platform for taxpayers to fulfil their tax obligations. The new platform will offer businesses a collaborative environment where the data they provide to the Greek Independent Authority of Public Revenues (IAPR) will not only affect their own books but will also auto-populate their buyers’ tax situation.
As a result of this innovative solution, taxpayers will be relieved from some of their filing obligations, which will be fulfilled automatically as a result of this application.
Taxpayers will submit their required transactional data through an automated solution to the platform or through the web portal of the IAPR.
The new platform, called myDATA, which stands for My Digital Accounting and Tax Application, includes two books: The Record Book, and The Summary Book.
The record book records the submitted transactions to the myDATA platform. These transactions are classified as income/expense according to their type (e.g sale of goods, provision of services etc.). Classified data is then summarised within the summary book and depicts the accounting and tax result for the respective period.
Suppliers are required to submit a summary of all their domestic and cross-border sale transactions (wholesale/retail). The reported sales data will update its income books and the domestic transaction data will update the buyer’s expense books.
Buyers are required to submit a summary of their domestic and cross-border purchase invoices for B2C transactions in Greece and abroad. On the other hand they need to submit acquisitions from abroad and they also have a joint responsibility with their suppliers for reporting B2B transactions in Greece. If the suppliers don’t submit the related transactions on the myDATA platform, then their buyers, in order to comply with the e-books requirement, should transmit this transaction data.
Taxpayers will continue to file their tax returns on the basis of their accounting books, but following the submission of their tax returns the data declared in them will be reconciled against the result of the submitted data recorded in the e-books for the corresponding period. If there is a discrepancy between the e-books and VAT returns the taxpayer has to correct the discrepancy within a two month period. After this time (initial disagreement) the taxpayer has two options: 1) to correct the discrepancy and achieve consistency between the VAT returns and e-books or 2) they can explain the discrepancy and achieve justifiable consistency. This will be considered as agreed and no further action will be taken.
A tax audit or penalty may be triggered if no action is taken by the taxpayer within the two month period to correct or defend the discrepancy.
There is an online portal available from the IAPR for testing purposes, where taxpayers can test the integration of their accounting software with myDATA APIs and test their solutions.
The myDATA scheme proposal was open to public consultation until 6 September 2019; no response has been published to-date by the IAPR on the feedback received from the industry and other stakeholders on the scheme. It is expected that myDATA will be introduced as a pilot in Q4 2019 and be fully operational by the beginning of 2020.
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Back in June this year, many heads were turned when the French Minister of Public Accounts and Action, Gérald Darmanin, went on record stating that the French Government has the intention of making e-invoicing mandatory also for B2B transactions. Now it seems that the Government – spearheaded on this topic by Minister Darmanin as well as by the Minister of Finance Bruno Le Maire – has moved from word to action. The French Finance Bill for 2020, formally presented after the meeting of the Council of Ministers on 27 September, codifies the plan to extend the B2G e-invoicing obligation in force today to cover also B2B e-invoices.
What’s new?
In just three short paragraphs, the draft finance law outlines the major principles for the budding reform. While much is left to be clarified by later decrees, art. 56 of the Finance Bill introduces the main rule that electronic form for invoices will be mandatory and that, as a result, paper invoices will no longer be permitted. It also introduces language that means that e-invoices most likely also will be cleared by the tax authority, or otherwise have the data transmitted to the tax authority to enable control of the VAT on the invoice. France will effectively, and not surprisingly, be joining the ranks of other countries such as Mexico, Turkey, Italy and Brazil, who have implemented measures to tackle its VAT gap through real-time VAT control mechanisms.
The timeline of the roll-out of the mandate will, just like the roll-out of the B2G mandate currently in force, be scheduled in stages; gradually becoming applicable for companies depending on the size of the business. The first stage of the mandate will begin on 1 January 2023, and according to the bill the entire economy should be up-and-running under the new e-invoicing system no later than 1 January 2025.
The Government also states that it, during the course of next year, will present a report to parliament, the Assemblée Nationale, presenting how the reform will be carried out as well as the underlying analysis of which method and what regulations constitute the most appropriate technical, legal and operational solution, particularly as regards the clearance/transmission of invoice data to the tax administration.
What’s next?
In addition to the analysis and drafting of both laws and reports that the Government announced, it’s also clear that one more critical element needs to be covered before the reform becomes a reality: Brussels.
Ever since Italy went down this same path and became the first EU country to introduce mandatory clearance B2B e-invoicing, many parallels have been drawn between the two countries. They share a similar situation in terms of VAT gap and IT infrastructures, which have made many experts (rightly) assume that France would follow down the path Italy set out. However, in order to lawfully do so, Italy had to seek and obtain permission from the EU Council to deviate from the provisions of the EU VAT Directive (2006/112/EC). The French Government has acknowledged that it will need to do the same.
Take Action
Want to learn more? For a continued and in-depth analysis of the French e-invoicing reform and its challenges, please join a webinar hosted by Christiaan van der Valk, e-invoicing expert and VP of Strategy at Sovos, on this topic on 3 October.
Inscrivez-vous ici si vous désirez rejoindre le webinaire de Christiaan van der Valk le 3 Octobre.
Last month, we made some predictions on how the outcome of the recent elections would impact the agenda of the Independent Authority of Public Revenues (IAPR) on the envisaged e-invoicing and e-reporting reform. It looks as if the newly elected government is fully in-line with the IAPR agenda to implement e-reporting and bookkeeping (mandatory e-invoicing is still in the agenda but at a later stage) and its proposed model, as announced yesterday by the minister of Finance during parliamentary discussions.
The IAPR has made great progress towards the implementation of the e-reporting scheme (named “Epopis”) by publishing, just yesterday, the technical specifications and schemas for the transmission of data to the IAPR platform. The IAPR reporting platform now has a name, “myDATA,” meaning Digital Accounting and Tax Application. It is worth noting that no legal documentation has been made available yet.
Having made available enough information on the process and the technical details, the IAPR has launched a public consultation to receive inputs from businesses and interested stakeholders on the proposed e-reporting scheme that will be open until 6 September 2019.
On 7 July, Greece began voting to elect a new government. The disposed governing left party has been dealt with a hefty blow having been in power since 2015. It was hoped they would introduce less severe politics which many claim they have not only failed to do but, in fact, they actually introduced stricter measures. As some expected, the opposition centre-right party won with an outright majority. With this result, Greece has once again voted for change with a manifesto to boost economic growth.
Impact on the proposed e-invoicing reform
We expect that the result of the recent elections may impact the agenda of the Independent Public Revenue Authority (IPRA) on how Greece will implement its envisaged e-invoicing reform.
The IPRA, which has authority over all tax matters in the country, is also the architect behind a recent proposal for a nationwide e-invoicing and reporting framework. Being an independent authority and not subject to any form of government oversight or control, the IPRA shouldn’t be affected by the outcome of the parliamentary elections; however, its policy might change depending on how strict the new government will be with tax controls and enforcement in its efforts to combat VAT fraud and close the country’s VAT gap.
Potential scenarios
Before making any predictions, it is worth noting that the IPRA first envisaged an e-invoicing mandate similar to what was rolled out in Italy during 2018-2019. However, just like Italy, Greece would in this situation need to seek and obtain EU approval ahead of such a reform. An Italy-like EU derogation would not only take time but may also be more difficult for Greece to obtain as it lacks the technical B2G e-invoicing infrastructure that Italy already had in place. It has instead moved ahead with another model based on e-reporting and bookkeeping within the tax administration’s online platform. Essentially, this model is a combination of supplier-driven reporting of basic invoice data combined with buyer-side requirements for validating the data with various accounting information. The process will also update the online ledgers held by the IPRA. This model stops short of real-time ‘clearance’ of electronic invoices, but the IPRA has stated that this Latin American style approach is ultimately their goal for the country.
IPRA has announced that the reporting and bookkeeping model will be implemented in January 2020 but as the country is facing political change in the coming months, this deadline appears unrealistic.
Although it is difficult to predict whether or not Greece will move ahead with the proposed e-reporting and bookkeeping framework, it is much less likely that the authorities will change the scope or specifics of the invoice data to be sent to the tax administration in the future reporting scheme. While implementation directions may change, the shift in focus from traditional compliance and audit to more continuous transaction controls in real or near-real time is significant. This trend is gaining momentum across Europe and is politically unstoppable as more and more governments take measures to combat fraud and make tax controls more effective.
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Italy has been at the forefront of B2G e-invoicing in Europe ever since the central e-invoicing platform SDI (Sistema di Interscambio) was rolled out and made mandatory for all suppliers to the public sector in 2014.
While a number of its European neighbours are slowly catching up, Italy is continuing to improve the integration of new technologies with the public administration’s processes. Its latest move is to make e-orders mandatory in public procurement. By leveraging the successful use of the public administrations’ Purchase Orders Routing Node platform (Nodo di Smistamento degli Ordini, or NSO) in the Emilia-Romagna region, Italy is now extending the functionality throughout the country.
E-ordering for purchases beyond healthcare products
As of 1 October 2019, all purchase orders from the Italian National Health System (Servizio Sanitario Nazionale, or SSN) must be delivered to and received by suppliers through the NSO platform. The suppliers affected by the mandate will be required to receive e-orders from public entities; the public administration will not proceed with the liquidation and payment of invoices issued by non-compliant companies. It is noteworthy that the mandate covers all purchase orders made by entities associated with the SSN, including office supplies and electronics, and not just health-related products.
In addition to mandatory receipt of e-orders, suppliers will also be able to send messages to the public administration. In cases where suppliers and the public administration have previously agreed, the supplying company may send pre-filled e-orders to the public administration buyer, which will confirm or reject the proposed supply.
Foreign suppliers and the new e-ordering mandate
Moreover, foreign suppliers must also comply with this mandate. The NSO mandate will have some impact on e-invoicing for Italian public administrations seeing as certain e-order data must be included in the e-invoices that are transmitted through the SDI.
The NSO system is built upon the existing SDI infrastructure, and as a result, the communication with the NSO requires similar channel accreditation as the SDI. Suppliers and intermediaries already performing the transmission of messages through the SDI platform are required to comply with complementary accreditation requirements, which are yet to be published. Furthermore, the technical specifications show that PEPPOL intermediaries may interact with the NSO platform through an Access Point service accredited with the NSO.
Anyone who has been closely following SAF-T announcements over the past few years may be forgiven for thinking that it all seems rather like Groundhog Day. Commencement dates and reporting requirements have been announced and subsequently amended and re-announced as the respective countries re-evaluate their needs and the readiness of companies to provide the data in the prescribed formats.
Earlier this month Poland announced that the changes planned for 1 July 2019, requiring mandatory filing of SAF-T information and the corresponding withdrawal of the requirement to submit a periodic VAT return, have now been deferred to January 2020.
Also this month, Romania announced plans to become the eighth country to introduce SAF-T by introducing requirements for transactional reporting by the end of 2020.
So, what is SAF-T, what is the latest position for countries which have introduced legislation and what lies ahead?
SAF-T – The Standard Audit File for Tax
The Standard Audit File for Tax (SAF-T) was developed by the Organisation for Economic Co-operation and Development (OECD) with the aim of producing a standardised format for electronic exchange of accounting data from organisations to their national tax authority and external auditors.
The two key principles behind SAF-T are that;
Organisations should be able to export information from their accounting systems (invoices, payments, general ledger journals and master files) into a standardised format and
Tax authorities and external auditors should be able to make their tax inspections and audits more efficient and effective as a result of data being made available to them in that standardised format.
In 2005 the OECD released the first version of the SAF-T schema which provides details of what should be included in a SAF-T xml reporting file and how that data should be formatted and structured. The original schema was based on the general ledger and details of invoices and payments, together with customer and supplier master files. A second version of the SAF-T schema was released in 2010 to incorporate information about Inventory and Fixed Assets.
What the OECD have not defined, and what remains the responsibility for the tax administration in each country to decide, is the exact format in which the data is to be captured and when and how it is required to be sent to the tax administration.
Different approaches
What has emerged from those countries which have adopted SAF-T are three broad approaches;
Data to be provided at the request of the tax authority (usually prior to a tax inspection or audit)
Submission of data periodically in addition to the periodic VAT return
Submission of transactional data as a replacement to the periodic VAT return
In some cases, the mandate starts with a requirement to produce data on request and evolves through to periodic submissions.
Where are we now?
There are currently seven countries which have introduced legislation enforcing SAF-T requirements.
Portugal
Portugal was one of the first adopters and Portuguese entities have been required to extract data into the SAF-T file format (based on version 1 of the OECD SAF-T schema) since 2008 on an annual basis. Further extensions to collect sales invoice data and other documents on a monthly basis followed in 2013.
Luxembourg
Luxembourg introduced the requirement to extract data in the relevant format in 2011. It only applies to Luxembourg resident companies subject to the local chart of accounts and is only required to be submitted when requested by the tax authority.
France
France introduced a SAF-T requirement in 2014, using a proprietary format rather than the OECD standard SAF-T schema, requiring files to be submitted in txt format. It is currently only required to be filed on demand when requested by the French tax authority.
Austria
Austria introduced SAF-T in 2009 and is currently only required on demand when requested by the tax authority.
Poland
Possibly the most significant implementor of SAF-T to date, with large companies having had to file monthly JPK (Jednolity Plik Kontrolny) returns since 2016.
Lithuania
Lithuania introduced the requirement to file the SAF-T based i.MAS on a phased basis, starting with the largest organisations in 2016 and working towards mandating SAF-T for all businesses by 2020. The i.MAS comprises three parts, i.SAF reporting of sales and purchase invoices on a monthly basis, i.VAZ reporting of transport/consignment documents and the i.SAF-T accounting transaction report, which is only required when requested by the tax authority.
Norway
SAF-T has been in place on a voluntary basis since 2017 and there are proposals to mandate it, on an ‘on-demand’ basis from January 2020.
What lies ahead for the future of SAF-T?
Countries which are receiving regular, transactional level details under SAF-T may look to reduce the periodic VAT return requirements. This is because the need to prepare a VAT return summarising the details which the tax authority already receives on a transactional basis can be seen as unnecessary duplication.
Poland is proposing that SAF-T data submissions will displace the need for filing a VAT return from January 2020.
Romania is proposing a phased transition to filing of transactional data from 2020, starting with large organisations, with a reduction in the VAT returns which are required to be filed.
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The French Minister of Public Accounts and Action, which has authority over all tax matters, has taken advantage of the process that is required to transpose the EU E-Commerce Directive to launch a number of initiatives to curb VAT fraud, including a renewed attempt to create a system of mandatory e-invoicing.
Going from B2G to B2B
A program for the gradual implementation of electronic invoicing for business-to-government (public procurement) transactions is currently entering its final stages whereby even small companies will soon be required to send their invoices to public entities via the so-called Chorus platform.
Current President Macron had previously, as Finance Minister under his predecessor François Hollande, already proposed to introduce a similar obligation for B2B e-invoicing, but this proposal was rejected due to inconsistencies with the VAT Directive and a perceived increase in the administrative burden on companies.
However, times have changed and France – like other EU Member States – is seeing new opportunities to go down the B2B e-invoicing mandate path since Italy led the way on 1 January 2019. The Italian government obtained an EU derogation from certain provisions in the VAT Directive which allowed the country to go live with a countrywide e-invoicing mandate that is based on prior real-time controls by the tax administration. Such ‘clearance’ e-invoicing systems, which are generally inspired by the approach taken in the past 5-10 years by Latin American countries, have proven to be very effective tools in the fight against VAT fraud.
A first step to nationwide clearance e-invoicing?
While it’s still too early to talk about a concrete (or theoretical) French proposal for B2B e-invoicing, it is clear that the government means business. Minister Gérald Darmanin has stated that the government will begin a consultation process that involves the private sector to discuss how to best get small and medium sized companies up-and-running as smoothly as possible.
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To help reduce delays in the payment of invoices, the French authorities by Ordinance No. 2019-359 of 24 April 2019 have clarified their invoicing rules to include two new mandatory content requirements. These are in addition to those already in place.
The two new requirements stipulated in the France invoice mandate are:
1) To provide the billing address of the buyer and the seller if it is different from their office / home address and
2) To include the purchase order number if it has been previously established by the customer.
The addition of this extra information on the invoice should help businesses which have their head office in one location and the invoicing department located in another. It should ensure that invoices are sent directly to the billing address and speed up the payment process by adding a purchase order number where this has previously been created.
In addition, the Ordinance has also considered it necessary and aligned commercial legislation and tax legislation to provide a single date of issue of the invoice to ensure legal certainty for both trading parties. According to the Ordinance, the date of issue of the invoice is set to be the day the products or services are delivered.
The cost of non-compliance
Failure to include this mandatory information on the invoice, incurs an administrative penalty of up to €75,000 for an individual and up to €375,000 for a business.
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