Changes are coming to Portugal’s Billing SAF-T reporting requirements for non-resident taxpayers that trade in the country.
The process may be stringent but that doesn’t mean it has to be difficult for your company. Here are four things you need to be aware of about Portugal’s billing SAF-T obligations.
1: Non-resident taxpayers must file the first billing SAF-T report by 8 February 2023
Billing SAF-T is already compulsory for resident Portuguese companies but from January 2023, non-resident VAT registered companies are also obligated to submit a monthly billing SAF-T. The first report is due on 8 February 2023 and has particular requirements, which we discuss below.
The monthly deadline for submitting the Billing SAF-T is the eight day of the month following the reporting period.
2: You must use a certified billing software to generate the monthly report
A unique requirement to Portugal is that the Billing SAF-T file must be generated by ‘certified billing systems’ as designated by the tax authorities. Failure to comply with this requirement is subject to a fine.
Non-resident taxpayers need to ensure they are using a certified billing software to remain compliant.
Sovos’ SAF-T cloud solution is recognised as a certified billing software by Portugal’s tax authority. This makes staying on top of Portugal’s SAF-T Billing report obligations simple, with customised options available for customers needing to take a tailored approach.
3: You must submit SAF-T Billing in the correct format
Portugal’s SAF-T requirements include specific formatting for generation and submission. Based on the original OCED 1.0 schema, this includes a specified header, master files, and source documents.
Master files can include: customer and/or supplier tables, product tables, and tax tables.
Source documents can include: sales and purchase invoices, documentation on movements of goods, and payment information, as applicable.
For the most part, information in the schema is conditionally required, meaning most fields only need to be submitted if the relevant data exists in a taxpayer’s source system.
Taxpayers must be able to generate the required fields in their system and understand which data is required for submission.
4: Portugal’s SAF-T requirements continue to change
Portugal’s tax authority has continued to introduce new requirements and extend the scope of SAF-T in the country. Changes include stricter integrity and authenticity requirements and reducing the time window for invoice reporting obligations.
The tax authority’s changing requirements and increased visibility put additional strain on taxpayers to submit compliantly and on time.
Sovos’ Managed Service can help ease tax compliance burden for companies operating in Portugal and beyond. Our team of tax experts combined with our tax technologies help companies with filing and reporting obligations. Speak to our team to learn more about how Sovos can help solve tax for good.
Serbia is on the final straight to implementing its mandatory e-invoicing, which will come into effect from 1 January 2023. Legislative changes are still being proposed before that deadline to allow for a complete introduction of mandatory e-invoicing to the whole B2B sector.
On 12 December 2022, the Ministry of Finance published the following Laws on Amendments in the “Official Gazette of the RS” No. 138 among others:
1. Amendments to Serbia’s Electronic Invoicing Law
One of the changes regarding the scope of the Law on Electronic Invoicing involves natural persons who are not liable for income tax for self-employment, in the sense of the law governing personal income tax, who will be excluded from the provisions of the Law on E-Invoicing.
Regarding the type of transactions that will not be in the scope of e-invoicing, there will be no obligation to issue an electronic invoice for the sale of goods and services free of charge. Lastly, the legal entities and entrepreneurs who are not VAT payers, nor voluntary users of SEF, will not be obliged to record VAT calculation in SEF if they are tax debtors.
In case of a temporary interruption in the operation of the electronic invoice system, the system will consider an e-invoice as delivered at the time operation resumes. The act of the Ministry of Finance that regulates such procedures will be adopted on 1 April 2023 – three months from the date of entry into force of this law.
Also, the following paragraph will be added to Article 6 stating: “An electronic invoice that has been rejected can be subsequently accepted”. This provision will apply from 1 June 2023 for electronic invoices recorded in the central register of invoices, in accordance with the law regulating the deadlines for settling monetary obligations in commercial transactions.
The law will enter into force on 1 January 2023.
2. Amendments to Serbia’s VAT Law
The changes introduced to the law on VAT that impacts electronic invoicing processes stipulate that an invoice is an electronic invoice accepted by the buyer, as required by the Law on E-Invoicing.
The law ensures that the taxpayer accepting the electronic invoice within the deadline to submit the tax return may exercise the right to deduct the preliminary tax at the earliest date for the tax period where liability occurred. The taxpayer will also need to notify the tax authority about a change of data relevant to the calculation and payment of VAT contained in the registration form. The notification will be exclusively electronic and excludes notice in writing.
The law will enter into force on 1 January 2023, coinciding with the Serbian e-invoicing mandate go live date.
3. Amendments to Serbia’s Fiscalisation Law
The Law on Fiscalisation regulates, among other things, the subject of fiscalisation and the procedure conducted through an electronic fiscal device. The supply of goods and services, conducted by a fiscalization obligor to a legal entity or taxpayer of income from self-employment, outside the retail store, is not considered a retail supply. Therefore, such supply will not be subjected to fiscalization requirements and will not need to be recorded through an electronic fiscal device.
Moreover, the amendments specify that the fiscal receipt does not need to contain the value of the transaction per tax rate as a mandatory element. By scanning the QR code for verification, which has all the parts of an electronic signature when printing a fiscal invoice or a hyperlink for verification when a fiscal e-invoice is issued, it will be possible to receive additional information about the fiscal receipt.
The amendments to the Law on Fiscalisation that impact the future e-invoicing mandate cover changes related to the fiscal invoices issued to legal entities and taxpayers on income from self-employment. Transferring these fiscal invoices to the System of Electronic Invoices (SEF) will happen upon fulfilment of technical requirements. The Minister of Finance will further regulate the method and procedure of data transfer in the future.
Based on Article 7, a separate regulation will control the manner and procedure of data transfer to the SEF platform, that will be adopted within 180 days from the day when this Law enters into force. This means adoption will be in June 2023 at the earliest.
The Law on Amendments and Supplements to the Fiscalisation Act will be enforced on the 8th day following its publication, which took place on 12 December 2022.
Integration of the Fiscalisation system with SEF
The above amendments relate to the plans introduced by the MoF to integrate the Fiscalisation system with the E-Invoicing system (SEF), which will most likely start at the earliest in January 2024. As the Minister of Finance Vuk Delibašić announced on 1 December 2022: “The plan is to integrate the E-Invoicing system with the Customs Administration, e-fiscalization, as well as the creation of a semi-automatic VAT declaration, and an electronic excise tax is also being prepared.”
Need help?
Still have questions about e-invoicing in Serbia? Speak to our tax experts.
The European Commission’s “VAT in the Digital Age” proposal brings significant modifications to the VAT treatment of the platform economy related to the operators in the short-term accommodation (max. of 45 days) and passenger transport services.
VAT treatment of the platform economy
It is worth mentioning that the ‘VAT treatment of the platform economy’ only relates to the supply of certain services via a platform. There are also a set of e-commerce rules related to the supply of goods via platforms.
The rise of the platform economy business model has triggered new challenges for the VAT system. As per the view of the EU Commission, one of these problems is VAT inequality that can be experienced if we look at:
The accommodation platform model that the EU Commission sees as competing directly with the hotel sector direct distribution model or
The transportation platform model that the EU Commission sees as competing directly with private taxi firms
We can better understand the EU view of the distortion of the competition if we look at the European Commission’s Impact Assessment report. The report outlines the growing importance of the platform economy in VAT collection and explains the studies conducted to ascertain where the EU Commission needs to take action.
In terms of numbers, the value of VAT revenue from the digital platform ecosystem is estimated at about EUR 25.7 billion per year for the Member States, i.e. 2.6 percent of total VAT revenue.
Scale of platform economy operation, by sectors (EU27, EUR billion, 2019)
The total value of VAT revenue includes EUR 3.7 billion related to accommodation services and EUR 3.1 billion related to transportation services.
In these two sectors, private individuals and small businesses (i.e. underlying suppliers) can provide their VAT-free services (i.e. they do not account for any VAT) via a platform. With the economies of scale and network effect, these businesses can be in direct competition with traditional VAT-registered suppliers.
Taking into account the supporting study, the number of underlying suppliers who are not registered for VAT, can be up to 70%, depending on the type of platform.
For example, in the accommodation sector, over 50% of users of a particular accommodation platform specifically access the platform’s offering over a traditional hotel. In Europe, the cost of accommodation offered via the accommodation platform can be, on average, some 8% to 17% cheaper than a regional hotel’s average daily rate.
In the view of the European Commission this means a distortion of competition between the same services offered via different channels.
The VAT treatment of the facilitation service
Clarifying the nature of services provided by the platform was the most supported intervention across different stakeholders.
In some Member States the treatment of the facilitation service charged by the platform is regarded as an electronically supplied service, whilst in others it is regarded as an intermediary service.
This is relevant because it can lead to different places of supply, which can lead to double or non-taxation. Therefore, clarification of these rules is necessary.
According to the proposal, the facilitation service (where the term “facilitation” extends to include short-term accommodation and passenger transport services) provided by a platform should be regarded as an intermediary service (Article 46a amending Directive 2006/112/EC). This allows for a uniform application of the place of supply rules for the facilitation service.
While this has no impact on the existing rules when the supply is carried out on a B2B basis, the same cannot be said about B2C supplies. Under this scenario, the place of supply will be where the underlying transactions takes place.
How will the VAT in the Digital Age proposal change the status quo?
According to the European Commission, the main issue with the platform economy is the inadequacy of the current VAT legal framework to ensure a level playing field with traditional businesses, specifically in the transport and accommodation sectors. Supplies made by small underlying suppliers via a platform are not taxed and the facilitation services made by platforms are taxed differently in different Member States. This leads to difficulties for the platforms, suppliers, and Member States.
Introducing a deemed supplier model will solve these issues, by which platforms will account for the VAT on the underlying supply where no VAT is charged by the supplier. This model ensures equal treatment between the digital and offline sectors of short-term accommodation rental and passenger transport.
In addition, clarifications will be given on the treatment of the facilitation service to allow for a uniform application of the place of supply rules, and steps will be taken to harmonise the transmission of information from the platform to the Member States.
In terms of timing, the proposed rules on the platform economy will take effect in 2025. This is a short period to put in place all needed changes to be compliant and it requires the platforms to begin looking into it as soon as possible.
Acquisition holds immediate benefit for customers with complex supply chains and footprints across Europe; furthers Sovos’ long-term global tax engine strategy
BOSTON – December 6, 2021 – Global tax software provider Sovos today announced it has acquired Germany-based TLI Consulting GmBH. The move significantly advances Sovos’ value-added tax (VAT) determination capabilities, with immediate benefits for businesses running SAP. VAT determination is one of three pillars of modern tax compliance, and often the first that multinational companies tackle before addressing digital reporting and complex continuous tax controls (CTCs), like e-invoicing. Sovos will leverage TLI Consulting’s software, consulting services and team to help customers Solve Tax for Good® with complete, continuous and connected solutions for every facet of the digital transformation of compliance.
Sovos is on a years’ long journey to build end-to-end offerings that help businesses infuse trust in every transaction. That journey has included the acquisition and development of global CTC, VAT reporting and SAF-T solutions, and a Sovos Connect Once API for a seamless customer experience across systems that need to comply with a wave of real-time and e-audit VAT mandates. TLI Consulting, Sovos’ ninth acquisition in the past 12 months, continues that journey with enhanced VAT determination for businesses with complex supply chains covering a broad jurisdictional landscape across Europe and beyond.
“Sovos has built the most complete suite of technology and services for frictionless compliance in digitizing economies, with advanced solutions for CTC, SAF-T, VAT reporting and other global requirements,” said Andy Hovancik, CEO, Sovos. “The acquisition of TLI Consulting continues that leadership with heightened capabilities for VAT determination, which is often the first piece of an increasingly complex puzzle companies must solve.”
TLI Consulting has served businesses whose transaction and tax determination needs are too complex or costly to configure and maintain via native SAP and in-house tax experts. The company’s software solution extends native SAP VAT determination functionality, and its consultants have the integration and implementation expertise to ensure that SAP ECC or SAP S/4 HANA enterprise resource planning systems can seamlessly determine the right VAT decisions and tax codes for any outbound or inbound transaction.
“Today’s announcement represents a key building block toward a Sovos tax determination portfolio that now helps customers meet modern indirect tax compliance challenges globally, including in Europe, the United States, Brazil and elsewhere,” said Steve Sprague, general manager, global value-added tax, Sovos. “Together, we’re creating the technology solutions that speed simpler tax determination for every transaction, in every jurisdiction, for every tax regime.”
Sovos’ acquisition of TLI Consulting has immediate potential for positive impact on customers in Germany and throughout Europe. In addition to the SAP software extensions upon which it has built its business, TLI Consulting’s expertise and experience will contribute to Sovos’ global tax engine strategy, which is to ensure any customer system can benefit from indirect tax determination, CTC and SAF-T support through a single integration.
“As we join Sovos, the TLI Consulting team gains the opportunity to help create the one-stop VAT solutions companies crave, while expanding our reach as part of a global technology leader. We look forward to this next phase and the positive impact it will have on our customers and future customers,” said Martin Grote, Sovos vice president of European VAT determination and former TLI Consulting director.
John Gledhill, vice president of corporate development for Sovos, said, “As a global organization with more than 2,300 employees, Sovos will scale TLI Consulting’s software and services business in support of the largest multinational companies with complex business transactions in Europe. With this acquisition, Sovos also establishes operations in Germany and now has employees in 14 countries.”
The terms of the deal were not disclosed. Sovos is owned by Hg, the London-based specialist private equity investor focused on software and service businesses, and TA Associates. EY served as financial advisor to Sovos, and Burness Paull and Luther provided legal counsel. Rödl & Partner advised TLI Consulting.
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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/en-gb/ and follow us on LinkedIn and Twitter.
About TLI Consulting
TLI Consulting offers VAT determination software and associated consulting to support clients in entering VAT processes into their SAP (and other ERP) systems through developing and implementing customized, practical and compliant solutions for accounts receivable and accounts payable processes. Further, TLI Consulting offers SAP solutions for VAT ID validations and VAT reconciliations and analysis.
Sovos Partner Network drives digital transformation of tax compliance for customers while offering significant profit potential and borderless growth to partners
BOSTON – October 6, 2022 – Global tax software provider Sovos today announced the launch of its new Sovos Partner Network designed to guide partners in addressing the critical needs of their customers as they navigate the complexity of digital compliance and changing tax regulations around the world. With access to Sovos’ complete portfolio of compliance solutions, along with its unmatched regulatory and tax expertise, this new program enables partners to bolster their tax compliance offerings and expand their business opportunities.
“Government authorities have gone increasingly digital with the calculation, reporting and compliance of taxes and Sovos continues to invest heavily in tax technology solutions. Collaborating with Sovos allows KPMG to bring both its leading technology and tax and implementation experience to clients,” said Niren Saldanha, Partner, Tax, KPMG LLP.
The Sovos Partner Network was built to align to our partners’ business models, whether they resell, co-sell, implement or embed Sovos solutions. Competitive incentives and other business-related program benefits were designed to assist partners in expanding their businesses in ways that best fit their go-to-market strategies. The modern program includes a rich array of consistent and accessible tools, training and a self-service partner portal. Industry leaders such as Oracle, NetSuite, SAP and KPMG have already partnered with Sovos to increase customer support, in addition to hundreds of other partners across the globe, both large and small. Collectively, these partners share Sovos’ core mission to Solve Tax for Good®.
Sovos’ global commitment to partners extends to Latin America. “EY Brazil brings tax transformation and automation to its clients by leveraging process and tax automation software in the market, such as Sovos Taxrules,” says Giovanni Schiavone, Tax Transformation Partner at EY Brazil. “We conduct ‘Tax Transformation Projects’ that evaluate our clients’ GAPs and then suggest automations using the most advanced features of solutions like Sovos to help create a high-performance tax area, aligned with current and future Brazilian compliance needs.”
Why partner with Sovos?
The Sovos Partner Network offers many ways to create mutually beneficial opportunities, including:
Driving new revenue streams: Business partners can expand their product portfolio and market coverage by offering solutions that solve their customers’ needs for compliance.
Offering the most comprehensive suite of solutions and services: Leveraging Sovos’ Cloud, SaaS and API development, partners can offer robust solutions to customers such as SAGE, Sun Chemical and Nationwide that address real-world challenges.
Building upon 40 years of experience and research: Through our team of subject matter experts, Sovos supports tens of thousands of customers around the globe, including half of the Fortune 500, and is deployed in more than 70 countries.
Collaborating with trusted names in the industry: Partners can provide their customers with up-to-date tax compliance solutions amid global regulatory changes with one of the most trusted brands in the market.
Access to growth-focused tools and resources: Sovos offers a wide range of actionable benefits that are designed to drive success, including sales and marketing, business development, technical and enablement tools and other resources that help partners grow their business.
“Strong partner relationships are a key component of our strategic business approach. This new global program represents the next step in our ability to support the evolving needs of customers in today’s global tax and compliance marketplace,” said Jonathan Eisner, vice president, global alliances and chief channel officer, Sovos. “Investing in a stronger ecosystem that better supports and rewards our partners is a critical part in solving these dynamic challenges.”
To learn more about the Sovos Partner Network or apply to become a partner, click here.
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.
Electronic invoicing in Poland via KSeF has undergone a long journey. Providing new expectations for B2B and B2G transactions alike, it is vital for taxpayers to understand what’s to come – though that can be tough when rules and regulations change frequently.
This blog provides a comprehensive timeline of Poland’s advancement towards its e-invoicing mandate, detailing the adjustments your organisation should be aware of. The cost of non-compliance reaches beyond financial penalties, so knowledge is vital.
If you’re looking for the current KSeF requirements, visit our overview of e-invoicing in Poland. If you want to see the journey the regulation has been on, and any upcoming changes that could affect your business, keep reading.
Update 26 April 2024 by Marta Sowinska
New E-invoicing Mandate Dates Announced
The Polish Ministry of Finance announced the new official implementation date for mandatory e-invoicing via KSeF during a press conference. The new timeline is as follows:
1 February 2026 – for taxpayers whose turnover exceeds PLN 200 million (approx. EUR 46 million) in the preceding year
1 April 2026 – for all other taxpayers
The Ministry of Finance emphasised that an earlier implementation date for the mandatory KSeF would not be feasible due to findings from an external technical audit. Consequently, the KSeF system will require a comprehensive architectural rebuild.
Further information concerning technical specifications and necessary legal amendments will be published in the coming months.
Update 23 January 2024 by Marta Sowinska
Electronic invoicing in Poland via KSeF has undergone a long journey. Providing new expectations for B2B and B2G transactions alike, it is vital for taxpayers to understand what’s to come – though that can be tough when rules and regulations change frequently.
This blog provides a comprehensive timeline of Poland’s advancement towards its e-invoicing mandate, detailing the adjustments your organisation should be aware of. The cost of non-compliance reaches beyond financial penalties, so knowledge is vital.
If you’re looking for the current KSeF requirements, visit our overview of e-invoicing in Poland. If you want to see the journey the regulation has been on, and any upcoming changes that could affect your business, keep reading.
Electronic invoicing in Poland via KSeF has undergone a long journey. Providing new expectations for B2B and B2G transactions alike, it is vital for taxpayers to understand what’s to come – though that can be tough when rules and regulations change frequently.
This blog provides a comprehensive timeline of Poland’s advancement towards its e-invoicing mandate, detailing the adjustments your organisation should be aware of. The cost of non-compliance reaches beyond financial penalties, so knowledge is vital.
If you’re looking for the current KSeF requirements, visit our overview of e-invoicing in Poland. If you want to see the journey the regulation has been on, and any upcoming changes that could affect your business, keep reading.
Update 19 January 2024 by Marta Sowinska
Poland Postpones E-invoicing Mandate Rollout
Poland’s Ministry of Finance announced today the postponement of its e-invoicing mandate. Originally scheduled for July 2024, the initiative has been postponed indefinitely due to major errors identified in the KSeF system.
The Minister of Finance emphasised that the current technical status of the KSeF system poses substantial challenges, preventing its secure implementation in Poland. Critical errors were identified in the code, affecting overall system functionality and performance of KSeF, prompting the Ministry to take decisive action.
To address these issues, the Ministry of Finance will initiate an external audit to assess the functioning of the KSeF system and evaluate the preparedness for its implementation. The final date for the introduction of mandatory e-invoicing will be contingent upon the results of these audits. In addition, the Ministry will intensify consultations with businesses regarding KSeF.
While expressing full support for the implementation of the KSeF system, the Ministry of Finance reiterated that their priority is to ensure the proper functionality of the system. This commitment stems from the need to secure the economic turnover in the country and avoid situations where taxpayers might be unable to issue e-invoices due to KSeF errors.
Update 5 January 2024 by Marta Sowinska
Poland Publishes Amendment to JPK_VAT Requirements
The regulation amending the scope of data included in the JPK_VAT with a declaration (VAT return) in Poland, has been published in the Official Journal on 4th January.
The final version of the regulation from 29 December 2023 has been further changed compared to the initial draft, and its final form does not include previously stated obligations to:
include the special mark “OFF” in the VAT return in respect to invoices issued during KSeF system failure or offline mode, when the technical difficulty to connect with KSeF was on the taxpayer’s side.
include the special mark “BFK” in the VAT return with respect to invoices issued outside of KSeF.
However, it still includes the obligation to include the unique ID number (numer KSeF) in the VAT return, in case the number has been assigned on the invoice, from:
1 July 2024 in the sales and purchase records voluntarily.
1 January 2025 in the sales records mandatorily.
The regulation is planned to enter into force from 1 July 2024.
Update: 19 December 2023 by Marta Sowińska
KSeF Technical Specifications Released
The Ministry of Finance has released technical specifications for the KSeF interface in the test environment. This documentation outlines details about QR codes and their associated verification links, it also clarifies information derived from the draft regulation on the use of KSeF that was published in November.
The QR codes serve as visual representations of the verification links and must adhere to the ISO/IEC 18004:2015 standard. Their size and precise placement on printouts are flexible and can be tailored to specific requirements.
Update: 28 November 2023 by Marta Sowińska
Mandatory E-invoicing Draft Acts Published in Poland
On 26 November, the Ministry of Finance published two long-awaited draft acts regarding mandatory e-invoicing via KSeF.
Verification codes (i.e. QR codes): included on the invoices sent to the buyer outside of KSeF and in the event of system or taxpayer failure to connect with KSeF (offline modes)
Offline modes: the scope of data allowing access to invoices in KSeF that were issued in offline mode
New authorisations and authentication methods to connect to KSeF, also for VAT RR and VAT RR KOR invoices
Invoices issued by VAT-exempt taxpayers must include the NIP numbers of both buyer and supplier to align with issuing invoices via KSeF from January 1, 2025
The draft acts are planned to enter into force on 1 July 2024, except for the obligation covering VAT-exempt taxpayers.
In the coming days, the tax authorities will publish the interface technical specifications and description of the technical requirements for the verification codes (i.e. QR codes).
On 4 August 2023, the Polish President signed an Act amending the VAT Act and certain other laws which introduces mandatory e-invoicing via KSeF. This means that the e-invoicing mandate will enter into force on 1 July 2024, with no further postponements.
Following the enactment of the law, the Ministry of Finance published a draft regulation amending the regulation on the use of KSeF from 27 December 2021.
Update: 28 July 2023 by Marta Sowińska
Poland’s Draft E-invoicing Law To Move Forward
The Sejm has voted against the Senate’s veto which blocked the draft legislation introducing the national e-invoicing system, KSeF, on the grounds of it being unconstitutional.
Following its adoption by Sejm and pursuant to the draft legislation, the e-invoicing obligation will come into force, as planned, on 1 July 2024, with some exceptions.
As a next step, the draft law will be adopted and enacted in the country after it has been signed by the President.
On 9 May, the government in Poland adopted a draft law introducing mandatory e-invoicing via KSeF, which will take effect from 1 July 2024. Now the draft law must be approved by Parliament, and the next session is planned for the end of May.
The adoption of this piece of legislation is an essential step, showing that the government is moving forward with the digitalization of the public sector by introducing mandatory e-invoicing via KSeF.
Poland has published the second draft law amending the VAT Act and certain other laws on the Government Legislation Centre on 15 March 2023.
The amendments mainly confirm previously announced changes, though some additions are worth noting. The essential clarifications include:
1. Scope of the KSeF mandate
Postponement of the KSeF mandate from 1 January 2024 to 1 July 2024, with some exceptions
VAT-exempt taxpayers will be in scope from 1 January 2025
From 1 January 2025,it will not be possible to issue invoices using cash registers and simplified invoices in the current form
The mandatory scope of the KSeF system will exclude invoices for B2C transactions, and invoices issued and settled for OSS and IOSS will not be included in the mandate.
Foreign taxpayers with a fixed establishment in Poland performing activities required to be invoiced according to Polish VAT law will be obliged to issue invoices via KSeF, to the extent that this permanent place of business relates to the supply of goods or services which are invoiced
2. Corrective notes excluded from KSeF
The draft law entirely withdraws the possibility for buyers to issue corrective notes. Buyers cannot propose corrections to the original invoices through or outside KSeF, which the previous draft law presented. Accordingly, changes in the issued invoice can be made only by issuing a corrective invoice.
3. Issuing invoices outside KSeF in case of failure
In line with the previous draft proposal, the current draft law specifies the possibility of issuing e-invoices in offline mode – outside of KSeF in a structured format and delivering to KSeF on the next business day – in case of a failure on the taxpayer side.
The Ministry of Finance will communicate relevant information to the public regarding any maintenance work conducted in KSeF or any system failure. During this time, taxpayers can issue invoices outside of KSeF and deliver them to the buyers in the agreed format.
Such invoices must follow the structured format, be assigned with a QR code and, after the failure ends, be delivered to KSeF within seven days. The date of issuance will be the date stated in the P_1 field, while the buyer’s receipt date will be the date when KSeF assigned the unique ID.
4. QR code
The government has added a new requirement for including a QR code on the invoices issued during a failure of the KSeF system. As previously announced, the QR code must also be included on the invoice visualizations issued outside of KSeF, for example, to foreign buyers and on the VAT RR invoices and corrections to them.
5. Self-billing process under KSeF
The Ministry of Finance responded to feedback about the lack of a self-billing process for cross-border transactions. Therefore, a method of authentication in KSeF for foreign buyers will be included in KSeF, allowing foreign buyers to issue structured invoices on behalf of the suppliers.
6. Exchange rate
The exchange rate used for converting foreign currencies into PLN currency can be maintained from the day preceding the date indicated in the P_1 (date of invoice issuance).
The exchange rate will be calculated based on the date when an e-invoice was issued (stated in the P_1 field), provided that an e-invoice is sent to KSeF no later than the day after the date indicated in the P_1 field.
7. Penalties
Sanctions will apply from 1 January 2025 (previously 1 July 2024) up to 100% of the amount of VAT indicated on the invoice or up to 18.7% of the total amount due shown on the invoice. However, no minimum penalty amount will apply – previously, it was 1000 PLN – approx. 200 EUR.
Next steps for Poland’s KSEF e-invoicing mandate
The draft law is expected to be published in Q3 of 2023, with most provisions applying from 1 July 2024.
Accordingly, the associated final schema FA (2) and FA (RR) are also planned to be published at the end of June or the beginning of July, as announced by the Ministry of Finance during a conference on 16 February 2023. Therefore, we are still waiting for the legislative process to be completed for the e-invoicing mandate to take effect.
Speak with our team if you need more information on the upcoming e-invoicing changes in Poland.
Update: 3 February 2023 by Marta Sowińska
Poland: E-invoicing Mandate Postponement to 1 July 2024
According to an official announcement published by the Ministry of Finance on 2 February 2023, the go-live date of Poland’s mandatory e-invoicing system is now 1 July 2024 – delayed six months from the previous date.
More than a year after the roll-out of the voluntary phase and following extensive testing of the KSeF system by taxpayers, the Ministry of Finance responded to the feedback submitted in the public consultation by delaying the mandate and relaxing certain requirements.
The expected changes are:
The e-invoicing mandate will be postponed from 1 January 2024 to 1 July 2024
VAT-exempted taxpayers must comply with the e-invoicing requirements and issue invoices via KSeF from 1 January 2025
The KSeF system will exclude B2C transactions
Invoices issued through cash registers and simplified invoices can be issued in their current form until 31 December 2024, meaning such invoices will be in the scope of KSeF from 1 January 2025
In the case of a technical failure on behalf of the taxpayer, they will be able to issue invoices outside of KSeF and transmit them to the system the next day
Penalties will be postponed until 1 January 2025and imposed on taxpayers on a case-by-case basis
Taxpayers should not treat the postponement of the e-invoicing mandate as a reason to pause the implementation process. Instead, treat the delay as an incentive to implement complex legislative and technical requirements before the go-live date and adapt their accounting and invoicing processes considering any errors that may appear.
The European Commission has announced its long-awaited proposal for legislative changes in relation to the VAT in the Digital Age (ViDA) initiative. This is one of the most important developments in the history of European VAT, and affects not only European businesses, but also non-EU companies whose businesses trade with the EU.
The proposal requires amending the VAT Directive 2006/112, its Implementing Regulation 282/2011, and Regulation 904/2010 on Administrative Cooperation on the combat of fraud in the field of VAT. They cover three distinct areas:
This regulatory change proposal will still need formal adoption by the Council of the European Union and the European Parliament under ordinary legislative procedures before it can come into force. In tax matters such as these, the process requires unanimity among all Member States.
This blog focuses on VAT digital reporting obligations and e-invoicing, whereas future updates from Sovos will address the other two areas.
VAT digital reporting obligations and e-invoicing – an overview
Intra-EU B2B transaction data will need reporting to a central database:
Digital Reporting Requirements (DRR) will be introduced for intra-EU (B2B) transactions: All suppliers and customers (no thresholds or exemptions) in an intra-Community B2B transaction will need to submit data to their local tax administration no later than two working days after the issuance of the invoice. Each Member State’s tax authority will channel the data to a central database
The EU Standard for Electronic Invoicing (EN16931) will be used for the data elements and reporting format; only a sub-set of the invoice will be reported
The DRR will be coupled with mandatory e-invoicing for B2B intra-EU transactions
The reporting requirement will replace the current intra-Community listings (known also as recapitulative statements or EC Sales Lists)
Digital reporting requirements for domestic transactions will remain optional:
Implementing digital reporting requirements for domestic transactions will remain optional for Member States. This has been the competence area of the Member States until now, and following the principles of subsidiarity and proportionality, the Commission strives to align and harmonise without forcing Member States to introduce this requirement
If digital reporting requirements for domestic transactions are introduced in a Member State, e-invoicing will be mandatory for the transactions in scope
A local system will need to ensure interoperability with the intra-EU system on a data level; domestic e-reporting must use (a subset of) the European Norm EN16931; for newly introduced systems, this requirement will apply immediately while existing domestic systems must converge in the medium term
There is no requirement on Member States to provide pre-filled VAT returns
Changes will be made to facilitate and align e-invoicing:
Electronic invoicing will be the default system for the issuance of invoices
The need for derogation to introduce mandatory e-invoicing in a Member State will be removed
The need for customer acceptance of supplier e-invoicing will be removed
The definition of e-invoicing will be amended to align with Directive 2014/55 and will include only structured electronic files. Therefore, non-structured formats like PDF will not be deemed to represent electronic invoices from a VAT perspective
Payment data will be introduced as a new content requirement for invoices
“Transmission” will not be regulated:
The European Commission has, at this stage, chosen not to propose regulation regarding the transmission channel of the reported data to the tax authorities. This is currently left to Member States to decide on.
The reason for this decision is likely because it’s a technical issue, and that the discussion would have slowed down the process of publishing this proposal. The European Commission also appears ambiguous about whether it would want to regulate this in the future.
What does the future of VAT in the Digital Age look like?
Many countries primed to introduce continuous transaction controls (CTCs) have been waiting for EU regulators to provide an answer to what rules the individual Member State will need to abide by. It remains to be seen whether this proposal will embolden these Member States to move ahead with plans, despite the non-final status of the proposal. It’s noteworthy that Germany filed for a derogation from the current VAT Directive to be able to mandate e-invoicing just a few days before the original date that the Commission had planned to publish this proposal – 16 November 2022.
A Quick Guide to E-invoicing and Real-Time Reporting
Tax regulations in Eastern European countries are complex but that shouldn’t be a reason not to do business there. If you’re responsible for VAT compliance, this ebook provides key details of the varying VAT digitisation mandates and business requirements across the region:
Understand how to comply with the e-invoicing and reporting in Eastern Europe
Deep dives into Hungary, Poland, Romania, Serbia and Slovakia
Must-read for tax professionals and consultants
A Quick Guide to E-invoicing and Real-Time Reporting
Tax regulations in Eastern European countries are complex but that shouldn’t be a reason not to do business there. If you’re responsible for VAT compliance, this ebook provides key details of the varying VAT digitisation mandates and business requirements across the region:
Understand how to comply with the e-invoicing and reporting in Eastern Europe
Deep dives into Hungary, Poland, Romania, Serbia and Slovakia
Must-read for tax professionals and consultants
Get the ebook
Who should read this ebook?
Tax professional
Need to be up to date with Eastern European regulations
Understand system requirements for real-time reporting and e-invoicing
Prepare and future-proof for upcoming tax digitization
Consultancy
Ensure best practices for clients
Keep up to date with latest regulations and developments
Confidently navigate the tax landscape to help clients with planning
Written by tax experts and regulatory specialists
Tax administrations continue to insert themselves into the invoicing process or demand detailed records within a matter of hours or days of transactions. Many have introduced continuous transaction controls (CTCs)and are seeing the benefits of closing their country’s VAT gap and gaining granular, real-time or near real-time insight. Eastern Europe is part of this trend, moving forward rapidly with real-time reporting and e-invoicing initiatives.
The challenge of VAT digitization in Eastern Europe
Each Eastern European country has a different approach to CTCs. These differences could extend further as mandates evolve and businesses have to deal with new filing formats like SAF-T and real-time reporting to stay tax compliant. Understanding the varying demands of VAT compliance is key for any business operating in or looking to expand into the region. With this guide you’ll gain a greater understanding of the requirements across the region. Our deep dive into key countries will help you comply with VAT regulations now and prepare for upcoming mandates.
What this guide to Eastern Europe e-invoicing and reporting compliance covers
Get our guide for a comprehensive picture of CTCs in Eastern Europe and the many requirements that vary country to country. This includes invoice format, connectivity, data requirements, how to submit, archiving, legacy systems, technologies and business processes-all of which need to be reconsidered and rewired to be compliant. We also conduct extensive reviews of key Eastern European economies as well as uncover what’s on the horizon in one of the most important countries in the region, Slovakia:
The CTC landscape in Eastern Europe is constantly evolving, with countries at different stages of their journeys.
The Czech Republic, Austria, Croatia and Montenegro all currently allow post-audit invoicing.
Countries that have already implemented CTC regimes (either e-reporting or e-invoicing) where paper invoicing is still possible include Hungary, Albania and Greece.
In some cases, such as in Slovenia and Bulgaria, there are CTC schemes planned but details have yet to be specified.
Others have outlined their specifications and implemented voluntary schemes. Our guide covers some of these countries, providing details about the scope, document flows, key requirements and timelines of their regimes.
Romania – A sneak peak
There are three requirements for taxpayers in Romania:
Mandatory e-invoicing for B2G transactions
Mandatory e-invoicing for high-risk products
Electronic transport mandate
Taxpayers are required to use the Romania e-transport system to issue an e-transport document regarding the transport of high fiscal risk products before transportation of goods begins. This includes data regarding the sender, recipient, goods, places of loading and unloading and details of the means of transport and carrier.
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Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our vice president of strategy and regulatory, Christiaan Van Der Valk to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Christiaan Van Der Valk: The digitization of VAT and other taxes considerably expands the scope of the finance and transactional systems that need to meet specific – and ever-changing – government requirements. This phenomenon of broadening and decentralizing tax compliance in a company’s system and process landscape happens at the same time that more of these applications (for accounts payable automation, EDI, procurement, supply chain automation, travel and expense management, order-to-cash, customer communications management etc.) are used on a SaaS basis in multitenant mode.
This requires you to take stock of the applications that may come within the scope of VAT requirements in all relevant jurisdictions, and to review vendor contracts to ensure clarity as to responsibility for compliance. Procurement practices to license such external applications may also need to be reviewed to ensure proper contracting around tax compliance from the start.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Christiaan Van Der Valk: A key success factor is the degree to which IT and tax can team up to affect change in the organization. The default response to indirect tax changes will be to view these as evolutionary and best resolved by local subsidiaries. The introduction of CTCs, however, is a paradigm shift and one of the consequences is that solving these challenges in a decentralized manner can be harmful to a company’s digital transformation potential. IT and tax need to work closely together to raise awareness among all corporate and country stakeholders on the importance of a coordinated, strategic response to this profound change. The role of tax technologists who specialize in these interdisciplinary challenges cannot be underestimated.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
Take Action
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
Problems encountered with Fire Brigade Tax rate increase in Slovenia
The rate increased from 5% to 9%. This came into effect on 1 October 2022. The first submission deadline followed on 15 November 2022.
Unfortunately, the transition has been plagued by problems. We discuss some issues and how Sovos is approaching them.
Slovenia’s new tax return
We had anticipated that the tax return would remain unchanged, with the premium reduction at 20% and the standard at 100% carrying over from the previous version. Instead, the Slovenian tax authorities overhauled the return entirely. This included:
The old rate at 5%
The new rate at 9%
Allowing for all combinations of rates to be selected
With the combinations, a return could include up to 30 different lines, but the return only includes four – one for each combination.
This layout suggests that the tax authority wishes to combine policies with the same rates, e.g., 100% and 9%.
This differs from previous returns.
Previously each class of business had a separate line. Sovos has contacted the tax authority about the most compliant way to complete this.
Telephone number information on tax return
Some aesthetic changes caused unexpected issues.
Telephone numbers now have a set number of boxes instead of an open line.
This change doesn’t accommodate longer phone numbers. For example, a UK phone number doesn’t fit.
This requires clarification from the tax authorities:
Should the number section be blank?
What about adding more boxes?
Will the authority issue a new tax return for international phone numbers?
Postcodes also have the same issue.
As frustrating as these issues are, there is a more significant frustration.
The amount of time between the new return’s publishing and the first submission deadline The new return was published online roughly three weeks before the deadline.
This was a very short turnaround to upload the returns to the systems and solve any problems that may have arisen, as well as informing clients about any new information that may be required here.
Fortunately, no new information was required. Short deadlines to comply with new tax return requirements are a frequent problem we encounter.
Conflicting information about Slovenia’s new Fire Brigade Tax return
Guidance from the tax authority has been inconsistent at best.
The new Fire Brigade Tax rate would apply to the cash received date. The 9% rate applies to any premiums generated after 1 October 2022.
However, guidance on the official Slovenian tax authority website stated that if the inception date for the policy was before 1 October, the 5% rate would still apply. This is regardless of when the premium was collected. This applies until the policy is renewed. At this point, the 9% rate is applied. This is a significant conflict. It’s potentially millions of euros difference in the amount due. Don’t forget the countless corrections required to balance the books.
As well as being issued late, multiple tax return versions were published online. Only one had the updated tax rate included. The return disappeared from the website and was replaced by the original return.
The English translation and other versions haven’t been updated – this is still the case even after the deadline.
Finally, the guidance on the tax authority’s website states it’s mandatory to submit the FBT returns online through the tax authority portal.
However, official communications from the tax authority directly informed us at Sovos that submissions were required by email only.
Again, this is a significant conflict. Submitting returns through the wrong channel would result in the tax authority declaring the submission late and levying fines.
Next steps with Slovenia’s new tax return
We have communicated all these issues to the Slovenian tax authority. We haven’t received a response yet, but we will update this blog as soon as we have more information.
Sovos has a wealth of experience that enables us to solve issues that arise and ensure our customers remain compliant with the latest tax requirements.
Need help with Fire Brigade Tax requirements in Slovenia?
Want to ensure compliance with the latest Fire Brigade Tax requirements? Speak to our experts.
Each country in the continent is developing their variation of a tax digitization system. This means there is currently no standardisation with compliance requirements differing in each jurisdiction.
A common transaction reporting feature among African countries is the use of electronic or virtual fiscal devices. Electronic fiscal devices are cash registers with software and direct communication to the tax authority. Virtual fiscal devices serve the same purpose but without the hardware component.
However, reporting transactions is one of many fiscal digitization processes applied by African countries. E-invoicing is on the agenda for several authorities, including Nigeria, Kenya and Uganda. In this blog we explain the key features of these systems.
E-invoicing in Africa: Countries
Nigeria: Automated Tax Administration System and Cross-Border e-Invoicing
Taxpayers report their transactions electronically to the tax authority through the Automated Tax Administration System (ATAS), established for electronic VAT compliance purposes.
In addition to this e-reporting function, as of February 2022, all import and export operations need an authenticated e-invoice issued according to the format specified by the Central Bank of Nigeria (CBN).
The CBN has introduced the Cross-Border e-Invoicing program, where suppliers and buyers operating in imports and exports register on the dedicated electronic platform. There are exemptions to obligatory e-invoices based on operations and taxpayers, such as the transaction value within the invoice.
Kenya: Tax Invoice Management System
Businesses subject to VAT must report their e-invoices to the Tax Invoice Management System (TIMS), which requires taxpayers to install, and use approved electronic tax register machines. These tax register machines connect to the tax authority’s online system. There is a mandatory format for submitting e-invoices to the tax authority.
Regarding the full implementation, the Kenya Revenue Authority (KRA) announced additional time to comply with the TIMS after the grace period, and taxpayers are expected to be fully prepared by the end of November 2022.
Uganda: Electronic Fiscal Receipting and Invoicing System
The Electronic Fiscal Receipting and Invoicing System (EFRIS) covers invoices and receipts of B2B, B2G and B2C transactions. Taxpayers must send e-invoices to EFRIS through electronic fiscal devices or via an API connection between the taxpayer and EFRIS. When initiating a transaction, transaction details are transmitted in real time to EFRIS to generate an e-receipt or e-invoice.
Africa’s future e-invoicing landscape
Given the growth in jurisdictions applying mandatory e-invoicing and e-reporting and the common agenda set by African Union that also refers to tax control and traceability, we can expect more African countries to introduce similar e-invoicing systems in the near future. The countries that follow will likely learn from the pioneers, leading to a more uniform development of tax digitization in Africa.
Need help for E-invoicing in Africa?
Ask our tax experts about e-invoicing compliance in African countries. Simply get in touch. Or read our E-invoicing Guide for more in-depth information about electronic invoicing’s development and adoption, globally.
Part IV of V – Ryan Ostilly, vice president of product and GTM strategy EMEA & APAC, Sovos
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our vice president of product and GTM strategy, Ryan Ostilly to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Ryan Ostilly: IT teams will have to work hard to ensure their core finance and transactional tax systems have the enhanced capability to extract, transform, remit and consume real-time data with all tax jurisdictions across their global footprint, in compliance with an ever-changing myriad of legal and procedural requirements. With the pace of disruption accelerating, governments are rewriting the rules on taxpayer control and engagement, forcing direct connection and intimacy with the data itself.
I fear that in a growing number of cases, the owners of the data may be functional departments. The IT department will need to evolve its role in this relationship, viewing the government as a critical business partner – one with whom they must always be connected, continuous and complete.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Ryan Ostilly: In this modern era of government-initiated tax transformation, the successful IT department will pursue a proactive strategy that prioritizes a connected, continuous and complete framework for government mandates and Continuous Transaction Controls (CTCs). These three principles are:
Connected – Architect a simplified integration and vendor strategy. Reduce exposure to multiple integrations and heavy projects when adopting new jurisdictions or implementing changes.
Continuous – Partner with regulatory and legal experts on a regular basis. Review upcoming mandates and assess the impact on your current and future business requirements.
Complete – Think beyond technical aspects and schemas. Partner with tax subject matter experts when translating and validating mandate requirements, as these outputs will define the financial and tax position of your company with the tax authorities in real time.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
Take Action
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
New bookkeeping law – Lov om bogføring
On 19 May 2022, the Danish Parliament passed a new bookkeeping law – Lov om bogføring – introducing requirements for companies to use a digital bookkeeping system.
Section 16 of the Law requires many Danish companies to use a digital bookkeeping system and make their bookings electronically. The final deadline is yet to be announced but is expected to be July 2024, with the Danish Business Authority announcing they will give businesses enough time to comply with the e-bookkeeping requirements.
Scope of Denmark’s bookkeeping law
The subjective scope of the digital bookkeeping requirements covers all companies in Denmark that are liable for accounting according to section 3(1) of the Financial Statements Act. Moreover, other companies whose net turnover exceeds DKK 300,000 in two consecutive income years are subject to digital bookkeeping requirements. Finally, the rules cover bookkeepers and others who carry out bookkeeping for other companies.
These companies will be required to record company transactions and store records in a digital bookkeeping system. Companies can use a digital bookkeeping system registered with the Danish Business Authority, Erhvervsstyrelsen, or any other bookkeeping system. However, companies who choose the latter option must ensure their systems meet the requirements according to Law for digital bookkeeping systems.
Potential e-invoicing mandate and PEPPOL
While the new bookkeeping law doesn’t introduce any mandatory e-invoicing or continuous transaction controls (CTC) obligations for businesses, it is envisaged that the digital bookkeeping systems must support continuous registration of the company’s transactions and the automation of administrative processes. This includes automatic transmission and receipt of e-invoices.
This requirement was further detailed in the draft executive order on requirements for standard digital bookkeeping systems, which outlines that the taxpayers:
send electronic invoices in OIOUBL and Peppol BIS format,
receive electronic invoices in OIOUBL and Peppol BIS format,
send electronic credit notes in OIOUBL and Peppol BIS format,
receive electronic credit notes in OIOUBL and Peppol BIS format,
send an application response on receipt of an electronic invoice
send a message-level response when receiving an electronic invoice, and
send an invoice response on receipt of an electronic invoice.
Moreover, the new bookkeeping law authorised the Minister for Industry, Business, and Financial Affairs to introduce rules:
(a) that require companies to record their transactions regarding purchases and sales with e-invoices as documentation of the transactions,
(b) on transmission of records by digital bookkeeping systems to a public receiving point through the shared public digital infrastructure for the exchange of e-documents and the storage of such records.
What’s next for Denmark?
Although Denmark’s e-invoicing journey is still in the early phases, it seems that the new bookkeeping law and requirements for digital bookkeeping systems lay the foundation for a future e-invoicing mandate to be duly introduced by the Minister for Industry, Business, and Financial Affairs.
It will be interesting to see how and when Denmark’s plans for e-invoicing will take shape and be affected by the upcoming results from the EU Commission on the VAT in the Digital Age project.
Need help for E-invoicing in Denmark?
If you have any question about Denmark’s new bookkeeping law or e-invoicing requirements in Denmark, please reach out to us: Speak to our tax experts. Refer to this guide for a comprehensive overview about e-invoicing in general.
Update: 3 November 2022 by Russell Hughes
Making Tax Digital – Filing VAT Returns through Online VAT Account to become redundant
From Tuesday 1 November 2022, businesses filing VAT returns in the UK will no longer be able to submit via an existing online VAT account unless HMRC has agreed to an exemption from Making Tax Digital (MTD). Businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023.
By law, all VAT-registered businesses must now sign up to Making Tax Digital and use compatible software for keeping VAT records and filing returns. HMRC has advised that from January 2023, any VAT registered businesses that fail to sign up for MTD and file returns through MTD-compatible software will incur .
Making Tax Digital’s aim is to help businesses get tax right first time by reducing errors, making it easier for them to manage their tax affairs by going digital, and consequently helping them to grow. More than 1.8 million businesses are already benefitting from the service, and more than 19 million returns have been successfully submitted through Making Tax Digital compatible software so far.
How to sign up to Making Tax Digital
If a business hasn’t already signed up to Making Tax Digital or started using compatible software, they must follow these steps now:
Choose MTD-compatible software – a list of free and low-cost software can be found here.
Check the permissions in the software – filing VAT returns is easy once a business has allowed it to work with Making Tax Digital.
Keep digital records for current and future VAT returns – a business can find out what records need keeping here.
Sign up for Making Tax Digital and file future VAT returns using MTD-compatible software.
Small businesses
If your turnover is under the VAT threshold of £85,000 and you haven’t signed up to Making Tax Digital in time to file your next return by 7 November 2022, you can still use your existing VAT online account for that return only.
New businesses
New businesses not yet registered for VAT will be automatically signed up for Making Tax Digital while registering for VAT through HMRC’s new VAT Registration Service (VRS). Registering on the VRS provides a quicker VAT registration and improved security. It also helps new businesses fully comply with MTD requirements from day one, subject to using the correct software.
Beginning in April 2022, the requirements for Making Tax Digital (MTD) for VAT will be expanded to all VAT registered businesses. MTD for VAT has been mandatory for all companies with annual turnover above the VAT registration threshold of £85,000 since April 2019. As a result, this year’s expansion is expected to impact smaller businesses whose turnover is below the threshold but who are nonetheless registered for UK VAT.
Update: 3 March 2021 by Andrew Decker
UK’s Making Tax Digital – 1 April Brings End to Soft Landing Period
Since April 2019, the UK has required the submission of VAT returns and the storage of VAT records to be completed in accordance with the requirements of its Making Tax Digital (MTD) regulations.
One of these requirements is that data transfer between software programs be achieved through ‘digital links.’ This requirement was initially waived during a ’soft landing’ period which is set to expire on 1 April 2021. As a result, to remain complaint with MTD requirements, businesses must ensure they can meet the digital link requirement.
What are the basic requirements of MTD?
Under MTD, businesses must digitally file VAT returns using ‘functional compatible software’ which can connect to HMRC’s API. Additionally, businesses must use software to keep digital records of specified VAT related documents.
What is a digital link and when is it required?
A digital link is required whenever a business is using multiple pieces of software to store and transmit its VAT records and returns pursuant to MTD requirements. For example, if a business stores its VAT records in its accounting program but then submits its VAT return using an approved piece of bridging software, the data must be transferred between the accounting and bridging software via a digital link.
A digital link occurs when a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications without the need for or involvement of any manual intervention.
The key to this requirement is that once data has been entered into a business’s software there shouldn’t be any manual intervention in transferring it to another program. This means that data cannot be manually transcribed from one program into another. Additionally, using a ‘cut and paste’ feature to transfer data doesn’t constitute a digital link.
For example, manually typing or copying information from one spreadsheet into another doesn’t count as a digital link but connecting the two spreadsheets using a linking formula does.
Additional examples of digital links include:
XML, CSV import and export, and download and upload of files
Automated data transfer
API transfer
Transfer of data and subsequent import of data into software by means of email or tangible digital media (i.e. flash drive).
The digital links requirement will apply to all businesses subject to MTD rules, however businesses that fulfill certain requirements can request an extension to delay the requirement.
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our chief technology officer, Eric Lefebvre to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Eric Lefebvre: Centralization is the key, but there is a process that needs to be followed to execute correctly. At the outset, centralization needs to start with business processes, practices, tools and standardization on data push/pull technologies across the organization. Next, IT needs to consider data based on SLA-based needs. Starting with:
Delivery Data:
Real-time data
Data warehouse – reporting data
Archive data
Once this has been solidified, IT can then focus on operational data, which contains:
Mandate-driven configuration data or rules
System telemetric
IT departments need to focus on availability of data by adding multiple replicated sources of that data. Location of data is another critical need driven by mandates mostly shifting to keeping data local, as we are seeing in countries such as Saudi Arabia and many other East Asian nations. IT departments need to ensure that satellite data stores can be provided, which are critical to countries with those specifications. Centralization of processes and tools for delivery of data is step one. For step two, data needs to be split, moving away from storing data for years in a single data store, making it impossible to move/replicate and make it available.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Eric Lefebvre: As organizations make the move to a centralized approach, they need to be aware that the blast radius of “failure” affects more than a single country. To combat this, IT organizations need to have strong procedures and plans in place that help to both avoid these situations and quickly limit the damage if a problem does occur. I view it as three distinct focus areas:
Change control procedures. Strengthen impact controls not just for code changes or operational updates, but also include regulatory changes and configuration changes. Testing procedures. Step away from just regional scope testing and incorporate global end-to-end synthetic testing, starting from the edge service to all the backend servers and back. Incident management. Pivot from backend monitoring to a central monitoring and outage single pane view, supported by a global operations center in a follow the sun style model.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
A recent preliminary ruling request to the European Court of Justice, Case C-664/21, NEC PLUS ULTRA COSMETICS, has re-emphasised the importance of collecting documentation when carrying out a zero-rated supply in the EU. The 2017 NEC PLUS ULTRA COSMETICS case involved a company established in Switzerland selling cosmetics products under the Ex Works clause from their warehouse in Slovenia to business customers established in Romania and Croatia. Ex Works (EXW) is an Incoterms rule, a set of definitions outlining the responsibilities of buyers and sellers in international transactions. With Ex Works the transport obligations, costs and risks are the buyer’s responsibility.
The tax administration of the Republic of Slovenia inspected NEC PLUS ULTRA COSMETICS and requested evidence and supporting documentation relating to these supplies to verify that goods had been transported to another EU Member State.
NEC PLUS ULTRA COSMETICS provided copies of the invoices and of the ‘Convention relative au contrat de transport international de marchansises par route’ (CMR) consignment notes. The company failed to provide the evidence requested by tax officers to prove the right to tax exempt the supplies to their customers (delivery notes and other documents mentioned in the CMRs).
The company clarified that the reason for the late submission was that the Hamburg office responsible for supplies to Croatia ceased its activities in August 2018, making it more difficult to find the documents asked for by the tax officers.
Consequently, the Slovenian tax authorities provided the company with an additional VAT assessment notice and ordered it to pay the relevant amount.
What documents do you need to keep for supplies carried out after 2020?
In the implementation of the Quick Fix related to the proof of transport in 2020, the European Commission has clarified that where the supplier arranges transportation of the goods, it must be in possession of either:
At least two non-contradictory items of evidence from two sources independent of each other and of the supplier and of the acquirer in what HMRC neatly describes as List A, below, or
A single item from List A and a single item from List B, below, again from non-contradictory and independent sources:
List A
Signed CMR document or note
Airfreight invoice
Invoice from the carrier of the goods
Bill of lading
List B
An insurance policy for the transport of the goods
Bank document proving payment for the transport of the goods
Official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the Member State of destination
Warehouse keeper’s receipt confirming storage of goods in the Member State of destination
If the acquirer is responsible for transport of goods (i.e. under the Ex Works clause), they must provide the vendor with a written statement by the 10th of the month following the date of supply that the goods have been transported by the acquirer or on the acquirer’s behalf. The written statement must include the following:
Date of issue
Name and address of the acquirer
Date and place of the arrival of the goods as well as the Member State of destination
Quantity and nature of the goods
Where it is a means of transport, its identification number
Identification of the individual accepting the goods on behalf of the acquirer.
How to ensure VAT compliance
In the case of the Ex Works clause:
Agree in the contract/purchase order that your customer is required to provide you with all required documents within an internal scheduled deadline; and
Keep this documentation according to the Statute of Limitation of each EU Member State where you trade.
If you don’t feel reassured by your customer, change the agreement and Incoterms clause before the supply takes place.
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Still have questions about VAT exempt supplies and the Incoterms Ex Works clause? Speak to our tax experts.
Part II of V – Oscar Caicedo, Vice president of product management for VAT Americas, Sovos
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our vice president of product management for VAT, Oscar Caicedo to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Oscar Caicedo: For me, this breaks down into four distinct categories:
1. Business Process Architecture – As regulatory entities become more advanced, it is important to look at the overall functional business process, not only the technical mechanism to report. Many business processes were solidified much before current capabilities were readily available. It is important to revisit the business process to be able to determine the best technical path forward.
2. Source of Truth – With the complex environment IT departments must navigate, you need to redefine the expectations of data/process source of truth. Back-end system ecosystems were not built with current compliance/regulatory needs in mind. In mature markets, where governments continue to advance technical capabilities, it is critical to have a clear strategy to protect against source-of-truth risks. Otherwise, local regulatory entities tend to become the ultimate source of truth.
3. Data Aggregation/Reconciliation – A lack of clarity on the source of truth for each functional business process can lead to major risks. Registering data in real time with local regulators was the initial challenge. The current challenge is ensuring all systems involved are maintained in sync and are always fully harmonized. IT departments must recognize it is now a must-have to navigate the current environment.
4. Master Data – Data in back-end systems was already complicated enough to support in a centralized manner. Once real-time regulatory needs were introduced, the data issue got exponentially larger. Data structures, data libraries and extraction programs are all attempts to solve the problem, but normally these attempts fail due to gaps in understanding what is mandatory vs. optional. Clear guidance on the local needs is critical before deciding on a technical strategy.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Oscar Caicedo: I would prioritize a clear regulatory understanding of the markets/geographies in which you operate. This seems obvious, but it is not always the case. Ninety-nine percent of the time when I speak with a large multinational organization, they are not clear on the needs of the local market. Efforts to centralize or take a cohesive approach fail because key IT decision makers didn’t understand the regulation.
In addition, you need to focus on business processes and the data requirements to make them successful and solve the problem end to end. The challenge does not end with registering data. The problem ends when you have the proper visibility, maintenance, support, reconciliation and intelligence to be fully prepared.
Don’t take chances. The regulatory environment is very dynamic, so it is important to ensure the proper testing of all business scenarios needed to operate. Failure to have clear testing scripts can lead to surprises in production environments, which can carry large implications for the operation.
Finally, consolidate as much as possible. This means simplifying end points, communication protocols, data structures, etc. This will allow for a more efficient way to manage the mandated processes in the different jurisdictions.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
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Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
