Part IV of V – Ryan Ostilly, vice president of product and GTM strategy EMEA & APAC, Sovos
Click here to read part III of the series.
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.
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
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.
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.
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:
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.
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.
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
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.
If a business hasn’t already signed up to Making Tax Digital or started using compatible software, they must follow these steps now:
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 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.
Still have questions about Making Tax Digital compliance? Speak to our tax experts.
Update: 17 March 2022 by Andrew Decker
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
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.
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.
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:
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.
For more information on MTD, including details on extension requests and criteria see VAT Notice 700/22: Making Tax Digital for VAT on HMRC’s website.
Important dates to remember regarding MTD for VAT
1 April 2019 –Business with annual turnover of £85,000 and over became liable to follow Making Tax Digital rule for VAT
1 April 2021 –Digital links requirement will be enforced
1 April 2022 – Taxpayers with turnover under £85,000 will be required to comply with making tax digital (MTD)
Sovos’ Advanced Periodic Reporting technology is fully compliant with Making Tax Digital, including digital link.
Part III of V – Eric Lefebvre, chief technology officer, Sovos
Click here to read part II of the series.
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:
Once this has been solidified, IT can then focus on operational data, which contains:
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.
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:
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:
In the case of the Ex Works clause:
If you don’t feel reassured by your customer, change the agreement and Incoterms clause before the supply takes place.
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
Click here to read part I of the series.
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.
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
Until the Covid-19 pandemic in March 2020, the view was that businesses provide insurance such as Employers’ Liability during normal day-to-day operations. Employers’ Liability insurance is compulsory, protecting a company’s employees and workplace visitors for accidents where a claim needs to be settled.
Following the Covid-19 pandemic, the definition of a workplace has changed. It’s no longer solely an office or factory, now a workplace is likely to include an employee’s home.
Although the world has gotten used to Covid-19, it is something we’ll all have to live with for the foreseeable future. Therefore, all employers have had to consider what future working arrangements they need to have in place based on the type of business.
Companies primarily office-based before the pandemic have taken the opportunity to discuss these future arrangements with employees. Many have adopted hybrid working which includes a combination of office and home working where possible. It does seem very unlikely that in the short-term there will be a move for people to return to working in the office full-time.
Companies will need to consider the events they will need insurance for and how this will impact their current insurance policies.
This means that while they’ll still need mandatory insurance, such as Employers’ Liability, some requirements will likely have a greater impact on the insurance coverage and premiums moving forward.
This could include regular home Health and Safety checks to ensure employees’ working environment meets the company’s rules and regulations. Insurers could require all employers to provide evidence that their employees have passed annual health and safety tests to ensure ongoing compliance. Having this information on file ready to present to insurers if an accident happens at home to an employee during their working day would provide comfort to businesses for future claims that they won’t be rejected.
It’s also worth pointing out that the working day has changed for many, from a strict ‘9 to 5’ to more flexible arrangements to accommodate childcare and other responsibilities. This change in working hours should be taken into consideration by employers and insurers for accident claims that in pre-Covid times would have been outside regular working hours.
The other types of insurance policies likely to be affected by changes in working arrangements are:
Businesses should review all their current insurance policies to ensure they have the necessary coverages in place to protect against these changes in working arrangements. The implications of not getting insurance coverages right could be serious for the company. If this isn’t something they’re looking at already, they should start the process sooner rather than later to avoid potential future problems for themselves and their employees.
Speak to our tax experts for help with business insurance compliance.
Imagine this scenario.
Your business partner changes the rules on you mid-stream and your ability to conduct business with them is now contingent on changing your entire reporting structure to meet their new demands.
Oh yeah, I should also mention the time frame to meet these demands is extremely tight and if you don’t, you can forget about doing business in their region until you get it right. And if at any point moving forward you fail to live up to these standards, they can fine you or shut you down.
Sound farfetched? It isn’t. It’s exactly what is playing out in major economic markets from Brazil to Italy and parts of Asia and Africa. You see, governments have caught up to businesses when it comes to technology, and in many ways, they have moved past them when it comes to digitization.
It means that governments have now taken on a more proactive approach to reviewing financial transactions and are demanding real-time reporting. As part of that, they have implemented real-time enforcement to ensure that it’s meeting the proper mandated specifications. To accomplish this, they have taken up permanent residence within your data stack. And make no mistake, when it comes to e-invoicing, they are calling the shots.
Governments throughout the world are implementing mandated e-invoicing for its ability to facilitate compliance and track fraud quickly and efficiently. After the fact reporting, which had been the norm until now, was more difficult to enforce and took lengthy and costly audits to recoup what was rightfully owed. Many organizations didn’t take the penalties seriously and would simply set aside some money to deal with these inconveniences as they emerged.
This approach resulted in a tax gap that is continuing to grow. In 2019, the VAT gap of the European Union’s 28 member states was over 134.4 billion euros for all member states combined. This had become unsustainable and unacceptable to many governments and thus a new technology that focused on digitization was made to ensure that all legally owed revenue was being collected timely and in full. Failure to comply would lead to faster and more impactful enforcement measures.
This trend is growing rapidly with countries across the globe adopting new mandates and methodologies for tracking and enforcing the rules. In the next five years nearly every country that employs the VAT system of taxation is expected to update their systems to some degree.
Make no mistake. Due to the demands for real-time information, this is an IT problem, not a tax issue. For multinational companies that do business in dozens of countries, there could be some painful moments along the way if they don’t plan early and develop a sound strategy for each of the locations in which they have operations.
IT should focus on the end goal: implementing a centralized approach to managing these government mandated e-invoicing laws to ensure a globally consistent approach to all digital filings. I can’t overstate the importance of implementation synergies as requirements increase and expand. This is only going to get more complex as time goes on.
And perhaps most importantly, don’t be afraid to ask for help. This is complicated stuff that is changing by the day. This is not the time or the issue to try going it on your own.
Reach out to our experts for more help and information.
Meet the Expert is our series of blogs where we share more about the team behind our innovative software and insurance premium tax (IPT) compliance services.
As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about regulatory changes and developments in global tax regimes to support you in your tax compliance.
We spoke with Sean Burton, senior compliance services representative who explained Slovakia’s specific IPT reporting requirements and shared some of his top tips to ensure compliance.
I’m a senior compliance services representative for IPT at Sovos. I joined the company just over three years ago and have mainly worked with clients writing global insurance programmes, exposing me to a wide range of scenarios within IPT.
My day-to-day role now involves overseeing the review and return preparation process for associates and representatives’ data, ensuring accurate submissions are prepared in a timely manner. The final step in this sequence is for me to sign off the final returns and pass them to our client money team. Outside of this work I deal with client queries, assisting with more complex annual reporting requirements and submission of the Slovakian IPT returns.
The IPT tax regime in Slovakia took over from the previous Non-Life Insurance Levy tax on 1 January 2019. Any policies incepted on or after this date are subject to the IPT tax as opposed to the old levy.
The tax rate remained the same at a flat 8% rate across all business classes.
There are three tax points for IPT in Slovakia:
This offers insurers greater flexibility with their tax points in comparison to other territories, allowing the insurer to pay taxes either upfront or spread across multiple returns in installments. The main point here is once a specific tax point has been selected, the insurer must use it for the next eight submission periods. After this they can change the tax point should they wish.
Slovakian IPT is submitted electronically via an online tax portal. The submission and payment are due at the end of each quarter.
As with most territories that have moved to online filings, the Slovakia tax authorities now require more specific information for each policy. As a result, Sovos now requests an additional field in our data template so that we can report this accurately.
Type of movement:
E/R – Issuance of a premium/renewals: grouped on the tax return by class of business. It’s important to note that an overall negative position for a specific business class is not permissible and will be rejected in the Slovakian Tax Portal.
S – Supplementary premium: the case whereby a premium or part thereof, is increased, reduced or cancelled. These premiums are reported within Box 19 on the Slovakian IPT return, where the total can be either positive or negative.
C – Correction of error: In the case of a correction of error a supplementary declaration must be submitted for the appropriate period affected.
This can be a problem for insurers who haven’t previously collated this information and it’s not part of their current internal booking systems, which can take time to update.
Another issue for insurers writing policies with a long duration over a number of years is that whilst the IPT regime took over from the old Non-life insurance levy (NLIL), NLIL can still be due if the policy incepted prior to 2019. Therefore, it’s important for insurers to be aware of this distinction and ensure both taxes are paid accurately.
My top tip for IPT reporting in Slovakia would be to collect as much detailed policy information as possible to complete the separate sections of the IPT return compliantly.
This will also help insurers be organised for any further updates to Slovakian reporting in the future. Requesting detailed policy information is a trend we’re seeing across all territories and insurers need to be prepared for this.
Firstly, at Sovos we have a good connection with local associates in Slovakia. This means we can keep our finger on the pulse with any IPT related legislative changes that arise in Slovakia.
Secondly, the online submission process requires each box to be manually inputted with information such as premium tax amounts, contact information and tax point selection. Leaving this process in our hands will certainly save insurers valuable time.
Have questions about IPT compliance? Speak to our tax experts or download our e-book, Indirect Tax Rules for Insurance Across the World.
France is implementing a decentralised continuous transaction control (CTC) system where domestic B2B e-invoicing constitutes the foundation of the system, adding e-reporting requirements for data relating to B2C and cross-border B2B transactions (sales and purchases).
Under this upcoming regime, data or invoices can be directly sent to the Invoicing Public Portal ‘PPF’ (Portail Public de Facturation, so far known as Chorus Pro) or to a Partner Dematerialization Platform ‘PDP’ (Plateformes de Dématerialisation Partenaires). In addition, there are also Dematerializing Operators (Operateurs de dématérialisation) that are connected to either the PPF or a PDP.
Requirements for these portal and platforms have been published.
The Ministry of Economy published Decree No. 2022-1299 and Order of 7 October 2022 on the generalisation of e-invoicing in transactions between taxable persons for VAT and the transmission of transaction data (together known as ‘new legislation’), providing long-awaited details for PDP operators and PPF.
The new legislation introduces rules concerning the application process for PDP operators. Although French establishment isn’t required, PDP operators must fulfill a number of requirements, such as operating their IT systems in the EU.
France is implementing a model where third-party service providers are authorised to transmit invoices between the transacting parties. With the mandatory use of the PPF or PDPs for exchanging e-invoices, trading parties cannot exchange invoices between them directly. Therefore, PDPs must be able to receive and send invoices in structured formats, whether the ones supported by the PPF (CII, UBL, or FACTUR-X) or any other required by their clients. Also, to ensure interoperability, PDPs are expected to connect with at least one other PDP. Besides this requirement, it’s stated by the new decree that PDPs must be able to send e-invoices to PDPs chosen by their recipients which implies a complete interoperability between PDPs.
It was previously announced that taxpayers could submit PDF invoices for a transitional period. The new legislation outlines the transitional period as until the end of 2027. During this period PDPs and PPF must be able to convert the PDF into one of the structured formats.
The new legislation also provides information about the content of e-invoices, which has new mandatory fields, and the content of transaction and payment data to be transmitted to the tax authority.
It also announced frequencies and dates of data transmission. Deadlines for transaction and payment data transmission are based on the tax regimes of taxpayers. For example, taxpayers subject to the normal monthly regime should transmit payment data within ten days after the end of the month.
With the aim of having traceability over documents, the lifecycle statuses of the domestic B2B e-invoices are exchanged between the parties and transmitted to the PPF. Lifecycle statuses that are mandatory (“Deposited”, “Rejected”, “Refused” and “Payment Received”) are listed in the new legislation.
Further details regarding the Central Directory, which consists of data to properly identify the recipient of the e-invoice and its platform, are provided within the Order.
PDP operator candidates can apply for registration as of Spring 2023 (precise date still to be confirmed), instead of September 2023 as previously set. From January 2024, a six-month test run is expected to be conducted for enterprises and PDPs before the implementation in July 2024.
Still have questions about France’s upcoming continuous transaction control mandate? Get in touch with our tax experts.
Update: 25 January 2024 by James Brown
There have been a couple of key developments in the space insurance landscape in recent months from an IPT perspective.
In October 2023, a District Court in the Netherlands passed judgment on its view of the compliant IPT treatment of space insurance. Whilst this only affects the Netherlands at present, it is one of the first countries to make a judgment in this context.
In the case, the insurance covered the reduced commercial book value of satellites launched into orbit. From a location of risk perspective, the court deemed that the risk resided in the Netherlands on the basis that this was the location of the establishment of the policyholder.
In light of this finding, the court considered the possible applicability of the IPT exemption that exists in the Netherlands for transport insurance. The court held that this exemption only applied to the coverage up until the point that a satellite was separated from the rocket being used to launch it into orbit. After this point, it viewed that it was no longer being transported as the in-orbit movement was incidental to the actual coverage.
In December 2023, Lloyd’s published its position on the treatment of space insurance, in part following its own work on the subject and in part as a response to the findings of the Dutch court. It confirmed its general agreement with the decision in the Netherlands.
More broadly, it confirmed its view that any separately apportioned insurance of the launch risk should benefit from international goods in transit IPT exemptions that may apply depending on the country. In-orbit risks will not benefit from these exemptions, however.
Nevertheless, if the risk location is a country with a more widely applicable space insurance IPT exemption (e.g. the UK), then that exemption could potentially still apply to in-orbit risks.
Although neither of these developments are legally binding across the European Economic Area, they will inevitably influence market practice.
If you have questions about your approach to the premium taxation of space insurance, speak with an expert.
Update: 27 October 2022 by James Brown
Space insurance and the application of IPT on these policies has been a talking point in recent months. The main question? Location of risk.
This blog considers the background and explores the current state of space insurance.
Space insurance typically provides a broad range of coverage relating to spacecraft, such as satellites and rockets, but also covers the vehicle used for launching the spacecraft.
Although not an exhaustive list, some of the classes of insurance set at European Union (EU) level that we expect to be included are:
Given the different elements of coverage possible, it is important to tax each element appropriately.
For example, the portion of the coverage related to damage to the spacecraft itself (including fire) may result in certain parafiscal charges due on property and fire insurance in some countries.
On the other hand, the portion of the coverage relating to the transport of the spacecraft may benefit from one of the exemptions that exists in many EU jurisdictions for goods in transit insurance.
It is worth noting that the United Kingdom has an IPT exemption relating to contracts of insurance for the operation of spacecraft within certain classes of business (including those classes identified above). The scope includes the operation of the spacecraft during launch, flight, orbit or re-entry, and the operation of the launch vehicle and any business interruption cover. This does not, however, extend to risks relating to spacecraft construction.
There may be multiple risk locations depending on the specific coverages provided on the policy.
When parts of a spacecraft are manufactured and then subsequently assembled, for example, they are considered moveable property and, as such, would be taxable in the property’s location based on EU rules, if contained in a building there.
When transporting spacecraft ahead of launch, then it would be taxable in the location of the establishment of the policyholder to which the insurance contract relates. Similarly, risks covering the launch, ongoing operation of the spacecraft once in orbit, and during the de-commissioning stage should be expected to be taxed in the same way.
From discussions within the market, we are aware that the practice has generally been to treat space policies as wholly exempt from IPT and parafiscal charges. This is rather than taking the approach to look at each element of the policy to see if they should be taxed, and if so, then how should the location of risk rules be applied to determine the correct country or countries.
Despite this practice, the market is presently rethinking its approach to taxing these policies. This is to mitigate the risk of assessments from EU tax authorities claiming for unpaid taxes. Subject to any future legal rulings affecting the market, the likely outcome is that IPT and parafiscal charges are charged as outlined unless there is a specific exemption.
Still trying to figure out how to approach space insurance? Get in touch with our IPT experts today.
With half a billion consumers, the EU market represents huge growth options for e-commerce companies. Maximize this potential through a seamless B2C service with fast delivery and no unexpected customer VAT charges.
Sovos Compliance Services Portal for e-commerce allows easy access to all simplified EU VAT reporting schemes:
Companies not established in the EU (unless established and supplying from Norway) are required to appoint an Intermediary to facilitate the reporting and payment of VAT under the IOSS scheme.
Sovos is set up to act as an Intermediary on behalf of your business. We will ensure that you reap the benefits of the simplification while safeguarding against the risk of penalties and expulsion for non-compliance.
Intermediaries assume joint responsibility for:
The Sovos Compliance Services Portal empowers you to take control of your sales data. Once you’ve mapped it into our portal, our tool allows you to run your own validation checks and correct any errors before our team of experts completes the filing. Our VAT Compliance for E-commerce solution gives you peace of mind that your data is secure and that your (I)OSS VAT return is accurate and reliable.
Future proof your VAT compliance profile, ensure your goods are delivered in a timely manner to your customers and do not get stuck at the border. Sovos Compliance Services Portal is underpinned by the deep knowledge and expertise of our Compliance Services & Consulting teams.
Our solution means you can:
A blend of human expertise and software to ease your VAT compliance workload and reduce risk wherever you operate today while ensuring you can easily flex to handle VAT requirements in the markets you intend to dominate tomorrow.
There are several countries within the European Union (EU) and European Economic Area (EEA) that have introduced a Fire Brigade Tax (FBT). Fire Brigade Tax is payable on certain premium amounts and usually in addition to Insurance Premium Tax (IPT).
Fire Brigade Tax, or the Fire Brigade Charge (FBC) or Fire Protection Fee (FPF) as it’s known in some territories, is levied on the proportion of the premium that covers fire risks. Fire Brigade Tax is calculated on the fire premium multiplied by the applicable Fire Brigade Tax rate, which seems straightforward but, as is often the case with IPT, some countries have made this calculation quite complex.
This blog summarises the challenges around Fire Brigade Tax calculation and what to consider when calculating Fire Brigade Tax, as well as including country specific rules. For further information about country specific Fire Brigade Tax rules read our blog posts about UK, Portugal and Slovenia.
Solvency II Directive 2009/138/EC doesn’t provide a definition of fire proportion.
The following approach is the most common way to determine the fire proportion of FBT regulations (e.g. Austria).
In Luxembourg the rule is as follows: where the fire and natural forces element cannot be separately identified, the 6% rate applies to 40% of the premium in case of household contents or 50% of the premium in case of non-household contents. This is based on guidance issued by the Luxembourg Tax Office.
In Belgium, the taxable premium for Security Fund for Fire and Explosion charge (Fire INAMI) is dependent on the type of risk covered. The fire proportion is determined by the Law on compulsory healthcare and compensation insurance. For example, for premiums covering terrorism risks the fire proportion is 35%, while for electricity risk it’s 10%. It‘s not possible to deviate from these dictated fire proportions.
In Austria the fire proportion rate can be determined by the insurer based on the covered risks.
An interesting example of Fire Brigade Tax calculation is Finland where the taxable basis of IPT is increased by the amount of calculated Fire Brigade Tax.
As these examples demonstrate, there are many different approaches to the Fire Brigade Tax. Insurers need to stay up-to-date with the local Fire Brigade Tax regulations to correctly calculate the Fire Brigade Tax amount.
When calculating the fire proportion, it’s important to understand that Fire Brigade Tax is not only applicable for fire risks but is due on other risks too. Understanding what risks may trigger Fire Brigade Tax liability requires familiarising ourselves in the mappings of the covered risks.
The immediate answer is Class 8, Fire and Natural Forces. According to Annex I of the Solvency II Directive Class 8, Fire and natural forces covers “All damage to or loss of property (other than property included in classes 3, 4, 5, 6 and 7) due to fire, explosion, storm, natural forces other than storm, nuclear energy, land subsidence.”
And from this definition it’s not difficult to figure out what other classes may be impacted by Fire Brigade Tax. So, these are Class 3 Land Vehicles, Class 4 Railway rolling stock, Class 5 Aircraft, Class 6 Ships, Class 7 Goods in Transit and Class 9 Other Damage to Property.
From a risks point of view, Fire Brigade Tax is usually charged on theft, hail and frost damages on top of the fire, storms or land subsidence.
Up-to date knowledge of the Fire Brigade Tax rates is required to calculate Fire Brigade Tax. Plus, you also need to know how the settlement is working, that is where to declare Fire Brigade Tax, what form should be used and the payment method etc.
Staying up to date with Fire Brigade Tax rates is even more important. In our ever-changing world tax rates increase and decrease constantly depending on the climate and politics.
Fire Brigade Tax rates vary across the EU. In Slovenia Fire Brigade Tax rates increased from 5% to 9% as of 1 October 2022. The new rate is applicable to policies that were cashed on or after 1 October 2022.
In some countries there are no separate Fire Brigade Tax regimes as such, but if fire is covered by the premium, then the applicable Insurance Premium Tax rate is higher. Examples include France and Greece. In Greece if the premium covers fire risks a higher IPT rate of 20% is applicable.
There are countries (Iceland), where, broadly speaking, Insurance Premium Tax applies only if fire is covered.
And lastly, there are countries where separate Fire Brigade Tax regimes exist and Fire Brigade Tax is calculated on the fire proportion and the applicable Fire Brigade Tax rate is applied. Examples include Austria, Germany and Luxembourg.
The Fire Brigade Tax rates discussed so far are in territories where the taxable premium rate model is used. However, there are Fire Brigade Tax regimes using other rate models too, like the sum insured. This is the case in Liechtenstein where Fire Brigade Tax is calculated based on the value of the property.
Within the frame of this topic, it’s also worth mentioning that Fire Brigade Tax can be insurer borne, insured borne or both. In Austria for example, 4% of the Fire Brigade Tax is insured borne and is invoiced to the policyholder as an addition to the premium and the other 4% is insurer borne and is deducted from the collected premium.
Completing the Fire Brigade Tax obligation requires submitting the tax declaration and paying the corresponding tax. These two processes can be referred to as settlement.
The variety of Fire Brigade Tax settlement processes is colourful. Differences exist in:
For compliant tax settlement, it’s vital that understanding and interpretation of Insurance Premium Tax regulation is up-to-date and accurate.
Need to learn more about Fire Brigade Tax regimes? Contact Sovos’ IPT expert team who are happy to help you.
Update: 27 July 2023 by Edit Buliczka
The registration requirements for settling taxes in a country are similar – if not the same, usually involving the central tax administration or tax authority.
This, however, is not always the case and there are exceptions. For example, due to a recent change in Austria, the registration requirements for Insurance Premium Tax (IPT) in favour of third-country insurers have been modified.
Third-country insurers can register and settle IPT liabilities directly with the Austrian Tax Office under this legislation, which takes effect on 1 January 2024. Currently, IPT payable on insurance premiums with third-country insurers must be handled by an authorised representative or the policyholder.
In Austria, IPT is levied on the collected premium and Fire Brigade Tax (FBT) may also be due if the policy includes fire risks.
The Austrian Tax Office has not changed the law that governs FBT rules. The FBT legislation is simpler than the IPT law, with no special regulations for local, EU or EEA-based or third-country insurers. The FBT Law states: “if the insurer has no domicile (seat) in a contracting state of the Agreement on the European Economic Area, but an authorised representative has been appointed to accept the insurance premium, then the latter is liable for the tax.”
There’s a possibility the FBT laws were purposefully left unaltered because the term “insurer” may be understood in a way that covers third-country insurers. As a result, third-country insurers can already register directly with the Austrian Tax Office for FBT purposes.
Interestingly, in Austria, both IPT and FBT are controlled by the Central Tax Administration – commonly referred to as the Austrian Tax Office and there is just one taxID used for both IPT and FBT.
Contact our team of experts if you have any questions concerning the Austrian IPT Registration.
Update: 4 October 2022 by Dawn Rowlands
Registering for IPT across Europe is often complex and can raise several additional questions. This is particularly pertinent if your company has branches established in different territories: can we register our head office and file a single return for all branches via this registration? What about branches operating on a freedom of service (FoS) basis? What about domestic branches? Is it mandatory or optional to register branches?
Before we dive into these questions, let’s take a closer look at why branches are useful. Some insurers prefer to have a separate IPT registration for their branches, even if it’s not a mandatory requirement of the country. It’s often an easier method of handling IPT compliance for the country, based on the reports generated from internal accounting systems. For acquisitive insurance companies who may be using legacy systems, it’s simpler to have individual branch registrations rather than consolidating all branches into a single return filed via the head office.
For many territories, it’s not mandatory to have branches operating as it’s possible for EU domiciled companies to register and file taxes through their head office, operating under FoS across the European Union. However, this is territory dependent and some require branch registration, as we will explain later.
In addition to the registration of your head office operating on a FoS basis, it’s also possible to register branches in some territories. Each branch must also be authorised independently by the regulators in their country of domicile to operate on a FoS basis.
In some territories such as Spain, Portugal and Italy it’s not mandatory to have a branch as taxes can be filed via a company’s head office. However, if your company does operate branches in these territories it is mandatory to be registered separately to head office. This requires companies with multiple branches to have multiple registrations, each with their own independent tax identification number. The registrations are managed separately, and a tax return is required for each of them.
Country requirements are also subject to change. For example, in Austria it was previously mandatory for branches to be registered separately to their head office. This rule changed and branch registrations are no longer permitted, with all returns being filed through the FoS head office. Any existing branch registrations had to be deregistered with the Austrian tax authorities.
A domestic branch is a branch of a company whose headquarters are located in a different country to where the branch is domiciled, and where the registration is required. For example, your head office could be in Germany, you write insurance business liable to IPT in Italy and you have an established branch domiciled in Italy – the Italian branch will be considered as your domestic branch.
If your company has branches and wishes to register for IPT in the country where your branch is domiciled, some tax authorities insist the domestic branch has a separate registration to its head office. This applies in Hungary, Germany, Italy, Portugal, Slovakia, and Spain.
In some instances, domestic branches will have different tax points to those operating under FoS.
If a branch or head office operating in the territory is operating noncompliantly, this will directly impact all parts of the business operating in the territory, and the fines will be levied accordingly.
Want to learn more about branches and IPT registration? Speak to Sovos’ tax experts today.
Continuing our IPT prepayment series, we take a look at Italy’s requirements. In previous articles we have looked at Belgium, Austria, and Hungary.
All insurers authorised to write business under the Italian regime have a legal obligation to make an advance annual payment for the following year. Refer to this blog for a general overview for IPT in Italy.
The amount of prepayment is calculated as a percentage of the total IPT and Anti-Racket contribution made in the previous year, deducting any IPT paid in respect of Motor Third-Party Liability business. The IPT prepayment rates increased from 85% for tax year 2020 to 90% for 2021 and 100% for tax year 2022 onwards.
All insurers writing non-life insurance risks in Italy need to pay 100% of their 2021 tax bill in November 2022 as a 2023 prepayment, in anticipation of their future tax liabilities. Once settled, the prepayment can be offset against IPT liabilities (excluding Motor third-party liabilities) arising from February 2023, when the January 2023 tax liabilities are due. Businesses can use excess prepayment to offset tax liabilities in the next period or offset against the next prepayment.
Prepayment is due by 16 November each year. No prepayment is required if the insurance company deregistered for IPT purposes prior to the prepayment deadline. Penalties and interest for late payments are strictly applied by the Italian tax authorities. They are time sensitive and calculated daily and payable alongside tax liabilities/prepayments.
Where the prepayment for the year is not fully utilised, balances can be carried forward to offset against future liabilities or used towards next year’s prepayments. If a company is no longer writing business in Italy and doesn’t expect further premiums to be received, they should formally file for a reclaim of any prepayment credits. Recovery is made through a formal reclaim and takes significant time (a few years) for the authorities to process and return the funds.
Although prepayment shouldn’t represent an additional cost to insurance transactions, it can pose some cash flow considerations for insurers. It’s Important to note prepayment is due on a historical basis and cannot be settled based on an estimate of future tax liabilities. The legal obligation to pay the prepayment doesn’t cease, even if the insurance company foresees termination of their insurance risks in Italy. This creates issues for insurance companies winding down their Italian exposures, starting underwriting Italian risks through EU based subsidiaries, or when closing the business.
Most UK insurers changed their company structure due to Brexit. A special application for transferring the prepayment credit needs to be made to the Italian tax authorities for mergers or portfolio transfers and a response or approval from the tax office can take significant time.
When an insurer is exiting Italy, be it due to Brexit or any other reason, being aware of their current and ongoing prepayment obligations is key to minimising unnecessary pain in the future.
Get in touch with our tax experts today for advice on how to navigate this often confusing IPT procedure in Italy. Questions about IPT in general? Read this guide to IPT compliance.
Brazil is known for its highly complex continuous transaction controls (CTC) e-invoicing system. As well as keeping up with daily legislative changes in its 26 states and the Federal District, the country has over 5,000 municipalities with different standards for e-invoicing.
The tax levied on consumption of services (ISSQN – Imposto Sobre Serviços de Qualquer Natureza) lies under the competence of the municipalities. Each municipality has authority over the format and technical standard of the services e-invoice (NFS-e – nota fiscal de serviço eletrônica). This poses a significant compliance challenge, as e-invoicing is mandatory for nearly all taxpayers in the country.
However, important steps have been taken towards changing this scenario. An agreement (Convênio NFS-e) recently signed by the Brazilian Federal Revenue Agency (RFB), the National Confederation of Municipalities (CNM), and other relevant entities, has established the National System of the NFS-e with a countrywide unified standard for the services e-invoice.
The SNNFS-e introduces a unified standard layout for the issuance of the NFS-e, as well as a national repository of all e-documents generated within the system. Adhesion to the system is voluntary for municipalities. Since the bill proposed to regulate this issue (PLP 521/2018) has been static in Congress since 2019, the agreement was designed to allow municipalities to voluntarily adopt the national standard, which then becomes mandatory for taxpayers.
The system will allow issuance of the NFS-e in a national standard, through the web portal, mobile app or API (application programming interface). It also creates the National Data Environment (ADN), the NFS-e unified repository.
The SNNFS-e offers several service modules and municipalities can choose which ones to adopt. The ADN is the only mandatory module, as it ensures the integrity and availability of information contained in the documents issued is in the unified standard. Additionally, the ADN allows adhering municipalities to distribute issued NFS-e among themselves and taxpayers.
Once the agreement is signed, the municipality must activate the system within a certain deadline, which hasn’t been established. Activation involves configuring system parameters and amending municipal legislation to reflect the national system requirements. Only after complete activation will taxpayers be able to issue invoices based on the unified standard.
Technical documentation of the NFS-e has also been released, but these are not the definitive specifications, which are still to be approved by the National Standard Electronic Service Invoice Management Committee (CGNFS).
The NFS-e national standard provides substantial simplification of taxpayers’ e-invoicing obligations. With a standard layout, compliance with multiple formats can be drastically reduced. The document format for issuance of the standard NFS-e is XML and it must be digitally signed.
Another benefit is that one of the available modules allows taxpayers to pay the ISSQN owed in several municipalities at once, using one single document (Guia Única de Recolhimento) issued by the system.
Although municipalities may choose to keep their current NFS-e issuance system, they must still adhere to the communication deadlines, layout, and security standards of the national NFS-e. They must also ensure transmission of all issued documents to the national data environment. This ensures that taxpayers will only be required to issue the NFS-e in one standard layout.
The first phase of production started on 23 July 2022 with five pilot municipalities. Transmission will be available through different methods, with gradual implementation. According to the initial implementation schedule of the National Confederation of Municipalities, API transmission is set to happen from mid-October 2022 or later, depending on the stability of the other transmission methods. Further development of this schedule can be expected in the coming months.
São Paulo, Salvador, and Florianópolis are among the many municipalities that have already signed the agreement. The success of this national NFS-e standard relies on significant adoption by municipalities, so taxpayers must ready themselves to comply as this takes place across the country.
Need to ensure compliance with the latest e-invoicing requirements? Get in touch with our tax experts.
Update: 20 May 2024 by Edit Buliczka
In January 2024, the Hungarian government modified the prepayment system for the extra profit tax on insurance premium tax (EPTIPT). These amended rules are first applicable at the end of May 2024, when the 2024 EPTIPT prepayment becomes due.
According to the new rules, the EPTIPT prepayment must be paid in two installments: one in May and another in November.
Both prepayments are based on installments paid for the 2023 final settlement. As a result, the prepayment, due by 31 May 2024, corresponds to the first installment of the 2023 EPTIPT settlement (paid in January 2024). The second installment of the prepayment, due by 15 November 2024, should be equal to the second installment of the final 2023 settlement (payable in July 2024).
Looking for guidance on meeting your IPT obligations? Sovos can help.
Update: 20 September 2022 by Edit Buliczka
It’s time to return to Insurance Premium Tax (IPT) prepayments – a continuation of our blog series on this important IPT topic. You can find the first entry in our blog series here.
IPT is declared and settled differently throughout Europe. Monthly, quarterly, or biannual declarations – the frequency varies across Member States – and some jurisdictions request prepayments to ensure the liabilities due from insurance companies are collected in good stead.
Hungary is one country where legislation states prepayments are required. However, the prepayment obligation is a new requirement, introduced alongside the so called ‘extra profit tax’ or supplemental IPT, which is payable on an annual basis. No prepayment is required in relation to the ‘normal’ insurance premium tax paid monthly.
Prepayments are defined as a tax payment credit made to a tax authority before the payment is actually incurred.
This prepayment tax will be deducted to cover the tax liabilities until the total credit is used, then current liabilities must be paid by the basis applied in each “jurisdiction“.
You can learn more about IPT prepayments in our blog.
Before the introduction of extra profit tax, or supplemental IPT, prepayment for IPT in Hungary wasn’t a requirement. The ‘normal’ IPT is paid monthly with no prepayment obligation and there is no need to submit an annual return.
In Hungary the prepayment concept is used for taxes where there is an annual declaration obligation, such as in the case of corporation tax.
Regarding IPT, the prepayment obligation was introduced with the extra profit tax regime. Extra profit tax or supplemental IPT is an annual tax. This might be the reason for the introduction of the prepayment obligation for this tax type.
Supplemental IPT prepayment is due on 30 November 2022 regarding 2022 (bi)annual supplemental IPT, while for 2023 the prepayment is due by 31 May 2023.
Based on the original concept, the basis of the prepayment for 2022 was the premium collected during the period between July 2021 and June 2022, applying the rates applicable for 2022. However, this was modified shortly after the issuance of the Government Decree of 197/2022 on extra profit taxes.
This adjustment most likely occurred as the original concept would have generated a substantial overpayment since the base period to calculate 2022 prepayment is one year and the supplemental tax is due only for the second half of 2022. According to the updated rules the basis of the 2022 prepayment remained the same but the applicable rates were changed from 2022 rates to the rates normally applicable for 2023. The 2023 rates are half of the 2022 rates, decreasing the prepayment amount by reducing the rate instead of changing the base period from one year to half year.
Regarding 2023, the calculation of the prepayment is equal to the supplemental tax paid for 2022 in January 2023.
The tax office confirmed that any overpayment regarding the extra profit tax/supplemental IPT can be offset against the ’normal’ IPT and vice versa. This is because the extra profit tax has the same tax code (number 200) and is payable to the same bank account as the IPT.
For example, if the prepayment for 2022 is higher than the 2022 extra profit tax there will be an overpayment on the 200 tax account at the end of January. This overpayment can be offset against the January 2023 IPT liabilities which are payable by 20 February 2023. Or if the insurance company has an IPT overpayment at the end of November 2022, this overpayment can be used to cover the extra profit tax/supplemental IPT prepayment obligation.
Get in touch with our tax experts today for advice on how to navigate this often confusing IPT procedure.
Update: 8 March 2023 by Kelly Muniz
Spain launches public consultation for B2B mandatory e-invoicing
The Ministry of Economic Affairs and Digital Transformation (Ministerio de Asuntos Económicos y Transformación Digital) has launched a public consultation on the upcoming B2B e-invoicing mandate.
The mandate will enable citizens to participate in elaborating norms before its development. This public consultation is carried out through the web portal of the competent department and all interested parties have until 22 March 2023 to send feedback.
Based on the feedback received, the government will develop and approve the regulatory framework that is needed according to the law adopting mandatory B2B e-invoicing which was published on 29 September 2022.
The public consultation consists of 32 specific questions on seven different areas that the regulatory framework will address. These areas are:
You can find the official text of the public consultation here.
Looking for more information on e-invoicing in Spain? Speak to a member of our expert team. For more information about VAT compliance in Spain read this page.
Update: 16 September 2022 by Victor Duarte
The Congress of Spain has approved the Law for the Creation and Growth of Companies, and it is expected to be published in the Official Gazette (BOE) in the following days.
This Law also amends Law 56/2007 on Measures to Promote Information to adopt the mandatory electronic invoice issuance requirement for all entrepreneurs and professionals in their commercial relationships.
According to this Law, all entrepreneurs and professionals must issue, send, and receive electronic invoices in their business relationships with other entrepreneurs and professionals. Additionally, the recipient and the sender of electronic invoices must provide information on the status of the invoices.
The main rules of the Law related to e-invoicing establishes that:
The process for accreditation of interconnection and interoperability of the platforms will be determined by the regulations at a later stage.
The law establishes that companies providing the supply of certain services to final consumers must issue and send electronic invoices in their relations with individuals who agree to receive them or who have explicitly requested them. This obligation affects companies supplying telecommunication services, financial services, water, gas, and electricity services among other sectors and activities prescribed in Article 2.2 of Law 56/2007.
These companies must provide access to the necessary programs so that users can read, copy, download and print the electronic invoice for free without having to go to other sources to obtain the necessary applications. They must also enable simple and free procedures so users can revoke the consent given to the receipt of electronic invoices at any time.
Companies within scope that refrain from offering users the possibility to receive electronic invoices will be sanctioned with a warning or a fine of up to 10,000 euros.
The Government will develop provisions of this Law in accordance with the regulations, and within the scope of its powers. Therefore, the Ministries of Economic Affairs and Digital Transformation and of Finance and Public Administration will determine the information and technical requirements to be included in the electronic invoice to verify the payment dates and obtain the payment periods.
It is also necessary to establish the minimum interoperability requirements between the providers of electronic invoice technology solutions, and the security, control, and standardisation requirements of the devices and computer systems that generate the documents.
The Government will have 6 months from the publication of this Law in the Official Gazette to approve the regulatory framework.
The provisions regarding mandatory B2B electronic invoicing will be effective according to their annual turnover:
This means that the B2B e-invoicing obligation could be effective for large taxable persons by the first quarter of 2024.
It is important to highlight that the entry into force of the B2B e-invoicing obligation is subject to obtaining the community exception to articles 218 and 232 of the VAT Directive. This exception is less difficult to obtain the previously as has been granted to other Member States such as Italy, France, and Poland to allow them to adopt the mandatory e-invoicing regime in their jurisdictions.
Need to ensure compliance with the latest e-invoicing requirements in Spain? Get in touch with our tax experts.