For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
The Spanish government has published the much-anticipated draft regulation with the framework for implementing mandatory B2B e-invoicing.
The proposed legislation outlines the operation of the Spanish e-invoicing system. Its main feature is the reliance on the principles of interoperability of e-invoice formats and interconnectivity of e-invoicing platforms. The goal is to promote digitalization (particularly for smaller companies), reduce late invoice payments and save on administrative costs such as the management of invoices.
The draft Royal Decree provides further details to the Law for Creation and Growth of companies published in September 2022, which initially establishes the e-invoicing obligation for companies and professionals.
All companies and professionals required to issue invoices under Spanish law will be obliged to do so electronically. This applies to B2B operations with a few excluded transactions, such as: when issuing a simplified invoice, issuing an invoice voluntarily when there is no such obligation to do so under Spanish rules and in other cases that the government may regulate in the future.
However, the obligation does not apply if one of the parties to the transaction does not have an established business, a fixed establishment or habitual business residence in Spanish territory where invoices are directly issued.
The Spanish e-invoicing system will consist of privately owned electronic invoicing platforms and the public electronic invoicing solution managed by the State Tax Administration Agency. Taxpayers under scope must send and receive e-invoices through one of these two means and will be able to use both in parallel.
Other important characteristics and requirements of this system are:
The proposed Royal Decree defines an e-invoice as a structured document, which means that a PDF will no longer be considered an electronic invoice. Taxpayers will be required to issue e-invoices using one of the accepted formats:
Additionally, in line with the principle of interoperability, private e-invoicing platforms must be able to convert e-invoices into all supported formats while preserving I&A.
The invoice recipient must communicate the e-invoice status to the invoice issuer within the maximum deadline of four calendar days counted from the date of the reported status.
Mandatory statuses comprise the following:
Additionally, the draft regulation establishes optional statuses:
The Royal Decree is currently in draft form but will be effective 12 months after its official publication on the Spanish Official Gazette (BOE). Following the Law for Creation and Growth of companies, the 12-month-timeline will apply to entrepreneurs and professionals whose annual turnover is over €8 million, and for the remaining taxpayers under scope the deadline is 24 months.
In the first year from the regulation’s effective date, companies under the e-invoicing obligation must attach a PDF file to the legal e-invoice to ensure readability to counterparties not yet in scope – unless the recipient agrees to receive it in the original format.
The obligation to report the e-invoice statuses will come into effect 36 months after the publication of the Royal Decree for entrepreneurs with an annual turnover below €6 million and 48 months after the publication of the Royal Decree for professionals below the same threshold.
Further details are expected concerning how taxpayers under the SII (Suministro Imediato de Información) mandate must inform the mandatory e-invoice statuses.
As this is still a draft and certain details remain to be established, taxpayers can expect changes before publication of the final version. Additionally, until 10 July 2023, the draft regulation is open for comments from the general public.
Another important note is that the entry into force of this draft Royal Decree is subject to Spain obtaining derogation from Articles 218 and 232 of the EU VAT Directive before the EU Commission. Although this is a formal step and there is no indication that the Commission would not grant the derogation, until it happens the new Spanish rules cannot enter into force.
Looking for further information on e-invoicing in Spain? Contact our expert team.
For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
In July 2023, the French authorities postponed the implementation timeline. A new timeline will be announced with the adoption of the finance law for 2024.
When your organisation trades cross-border, regular changes to the regulatory landscape are a given. Whether those changes are brand-new requirements in a country where you do business or the evolution of existing legislation, you must be ahead of the developments to remain compliant.
With global tax authorities continually making progress with their digitization strategies, the e-invoicing revolution continues at speed.
In this quarter’s instalment of our VAT Snapshot webinar, Kelly Muniz and Enis Gencer from Sovos’ Regulatory Analysis and Design team, will look in detail at anticipated changes in countries with emerging digital strategies and discuss updates to some of the more established regimes.
They will cover:
Join our 30-minute update on 13 July for the latest news, and for an opportunity to put your questions to our speakers.
Many companies utilise SAP for their tax processes, but limitations in native software functionality add a layer of complexity.
Custom coding is often required for businesses to achieve their desired results, producing the need for ongoing customisation and optimisation – this creates a hefty burden for companies, in addition to their tax compliance obligations. SAP-certified add-ons can lighten the load.
Have you considered purchasing an add-on for the SAP S/4HANA system that you have? Ensure that SAP certification is a top priority, including checking the certification of any umbrella modules that a service provider offers.
The following points highlight the importance of using certified add-ons.
When an add-on is certified by SAP, both the vendor and SAP share some level of accountability and confidence in the add-on. Before deciding on a non-certified alternative, it is essential to conduct adequate research because not all add-ons are subjected to the certification process.
Consider the vendor’s past success in deployments similar to yours, as well as their customer references and reputation. Complete due diligence against prospective vendors to ensure they are financially stable and invest in certification and continuous research and development.
Remember to make a decision based on the prerequisites and potential risks of the SAP S/4HANA environment you work in.
At Sovos, we make it a point to guarantee that all of the modules that make up our SAP product line are certified against the latest releases from SAP. Examples of these modules include VAT Determination (including Sales, Purchasing, Monitor & Reporting and VAT ID Validation products) and Continuous Transaction Controls (CTC) frameworks for SAP.
Download our free eBook on SAP S/4 migrations and tax compliance for more information.
The Ledger of Economic Operations (Libro Registro de Operaciones Económicas), also known as LROE, is a main compliance element of the Batuz tax control system. This system is under implementation in the province of Bizkaia, located in the autonomous Basque community in Spain.
Taxpayers under the Batuz mandate must comply with both TicketBAI and LROE obligations. While TicketBAI applies to invoice issuance, LROE rules require taxpayers to electronically record and report data on income, expenses and other fiscally relevant information to the tax authority in a structured format.
Regardless of size or business volume, individuals engaged in economic activities and organizations must meet LROE requirements if subject to Bizkaia regulations on Personal Income Tax, Corporate Tax or Non-Resident Income Tax for permanent establishments. The rule will come into effect on 1 January 2024 and includes taxpayers currently subject to Bizkaia’s SII (Immediate Supply of Information) mandate.
LROE is the electronic ledger where taxpayers must document several economic activities and report such financial information to the tax authority. Individuals engaged in economic activities report this information via model 140, while companies use model 240.
For compliance with LROE, taxpayers must record and transmit their sales, purchases and other financial data in a structured XML format according to legal technical specifications. Taxpayers can send the data in the ledger either through webservices or manually uploaded via the portal provided by the Bizkaia Tax Authority.
The structure of LROE information for companies and non-resident taxpayers with permanent establishment (model 240) is comprised of the following:
Certain chapters also contain subchapters. The chapter of issued invoices, for example, has a subchapter of issued invoices with guarantor software which requires transmitting data from invoices generated using TicketBAI.
In the case of Bizkaia, as taxpayers do not need to submit the TicketBAI XML (generated with the invoice) directly to the tax authority, they will send this data via the LROE subchapter in a specific TicketBAI field.
The deadline to submit the LROE files to the tax authority varies according to the type of taxpayer under the obligation.
The general deadline is quarterly. Taxpayers must report the data from when the transaction is carried out until 25 April, 25 July, 25 October, or 25 January – depending on the specific quarter.
The deadline for companies under the Bizkaia SII obligation to submit LROE records is four days from the operation’s completion, in line with the general SII deadline. The SII obligation will be considered fulfilled by submission of the LROE.
Failure to comply with the requirement to keep and submit LROE records electronically will result in a monetary fine. The proportionally calculated penalty is 0.5 percent of the transaction amount the taxpayer failed to report, with a quarterly minimum of 600 EUR and a maximum of 12,000 EUR.
By using the TicketBAI invoicing system and reporting the LROE, taxpayers will provide information to the tax authority so that it can fulfil the third element of the Batuz tax control system.
The third element of Batuz entails the preparation of pre-filled VAT draft returns and Corporate and Personal Income declarations, which will be available for taxpayers in Bizkaia from 2024 forward.
Need more information about Batuz LROE or tax in Bizkaia? Contact our team of experts today.
For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
The rapid pace of changes in tax regulations and requirements can make it challenging to keep up with the latest trends. To stay ahead of the curve, join our quarterly webinar, VAT Reporting and SAF-T: Progress and Prospects, where Sovos’ regulatory expert Inês Carvalho offers solutions to help businesses stay up to date with the latest VAT Reporting and SAF-T trends.
Inês will provide a more in-depth understanding and the latest industry developments, including an overview of SAF-T. Join our free webinar to find out more about:
This knowledge will enable businesses to better align their reporting processes with the latest requirements and maintain compliance with tax authorities. Register now for VAT Reporting and SAF-T: Progress and Prospects and a unique opportunity to enhance your tax compliance knowledge.
Significant inflation increases have impacted most of the world’s economies, with the UK still above 10% in 2023. This increase means a reduction in the purchasing power of consumers. Together with increases in the cost of raw materials, this has created uncertainty regarding growth of entire industrial departments and reduced profit margins for companies.
The above is the perfect environment for an increase in the value of ‘safe-haven’ assets, such as houses, gold and works of art and antiques.
When we think about fine paintings, elegant furniture or statues, these can be valuable financially and generally increase in value over time.
However, investing in art may have certain VAT implications and, in the near future, it is one of the areas included as part of:
Following Brexit, France’s art market has increased, with a 7% global market share and $4.7bn in total sales in 2021.
One of the key factors of France’s success is the favourable reduced VAT rate of 5.5% for works of art.
Italy has a reduced VAT rate of 10% for art under certain conditions, and in the UK, the rate is 5%.
Along with general VAT rates rules, several existing derogations allow certain EU Member States to apply lower rates. Specific geographical features, social reasons for the benefit of the final consumer, or general interest justify these lower rates.
This creates a complicated map of VAT rates for operators to navigate.
There are two significant VAT changes due in 2025 that could impact the art sector:
Second-hand goods supplied under the margin schemes, works of art, collectors’ items and antiques will be subject to distance selling rules as of 1 January 2025. These rules make these goods subject to VAT in the Member State of arrival.
If works of art or antiques are not transported or dispatched, or if the transport starts and ends in the same Member State, the supply will be subject to VAT in the place where the customer is established, has their permanent address or usually resides.
This extension of the single VAT registration under the One Stop Shop (OSS) scheme will allow a company to register for VAT uniquely in one EU Member State and report their B2C supplies in quarterly VAT Returns
The EU Directive 2022/542 of 5 April 2022 (that amends previous Directives 2006/112/EC and EU 2020/285), on rates of value added tax, aims to “safeguard the functioning of the internal market and avoid distortions of competition“. The Directive will enter into force on 1 January 2025.
This will require the application of the standard VAT rate to art. This potential change has already raised some concerns in the art market in France.
Italy views this change as an opportunity, with Undersecretary for Culture Vittorio Sgarbi saying that Italy intends to implement the EU directive that reduces VAT on the import of works of art from 10% to 5%.
The changes are ongoing and we will keep you updated on developments to art VAT rates across Europe as they unfold.
Need to discuss reduced VAT rates for art in Europe? Speak to our team of tax experts about how the upcoming changes could affect your business.
Much of the discussion on the Location of Risk triggering a country’s entitlement to levy insurance premium tax (IPT) and parafiscal charges focuses on the rules for different types of insurance. European Union (EU) Directive 2009/138/EC (Solvency II) set out these rules. However, a related topic of growing importance in this area concerns territoriality, i.e. the geographical scope of taxing policies and the different approaches taken by countries in Europe.
It is important to note that this topic should not lead to double taxation for policies involving EU insurers and EU risks becoming an issue as this would be in contravention of Solvency II. It is more that a lack of consistency of geographical scope application across Europe could lead to cases of insurers being unsure of whether some policies should be taxed and where this should be.
There are several fixed energy installations that are commonly situated offshore from a given country. Examples of these are oil rigs, gas platforms and wind farms. The current push towards renewable energy sources could see countries increase their use of wind power in particular. This could lead to an increase in fixed energy installations in future.
These types of offshore installations are expensive forms of property and there is a need for insurance to provide coverage for any damage suffered. Coverage would also typically include associated liability, business interruption, and other financial loss coverage.
Based on the rules at EU level, insurance relating to offshore installations is generally interpreted as taxable in the country the property is situated. This is because they fall within the definition of being a building if they’re fixed to the seabed. This raises the question of when to consider an offshore installation as situated in a country.
In some European countries, the position is fairly clear. For example, for IPT purposes the territorial scope of the United Kingdom (UK) consists of Great Britain, Northern Ireland, and waters within 12 nautical miles of their coastline (its territorial sea). As such, insurance for installations within this territorial scope is taxable in the UK, whereas anything beyond the 12 nautical miles is not.
Some countries like Germany refer in their IPT law to the country’s exclusive economic zone (EEZ). The United Nations Convention on the Law of the Sea establishes this zone, mandating it can be no more than 200 nautical miles from a country’s coastline. Again, the taxability in these countries is simple based on an application of the limit in place.
There has been a lack of clarity in those countries where the IPT legislation does not make reference to any geographical scope. In the past insurers may have interpreted this as a country’s decision not to tax offshore risks. There are obvious concerns with this presumption if the tax authority becomes aware of insurance provided within its territorial sea or EEZ but without any tax payment. The waters are further muddied if legislation for other taxes (like VAT) refer to one of these limits as there is an argument that this limit could be extended to apply to IPT as well.
We are aware of an ongoing court case within an EU jurisdiction on the applicability of IPT to policies covering offshore installations. It may be several years before the outcome of the case is known if it goes through the appeals procedure, potentially up to the European Court of Justice. In the meantime, insurers may consider taxing offshore policies even where the geographical limit of a country is not defined in its IPT law. This is with a view to avoiding any such dispute themselves.
Need to discuss IPT and territoriality further? Sign up for our webinar IPT: Location of Risk and Territoriality in the EU on 8 June 2023.
TicketBAI is a joint project of the Provincial Treasuries and the Government of the Basque Country with the objective of implementing a series of legal and technical obligations for the taxpayers’ invoicing software.
These obligations allow the tax authorities to control their economic activities, especially those in the sector of sales of goods and provisions of services. TicketBAI is a joint project, but each region has its particularities in the implementation and sending of files.
TicketBAI is an invoicing software that follows specific standards to guarantee the integrity, conservation, traceability and inviolability of records that document the supply of goods and services. This compliant invoicing system is also called “guarantor software”.
The TicketBAI mandate applies to all taxpayers, whether a person or a business, that operate economically in a way which falls under the Basque Regional Treasuries regulations. However, the details of the mandate and implementation dates are unique across Bizkaia, Álava and Gipuzkoa.
TicketBAI invoicing is one of the three elements in Bizkaia’s Batuz tax control strategy, devised with the aim of reducing tax tampering in the region.
Taxpayers subject to Batuz will be obliged to issue invoices using TicketBAI-compliant software, which must meet technical specifications and functional characteristics established by law.
Bizkaia’s TicketBAI system has particularities compared with TicketBAI in other regions of the Basque country, so understanding specific requirements in each province is crucial to ensure compliance for affected taxpayers.
TicketBAI-compliant software must be able to generate the following documents:
The TicketBAI XML file that records sales operations carried out using TicketBAI software. Taxpayers must generate the TicketBAI XML file just before or as they issue the invoice.
The invoice or supporting document which can be issued in either paper or electronically as per invoice requirements already established by Bizkaia regulations.
In Bizkaia, unlike in the other Basque regions, taxpayers do not need to send the TicketBAI XML file to the tax authority. Taxpayers will send the relevant file information via the subchapter of invoices issued with guarantor software in the Ledger of Economic Operations (LROE).
In Bizkaia, for electronic invoices for relevant transactions to be valid under TicketBAI obligations, they have to be issued by the TicketBAI invoicing software and must contain specific information. The invoices can be issued either paper or electronically in any format as per invoice requirements already established by Bizkaia regulations.
TicketBAI-compliant invoices must also include:
TicketBAI software is required for B2G, B2B and B2C transactions. This applies to all operations considered as a supply of goods or provision of services, under Bizkaia VAT law. Any transaction not considered as such is exempt from TicketBAI requirements.
The Bizkaia government has already made the voluntary adoption of Batuz possible. Starting 1 January 2024, taxpayers will be obliged to comply.
Currently, a draft law is being discussed to postpone Batuz obligations, including TicketBAI, for:
As it is still a draft, it needs to be officially published to become effective. The draft, however, does not propose changing the go-live for large companies, which are still expected to comply starting 1 January 2024. For all other groups, a phased implementation is proposed to start on 1 July 2024 and be completed on 1 January 2026.
Taxpayers under the Batuz mandate must develop or acquire TicketBAI-compliant software. They can consult the guarantor software registry, which provides the official list of registered guarantor software.
TicketBAI’s implementation in Álava came in phases over 2022, starting with a voluntary period that commenced on 1 January. The mandate came into effect for all on 1 December 2022.
As a result, taxpayers in the province of Álava have to comply with TicketBAI invoicing. It is important to note that TicketBAI compliance does not exempt taxpayers who are also obliged to comply with SII.
To comply with TicketBAI, businesses must have software which generates XML files for each transaction it makes.
Gipuzkoa’s implementation of its TicketBAI obligation began on 1 January 2021, starting with a voluntary period for taxpayers. The phased roll out of the mandate was made by sectors of activity and ended on 1 June 2023.
In Gipuzkoa, TicketBAI does not exempt taxpayers from their SII obligations.
As with other Bizkaia provinces, relevant taxpayers in Gipuzkoa must use software which generates XML files for transactions.
Complying with TicketBAI is just one aspect of total VAT compliance in Spain. As previously mentioned in this blog, taxpayers are not exempt from the SII mandate when complying with TicketBAI so it is important to know the rules at play there.
It is also worth noting that TicketBAI is separate from the Spain e-invoicing mandates that are in place across B2G and B2B transactions.
If you need help with VAT compliance in Spain, don’t hesitate and speak to our experts.
After a very long few years, we are finally seeing the return of in-person events and experiencing steady growth, especially as summer arrives. However, the industry has adapted to the new normal by utilizing technologies to create engaging virtual experiences.
The demand for events is increasing, whether in-person or online, and companies need to understand the VAT implications.
In this webinar, our VAT experts will cover the essential points your business needs to consider when planning events:
You can help drive the session by telling us which VAT exemptions you want to discuss.
Expertise in technology and regulatory provides stability for companies during period of uncertainty
BOSTON – APRIL 20, 2023 – Global tax software provider, Sovos, today announced that world-renowned VAT expert, Christiaan Van Der Valk, vice president of strategy and regulatory will headline the E-Invoicing Exchange Summit Miami, April 24 – 26, 2023. His scheduled presentation, ViDA and the Global Tax Digitization Tsunami: Overcoming Business Pitfalls will be his first public presentation on the topic since the European Commission (EU) announced its plans for ViDA in December of 2022.
VAT in the Digital Age (ViDA) will change how trade within the EU is conducted and reported forever. It will require changes in approach from both a regulatory and technology perspective to remain compliant with all local laws and mandates. To help keep businesses informed of new developments and help guide them through the proposed changes, Sovos has established a ViDA HUB page that will be updated continuously as information becomes available.
As part of Sovos’ ongoing commitment to assist businesses in navigating ViDA successfully, we are working with KPMG to produce a series of video segments that address the primary issues behind ViDA, lessons learned from tax digitization pioneers in Latin America, and what companies need to be doing now to best prepare for ViDA. Participating in these segments will be Kathya Capote Peimbert, Tax Managing Director, Indirect Tax, KPMG, Vinicius Pimentel de Freitas, CTO, Inter-American Centre of Tax Administrations and Christiaan Van Der Valk. Parties interested in receiving this video content can pre-register here and will receive an alert when it is available.
“ViDA, at its core, is about Data. The ViDA proposal is an indication that governments within the EU are no longer content to receive after the fact tax filings that only provide superficial insight into aggregated data,” said Christiaan Van Der Valk, vice president of strategy and regulatory, Sovos. “By leveraging technology, tax administrations can now receive authenticated transaction data detailing every sale and purchase straight from companies’ source systems. By moving tax controls much closer to the actual business operation, tax administrations can also respond to anomalies in near-real-time. My advice? Do not wait, ViDA will be your new reality sooner than you think.”
About Sovos
Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe and is owned by Hg and TA Associates. For more information visit www.sovos.com and follow us on LinkedIn and Twitter.
Note: The Finance Law for 2024 has been officially adopted and published in the Official Gazette on 30 December 2023. Our blog, France: B2B E-Invoicing Mandate Postponed, is promptly updated whenever there are changes to the rollout of the French mandate.
Tax compliance in France is already complicated. New e-invoicing and e-reporting regulations being introduced by the DGFIP will mean companies doing business in the French Republic face some of the most onerous compliance obligations of all VAT jurisdictions.
One significant change for many businesses will be the need to use Partner Dematerialization Platforms, also known as PDPs. The role of a PDP is highly specialised. Indeed, strict legal requirements and technical specifications must be met to become a registered PDP.
The timeline affecting all businesses is clear. However, depending on your industry, you may need to rely on a PDP to ensure you’re fully compliant with the new requirements. Key industries include:
Companies that need to use a PDP to achieve compliance with the French mandate face an additional, critical decision in what is already a complex new process to navigate. The need for a PDP raises the stakes, making it crucial to have dependable answers to the following:
We’ve created a rundown of key questions to consider when choosing a PDP.
In addition to the existing requirement for B2G invoices (Public Procurement), the French Mandate reform will require B2B invoices to be exchanged electronically. As each B2B e-invoice is progressed, its status will shift. There are 14 status possibilities that need to be communicated between trading parties. Of these 14, 4 must also be automatically reported to the tax authority platform. The result will be a huge amount of additional data flowing in multiple directions.
Additionally, the transaction details of B2B cross-border sales and purchases – excluding non-EU imports of goods – and B2C sales and payment data for Services Sales must be reported electronically to the tax authority.
Meeting these processing and capacity demands will be a significant undertaking for solution providers. For context, 100 million B2G e-invoices are processed annually. With the addition of B2B e-invoicing to the French mandate, this number will now be in the billions.
Why does this matter?
You want to be able to trust that your PDP can cope with increased capacity and processing needs as well as evolving compliance requirements. You want to set yourself up for success for France as well as to deal with the growing obligations across Europe and beyond.
The French Mandate is part of a global trend towards tax digitization. E-invoicing mandates are constantly changing, being modified and updated.
Take Italy, for example. Since January 2019, the e-invoicing mandate has been revised over 40 times.
The French tax authority has already released four versions of the upcoming French Mandate specifications and these will continue to evolve. Will your chosen software solution be robust enough to handle these changes so they don’t negatively impact your business? By asking the right questions, you may find that some aspiring PDPs, who also happen to be existing e-invoicing providers, are out of their depth.
On top of this, there’s the EU-wide VAT in the Digital Age initiative and the changes it will bring. Your future PDP must have the bandwidth and agility to keep up with the inevitability of these future developments. You will also need to consider whether this PDP can take care of your compliance needs beyond France too.
Trust is everything. A seasoned partner with experience navigating and solutioning for diverse e-invoicing obligations is important for your business. As government interest in business data grows, it’s essential to avoid blind spots, often created by complex supply chains, across multiple countries, within and beyond the EU. You’ll need a holistic view of your data that’s broader than e-invoicing and CTCs (continuous transaction controls). Think SAF-T and the other domestic obligations you face, alongside compliance challenges like VAT determination and periodic reporting.
If you’re also doing business beyond France, these need your attention too.
Let’s be clear. Despite what you may have heard about France’s e-invoicing mandate, this is not more of the same.
Yes, electronic invoice requirements used to be relatively manageable. They needed to be readable and unalterable, providing clear proof of the original supplier’s identity.
The scheme that will be introduced with France’s mandate complicates matters, adding requirements for:
Failure to meet the exact stipulations of the reform will result in invalid invoices.
Without legally valid invoices, not just VAT collection and VAT recovery are jeopardised: This would impact your company revenues and your trading partners, creating cash flow and profitability risks.
Make no mistake, the commercial and reputational impact of not meeting these minimum requirements are even more significant than the potential penalties.
French companies may be used to correcting e-invoice errors at a later date, but soon that will no longer be an option. The mandate ushers in continuous transaction controls, so any data or syntax errors will be glaring. If problems arise with e-invoicing, it won’t be possible to revert to paper or PDFs producing a significant cash flow risk for suppliers. E-invoices must be correct and compliant first time, every time.
Reliance on an experienced and knowledgeable PDP for e-invoicing and associated compliance obligations doesn’t just join the dots in your data. It makes good business sense.
For traditional e-invoicing, a large business network has been a supply chain advantage. A large network allows any one business to connect with a multitude of suppliers and buyers that choose to automate billing and invoice payments.
However, the interoperability requirements of the upcoming mandate erode the power of network size. Every supplier and buyer will need to connect through France’s e-invoicing system (Portail public de facturation or PPF) either directly, or indirectly through a PDP. Giving you more freedom when selecting the right PDP for your business.
While each registered PDP is required to cover both inbound and outbound invoice flows, they’re not required to cover all 36 specific use cases mentioned in the official documentation so far. Each use case needs an adapted treatment, which creates complexity that PDPs must address.
It’s important to ask any PDP you’re considering about their plans to address these use cases and any future ones that could arise as requirements evolve.
Our experts remain close to the requirements of the French Mandate. Especially as these evolve. Make it easy for yourself; connect with us.
Speak to us about our future-proof tax compliance solution, for the French Mandate and beyond, or download our deep dive guide on preparing for France’s mandatory continuous transaction controls.
Bizkaia is a province of Spain, and a historical territory of the Basque Country, with its own tax system. Before the approval of the Batuz strategy, the Bizkaia tax authority developed different approaches to implement a comprehensive strategy that would reduce tax fraud. The goal was to stop fraud from affecting revenue generated from economic activities.
This initiative started in the early 2010s when the authority introduced requirements for maintenance of the ledgers of economic operations for individuals with economic activities via model 140, and later by imposing the Immediate Supply of Information (SII) obligation to certain taxpayers in the region.
Batuz represents a significant advancement towards achieving an integral digitized tax control system, covering individuals and entities that carry out economic activities regardless of size. As this article outlines, the system establishes new models that facilitate compliance with fiscal obligations.
Batuz is a tax control strategy implemented by the Bizkaia government that applies to all companies and self-employed persons subject to the regulations of Bizkaia – regardless of their size and volume of operations – comprising the following requirements:
The tax authority based Batuz on the three pillars listed above. Each one entails the following set of obligations that, together, encompass compliance:
Voluntary adoption has been possible since 1 January 2022, with tax incentives for those who commit to early compliance.
From 1 January 2024, Batuz will become mandatory in Bizkaia for all taxpayers in scope – meaning there will not be a phased roll-out, as is usually the case.
For more guidance on the nuances of tax in Bizkaia, speak to our experts.
For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
The ever-changing Insurance Premium Tax rules and regulations can be challenging to keep up with, so staying on top of the latest developments in IPT compliance is key.
Join Sovos’ Edit Buliczka, Senior Regulatory Counsel, and Christopher Branch, Junior Regulatory Counsel in a webinar on regulatory analysis, where they will cover the recent updates and changes in IPT in Europe.
Register for our webinar to discover more information about:
Find out more about the impact of these regulatory changes on your IPT obligations and how to ensure compliance with the latest regulations.
For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.
The European Commission’s VAT in the Digital Age (ViDA) proposal continues to unfold with the latest details published on 8 December 2022. As a result, many EU countries are stepping up their efforts towards digitising tax controls – including mandatory e-invoicing.
While we see different approaches to initiate this transition across Northern Europe, the trend towards continuous transaction controls (CTCs) and e-invoicing mandates has accelerated.
Recent statements indicate that Germany is taking steps towards a B2B e-invoicing mandate, however, without a centralised reporting or clearance element – at least for now. During a VAT conference on 10 March, the Federal Ministry of Finance announced that a draft paper will be published in a couple of weeks for the introduction of the e-invoicing mandate.
It is worth noting that Germany had previously requested a derogatory decision from the European Commission to implement a mandatory e-invoicing regime, as announced by the Ministry of Finance in November 2022.
Sweden is another country where it would not be surprising to see an e-invoicing requirement emerge. The Swedish Agency for Digital Government (DIGG) has expressed the desire to implement mandatory e-invoicing in the country.
With the Swedish Tax Agency and the Swedish Companies Registration Office, DIGG has requested the government research the conditions for mandating e-invoicing in B2B and G2B flows, which would be added to the current B2G e-invoicing mandate.
The reasoning behind this request is that if the European Commission’s ViDA proposal is adopted, it will result in mandatory e-invoicing in cross-border flows. Therefore the national system should align for efficiency purposes. DIGG does not believe that alignment will occur voluntarily, but a mandate will be necessary.
In Finland, no mandatory B2B e-invoicing mandate is in place. However, buyers can receive a structured electronic invoice from their suppliers if requested. This regulation has been in effect since April 2020 for all Finnish companies with a turnover exceeding €10,000.
Furthermore, the Finnish government recently demonstrated their support of electronic invoicing by sending a letter to Parliament outlining its benefits. The government sees electronic invoicing as a means of increasing business efficiency and combatting VAT fraud through the ViDA package.
Lithuania is laying the groundwork for the broader use of e-invoices. It has announced plans to build a technological solution that complies with the European standard for the transmission of electronic invoices.
The platform is expected to be available free of charge to businesses for at least five years and should be ready by September 2023. Additionally, the platform will meet Peppol Network requirements and comply with Peppol BIS 3.0.
Denmark has also been working on digitizing the business processes by implementing a new bookkeeping law. The Danish Business Authority has initiated implementing the Bookkeeping Act’s digital bookkeeping provisions by adopting draft executive orders for standard digital bookkeeping systems and their registration.
As a result, providers of standard digital bookkeeping systems must adapt their systems to the new requirements by 31 October 2023 at the latest. The new provisions stipulate that traditional digital bookkeeping systems must support the automatic sending and receiving of e-invoices in OIOUBL and PEPPOL BIS format.
While Denmark has not announced the final dates, it expects taxpayers to adhere to the digital bookkeeping rules between 2024 and 2026.
Speak to a member of our team if you have further questions about e-invoicing.
Update: 4 October 2022 by Enis Gencer
The recent EU Commission report on the VAT in the Digital Age Initiative indicates that continuous transaction controls (CTCs) will become more prevalent across Europe. The final report suggests introducing an EU-wide CTC e-invoicing system covering both intra-EU and domestic transactions as the best policy option. While Eastern European countries have been at the forefront of local implementations, acting swiftly and introducing CTCs, it’s also worth keeping an eye on some of the developments in Northern Europe.
Following the 2021 national elections, the new coalition government in Germany identified VAT fraud as a policy question. It announced its intention to introduce a nationwide electronic reporting system as soon as possible, which will be used for the creation, checking, and forwarding of invoices. Although there are no details about the nature of the system, discussions are ongoing with stakeholders from the private sector, mainly focusing on the implementation timeline and the government’s role in such a system.
B2G e-invoicing has been mandatory for invoices issued to the federal administration since 2020. The scope was expanded from 1 January 2022 to include state-owned authorities in Baden-Wurttemberg, Hamburg, and Saarland, with the next states joining in 2023 and 2024. Moreover, the IT Planning Council, the Central Body for the digitization of administration in Germany, issued the decision 2022/31 advising all contracting authorities to accept electronic invoices via the PEPPOL network by 1 October 2023 to connect the entire public area in a uniform manner.
Denmark is also aiming to introduce new requirements to digitize the business processes of Danish companies. On 19 May 2022, the Danish Parliament passed a new accounting law requiring taxpayers to make their bookings electronically using a digital accounting system. The mandate will take effect gradually between 2024 and 2026, depending on the company’s form and turnover.
While the new accounting law doesn’t introduce any mandatory e-invoicing or CTC obligations, it is envisaged that the digital accounting systems must support continuous registration of the company’s transactions and the automation of administrative processes, including automatic transmission and receipt of e-invoices. The Ministry of Finance has been authorised to adopt rules requiring companies to register purchase and sales transactions with electronic invoices as the documentation of the transactions, which in practice would amount to an e-invoicing mandate.
The Danish Business Authority, Erhvervsstyrelsen, has prepared drafts for three executive orders concerning the new digital bookkeeping requirements. According to draft regulations, digital accounting systems are required to support the automatic sending and receiving of e-invoices in OIOUBL and PEPPOL BIS format. These systems must be able to share the company’s accounting data by generating a standard file, which is the Danish SAF-T Standard recently published by Erhvervsstyrelsen.
The draft regulations will be available for public consultation until 27 October and the requirements are expected to enter into force on 1 January 2023. There will be a conversion period until 1 October 2023 for digital accounting systems to comply with the requirements.
Sweden is another country looking at introducing digital reporting requirements. The Swedish Tax Administration, Skatteverket, is considering different ways to ensure the correct collection of VAT while obtaining useful economic data from businesses. The project is still at an early phase, and while such requirements could mean introducing Standard Tax Audit File (SAF-T) requirements or a type of CTC, e-reporting, or e-invoicing, the tax authorities would still strive to implement a smooth system for businesses.
The Latvian Ministry of Finance has been working on digitizing invoicing processes for a while. They conducted a public consultation and took into consideration opinions of companies and non-governmental organizations to find out the readiness to start using e-invoices in Latvia.
As a result, the Ministry of Finance prepared a report discussing the current situation and the implementation of e-invoices, and possible technological solutions. The report focuses on different e-invoicing systems, such as post-audit e-invoicing, centralised e-invoicing, and decentralised e-invoicing, comparing the advantages and disadvantages of such systems.
The report favours the PEPPOL BIS standard for the introduction of mandatory e-invoicing in B2B and B2G transactions and proposes the use of e-invoices must be defined as an obligation in Latvian regulations, setting a mandatory requirement for the use of e-invoices to start no later than 2025.
The Latvian government approved the report, and the necessary regulatory acts, hence implementation of technological solutions are expected to take shape in due course.
It’s clear that CTC initiatives are becoming increasingly popular among governments and tax authorities in Europe, with the Northern European countries starting to follow this trend, even if they seem to be acting more cautiously. It will be very interesting to see how and when these CTC projects take shape and be affected by the upcoming results from the EU Commission on the VAT in the Digital Age project.
Need help with e-invoicing requirements? Get in touch with our tax experts.
Update: 3 May 2024 by Dilara İnal
The Israeli Tax Authority (ITA) has postponed the rollout of the continuous transactions controls (CTC) mandate.
The deduction of input tax is allowed with this second postponement, even in the absence of an allocation number, until 4 May 2024. The previous cut-off date was 31 March.
Starting 5 May 2024, businesses engaged in B2B transactions exceeding 25,000 NIS (approx. EUR 6,500) are required to obtain an allocation number assigned by the ITA.
Contact our expert team for more information on Israel’s CTC changes.
Update: 2 November 2023 by Dilara İnal
On 23 October 2023, the Israeli Tax Authority (ITA) announced that it had extended the continuous transaction controls (CTC) implementation timeline to offer businesses more time to complete their technological development. According to the announcement, the ITA will allow the deduction of input tax from a tax invoice, even in the absence of an allocation number, until 31 March 2024.
The new Israeli invoicing framework will require businesses engaged in B2B transactions that exceed a specific threshold to obtain an allocation number. The first phase starts on 1 January 2024 for invoices exceeding 25,000 NIS. Businesses must ensure that their invoices include the allocation number to be eligible for input VAT deduction as of this date. In light of this recent announcement, buyers will receive an additional three-month period to comply.
It is important to emphasise that although the ITA has extended the time for input tax deductions, the clearance platform will be fully operational as originally planned from 1 January 2024. From this date, invoice issuers who will request allocation numbers will receive them.
Looking for more information on Israel’s invoicing developments? Find out more.
Update: 6 July 2023 by Enis Gencer
The Israel Tax Authority has released a set of guidelines encompassing technical details and other relevant information regarding the implementation of the Israeli Invoice model.
The guidelines state the new model will be a phased implementation that begins with a pilot program in 2024. A key objective of this new model is to address and mitigate the long-standing issue of fictitious invoices in Israel.
Under the newly introduced Israeli Invoice model, taxpayers involved in B2B transactions which exceed a specific threshold will be required to obtain an invoice number. This will be done by contacting the designated tax authority service via APIs and sending the invoice information prescribed by the tax authority.
The guidelines define the set of information that must be reported to the tax authority, including:
Once acquired, the invoice number must be included on the tax invoice. Without this number, taxpayers will not be eligible to deduct input VAT. It is important to note that the tax authority reserves the right to not assign the invoice number if there is reasonable suspicion of any legal inconsistencies concerning the invoice.
Buyers can use the invoice number to access invoice details through the tax authority service. This feature is designed to optimise the process of incorporating the invoice into the taxpayer’s accounting system.
The Israeli Invoice model will be a phased implementation, beginning with a pilot program in January 2024 for invoices exceeding 25,000 NIS (approximately 6,500 euros). During this phase, the tax authority can only reject the request for invoice numbers in cases of technical errors.
As implementation progresses, the threshold will be gradually reduced as follows:
Israel is quickly taking steps towards the introducton of its invoicing system by publishing technical details and its implementation timeline soon after introducing the system formally in February 2023. Taxpayers should now prepare their systems according to the legal and technical guidelines that the tax authority has recently published.
Looking for more information on Israel’s upcoming regulations? Contact our team of experts.
Update: 26 May by Enis Gencer
More details have emerged regarding the implementation of the continuous transaction control (CTC) model in Israel, which was announced to be introduced in the country in February 2023.
As we reported earlier, Israel’s government approved the 2023-2024 budget on 24 February 2023, setting the stage for the adoption of the CTC model. Since then, the proposal has gone through the standard legislative process and it has recently received approval from the Finance Committee, with some modifications.
According to the latest announcement, the modified plan introduces a CTC e-invoice clearance model for invoices exceeding NIS 25,000 (approximately 6,500 Euros) in business-to-business (B2B) transactions. Under this model, invoices must be issued through the tax authority’s system and obtain real-time approval. Taxpayers will not be allowed to use unvalidated invoices for deducting input tax.
The implementation of the CTC e-invoicing model is scheduled to start in January 2024, and by 2028, the threshold will be reduced to NIS 5,000, thus covering smaller amount transactions.
Despite the short implementation timeline, it is important that the authorities publish regulatory and technical specifications in time for taxpayers to prepare their invoicing systems to fully comply with the new requirements by January 2024.
Find more information about Israel’s current e-invoicing system here.
Update: 14 March 2023 by Enis Gencer
Israel’s government approved the 2023-2024 budget on 24 February 2023 to introduce a continuous transaction control (CTC) model in its tax system.
This long-awaited move will have significant implications for businesses operating within the country. It is essential to know the changes that may impact your company.
The new plan, prepared by the Ministry of Finance and approved by the government, envisages an e-invoice clearance model for invoices over NIS 5,000 (appx. 1300 Euros) issued between businesses. Under this model, invoices must be issued through a tax authority system and receive real-time approval.
The tax authority system will issue a unique number as proof of clearance for each invoice, which businesses can then use to deduct input VAT. The government has also proposed that the tax authority be entitled to refuse a request to assign a number and not clear the invoice if there is a reasonable doubt that the invoice is not issued legally.
While this plan is an exciting development, it is only the beginning of a long journey towards implementing a CTC model. The above proposal is currently only outlined in a budget document, which will be subject to further readings and approvals before the government can implement it.
Additionally, an amendment to VAT Law and the publication of technical details will be necessary to make it legally and technically enforceable.
For further information on the digitization of tax in Israel, speak to a member of our team.
Update: 9 April 2020 by Joanna Hysi
With the long-lasting problem of fictitious invoices in Israel, a move towards some form of mandatory e-invoice clearance might be the answer. After having been withdrawn once due to failing support, the idea of a continuous transaction control (CTC) model is being revived by the Israeli tax authority. The proposed model, similar to Chile’s e-invoicing system (clearance), would include a direct connection between the tax authority and businesses in real time for each transaction. The proposal, which is currently being reviewed with interested stakeholders, will be presented to the Knesset Finance Committee, with the hope of promoting legislation for implementing the planned reform measures as soon as a new government is formed.
Subject to final adoption in law, the core points of the reform are:
It’s an interesting observation that for years Israel appeared to be heading towards the EU approach of a post-audit system, yet recently they seem to have pivoted and be heading towards the more Latin American style of continuous transaction controls.
Either way, the Israeli tax authorities are now taking firm measures to combat VAT fraud, as to whether they go for a model similar to Chile, or something close to home in India or Turkey, we will have to wait and see.
Note: The Finance Law for 2024 has been officially adopted and published in the Official Gazette on 30 December 2023. Our blog, France: B2B E-Invoicing Mandate Postponed, is promptly updated whenever there are changes to the rollout of the French mandate.
France will implement a mandatory B2B e-invoicing and an e-reporting obligation. Every company operating in France is affected.
Electronic invoicing in France requires using a (partner) dematerialization platform. The already enacted legislation leaves the choice of which platform up to companies.
Should you use the public platform (‘PPF – Portail Public de Facturation’, i.e. Public Invoicing Portal) or a third-party private platform (‘PDP – Plateforme de Dématérialisation Partenaire’, i.e. Partner Dematerialization Platform)? And which organisation registered as a PDP should you opt for?
There is a lot to consider – including the type of invoices, data management, customer/supplier relations, transmission, functionalities, and more – this blog will help you make a decision.
The electronic invoicing process includes formatting, controlling, reporting, routing tracking, transactions, whether between trading parties (domestic B2B e-invoices) or with the PPF (domestic B2B e-invoices, cross-border B2B sales and purchases, B2C sales, payments received on services). In this respect, PDPs are essential.
French legislation allows companies to choose their dematerialization platform for submitting and/or receiving domestic B2B invoices and reporting transactions. A public solution exists, the PPF, alongside which other PDPs position themselves.
What parameters should you consider when choosing a dematerialization platform? What are the conditions for becoming a PDP and when will they be operational?
This blog discusses the elements that enable companies to understand the role of dematerialization platforms in managing electronic invoicing. If you wonder how to choose the right PDP for your organization, read this blog about Choosing the right PDP – 5 Questions to ask Yourself.
The need to use a dematerialization platform is part of the electronic invoicing requirements, which come into force for business-to-business (B2B) transactions with go-live of the mandate.
An electronic invoice must be delivered in a structured format, leaving it to the trading parties and their PDPs to agree on the standard. By default, PDPs must be able to process the three core set formats, UBL, CII, or UNCEFACT, with the obligation for the platforms to produce a legible version of each invoice, or Factur-X hybrid format (XML+PDF/A-3).
PDPs may also offer to process any other structured formats (e.g. EDI formats such as EDIFACT), subject to acceptance by both the buyer and the seller. In both cases, PDPs will have to extract mandatory data from the issued e-invoice and map it into one of the core set formats – and then report them to the PPF within 24 hours of the e-invoice issuance.
The corresponding flows can be exchanged under various communication protocols (EDI, API, etc.)
Using a PDP isn’t mandatory from a legal point of view. However, using a PDP will be necessary for companies who want to exchange invoices in specific formats due to the specificities of the invoice flow (not supported by the PPF).
The PPF will be used for the obligatory transmission of invoice data to the tax authorities.
It will manage the following for companies:
The PPF performs other functions including management of the Central Directory (in which any registered company subject to VAT will be identified), data collection and transmission to the tax authorities, and retention of e-invoices.
Like the PPF, a Partner Dematerialization Platform (PDP) ensures the submission of invoices and conversion into one of the three core-set formats – CII, UBL or Factur-X.
But, contrary to the PPF, they will allow the exchange of invoices in any EDI format (other than the three core-set formats).
The PDPs will allow the following:
In addition to these mandatory functionalities, they may also offer the following:
A PDP is a platform registered and authorised by the French tax authorities. The official registration number will be issued based on an application file submitted by an operator. This file will have to document how the regulation requirements (decree and order published in October 2022) are met, particularly the ability to perform the functions expected of a PDP. These requirements are meant to be slightly revisited with a new decree/order to be published beginning of 2024 (more precisely, with the removal of connectivity tests with TA Platform as a PDP Registration Criteria)
In addition to the guarantee provided by this registration (mainly from the point of view of compliance with stringent security rules), what distinguishes a registered platform from a simple dematerialization operator is the possibility of transmitting invoices to other dematerialization platforms (PPF or other PDPs).
This registration is valid for three years and then must be renewed, based on audits to be regularly provided by the PDPs (first audit to be conducted no later than 12 months after the registration entering into force).
The first certified PDPs should be announced in the beginning of 2024 and will be published on the tax authority’s website.
Find out how Sovos can help you comply with e-invoicing regulations by speaking with one of our experts.
It’s essential to stay on top of your company’s VAT requirements. This requires sound knowledge of the rules and what authorities expect of businesses. This includes dealing with supplies of goods and services outside standard VAT obligations.
Not every product or service incurs VAT. This is VAT exemption.
Some goods and services are exempt from VAT. This depends on the sector and country you are selling within.
For more information on how to comply with European VAT, download our free eBook or read our comprehensive guide to the EU VAT e-commerce package.
If a supply is exempt from VAT, it may be because the EU considers the goods or services as essential. VAT exempt supplies include:
If your company only sells VAT exempt products or services, your business operates differently. It is a VAT exempt business and:
For example, if a company solely provides education and training services in the UK, the government would consider it an exempt business. The above rules would apply.
In some circumstances, a business might be partially exempt from VAT. Partial VAT exemption applies to VAT-registered companies that carry out both taxable and VAT exempt supplies of goods or services.
If your business is partially exempt from VAT, you can still reclaim any VAT incurred when producing or acquiring non-VAT exempt goods or services you sell to customers.
Additionally, partially exempt businesses need to keep separate records. These records should cover VAT-exempt sales and provide details on how VAT was calculated for reclamations.
VAT exemption is not the same as 0% VAT. No extra charges are added to the original sales price for either zero-rated or VAT-exempt supplies, but there are a few significant differences.
Unlike VAT-exempt supplies, zero-rated goods and services are part of your taxable turnover. Zero-rated supplies should be recorded in your VAT accounts – whereas, in some countries, businesses might only record non-taxable sales in regular company accounts.
Furthermore, in contrast to VAT exemption, you can reclaim the VAT on any purchases for zero-rated goods or services.
VAT rates and exemptions vary across the world, so we will use the UK as an example to illustrate the concept.
In the UK, most goods and services are subject to a standard VAT rate of 20%. However, some are subject to a reduced VAT rate of 5% or 0%.
Goods and supplies with a VAT rate of 5% include:
Goods and supplies with a VAT rate of 0% include:
These reduced rates may only apply to certain conditions, or in particular circumstances depending on the following:
Continuing with our UK example, if you sell, send or transfer goods out of the UK, UK VAT is often not included as they are considered an export.
You can send most exports to a destination outside the UK with a zero rating if you meet the necessary conditions:
VAT exemptions are always changing. Don’t get caught out. Contact our team for advice on how your business should manage its VAT obligations if it is exempt from VAT.