Starting with the introduction of a multiple tax rate system in 2019, Japan is in the middle of a multi-year process of upgrading its consumption tax system. Through this significant change, the Japanese government seeks to solve a tax leakage problem that has existed for years.
The recent series of tax reforms in Japan started with the introduction of its multiple tax rate system on 1 October 2019. Following this, changes in the country’s indirect tax, the Japanese Consumption Tax (JCT), started to take place. To counter systemic problems caused by the current ledger system structure, anew system – the Qualified Invoice System –will be introduced from 1 October 2023. The key difference from the current system is that a Qualified Invoice must include a breakdown of applicable tax rates for that given transaction.
Not long after these changes were announced, a new organisation, the E-Invoice Promotion Association (EIPA), was established in July 2020. It aims to promote digitization of overall commercial transactions. Leveraging the opportunity presented by the new Qualified Invoice System, the EIPA began to work on developing a standard specification for electronic invoices.
Since January 2021, the EIPA – with support from the Japanese government – has been working with the OpenPEPPOL team to develop a Japanese specification that meets the country’s regulatory framework and business demands. In September 2021, Japan acquired PEPPOL Authority status and aims to allow businesses to issue and receive electronic invoices through PEPPOL in the Autumn of 2022.
Introduced in January 1989, it’s the indirect tax charged on the consumption of goods and services in Japan. There are national and regional levies, and a reduced rate of Consumption Tax in Japan.
Japan’s Consumption Tax is the equivalent of VAT which is charged across the European Union.
Consumption Tax in Japan is levied when a business transfers goods, provides services or imports goods into Japan.
A refund of Consumption Tax in Japan isn’t possible for businesses without taxable sales in the country.
As Japan implements its Consumption Tax System updates, requirements for Japanese taxpayers will change. Need help ensuring your business stays compliant with all future Japanese Consumption Tax system updates?
Our experts continually monitor, interpret and codify regulatory changes from around the world into our software, reducing the compliance burden on your tax and IT teams.
1 July begins the second half of 2022, and in line with that milestone, changes have started to be implemented in the CTC sphere. In this blog, we highlight vital developments that have taken place in and outside Europe that may influence the continuous transaction controls (CTC) landscape globally.
The Philippines has officially implemented its mandatory continuous transaction controls (CTC system, which consists of the near-real-time transmission of electronically issued invoices and receipts. On 1 July 2022, the Philippines tax authority launched the Electronic Receipt, Invoice and Sales Reporting System (EIS) pilot program.
This initiative was first introduced in 2018 by the Tax Reform for Acceleration and Inclusion Act, known as TRAIN law. 100 selected pilot taxpayers are now obliged to issue and transmit e-invoices/receipts to the Bureau of Internal Revenue (BIR) through the EIS platform. (Philippines Advances Towards Mandatory CTC Reporting | Sovos)
Romania has been taking steps toward implementing its continuous transaction controls (CTC system since 2021. As of 1 July 2022, Romanian taxpayers are required to use the CTC e-invoicing system e-Factura for the supply of high-fiscal risk products in B2B transactions and all B2G transactions. Suppliers must transmit structured invoices issued in XML format to the E-Factura system. Subsequently, the seal will be applied by the Ministry of Finance as proof of clearance. Such invoice will be legally valid under the Romanian regulation. (Romania: Questions Remain as Deadline Looms | Sovos)
Alongside the 1 July 2022 go live for the CTC e-invoicing mandate, the e-transport system has been introduced to monitor high-fiscal-risk goods transported domestically. Taxpayers must issue an e-transport document before certain goods are transported. Moreover, taxpayers must send files to the tax authorities in XML format. Based on Act No. 106 issued by the Romanian government on 30 June 2022 and the change of Articles 13 and 14 of GEO, the fines for non-compliance with the e-transport requirements will not be effective until 1 October 2022. Also, starting from 1 July 2022, SAFT began to apply to large taxpayers as the penalty grace period has ended.
On the list of countries expanding their e-invoicing requirements is also Vietnam, where the issuance of e-invoices became mandatory for all taxable persons operating in Vietnam as of 1 July 2022. Previously, the expected deadline was 1 November 2020, but the tax authority extended it due to the difficulties encountered by local companies to implement on time a compliant e-invoice solution.
Moreover, enterprises, economic organisations, other organisations, business households and individuals must register with the local tax administration to use e-invoices according to the rules established in Decree 123. (Vietnam: E-invoicing Roll-Out in July 2022 | Sovos).
Mandatory B2G invoicing has been postponed for small, medium, and microenterprises with the enactment of Law Decree 42-A/2022. The initial date was 1 July 2022. Now, the B2G e-invoicing is going to be mandatory from 1 January 2023. The reason for this change is that, after extending the deadline for acceptance of electronic invoices in PDF until 31 December 2022, the Portuguese government considered it important to also extend the deadline for receiving and processing B2G electronic invoices for micro, small and medium-sized companies until 31 December 2022 (Portugal: Mandatory B2G invoicing for SME’s postponed again | Sovos)
In Turkey, the tax authority expanded the scope of taxpayers required to use e-fatura, e-arsiv and e-waybill applications. This expansion was done by either adding new sector-based mandates or decreasing the annual revenue threshold. The new requirements became applicable recently, and the taxpayers in the scope of the changes started using e-documents as of 1 July 2022. (Turkey Expands Scope of E-Documents (sovos.com)
In South Korea, e-invoicing has been mandatory for all corporate businesses since 2011. An issued e-tax invoice must be transmitted to the National Tax Service (NTS) within one day of the invoice being issued. The current change concerns the threshold limit for individual businesses, which from 1 July 2022 has been lowered to KRW 200,000,000.
Italy has also entered another phase of implementing its CTC requirements. Starting with cross-border invoices, the Esterometro (the report of cross-border invoices) has been replaced with the transmission of cross-border invoice data to the SDI in a FatturaPA format from 1 July 2022. Additionally, the recently published Decree n.73 established a threshold for the cross-border invoice reporting mandate. Taxpayers are only required to report transactions that exceed the amount of EUR 5,000 for every single operation. This applies, more specifically, to purchases of goods and services not territorially relevant for VAT purposes in Italy, under Articles 7 to 7-octies of Presidential Decree 633/1972.
Moreover, e-invoicing through the SDI became mandatory from 1 July 2022 for taxpayers applying the flat-rate VAT regime (regime forfettario), as well as amateur sports associations and third sector entities with revenue up to EUR 65,000. Lastly, e-invoicing became mandatory between Italy and San Marino from 1 July 2022. The system for e-invoice exchange between Italy and SM will leverage the SDI as the access point for Italian taxpayers and a new, comparable hub for companies in San Marino.
Many countries around the world are either introducing or expanding their existing CTC Regimes with the active changes taking place globally. Sovos continues to monitor which countries are next on the list to build its local CTC regimes and comply with the international standards.
With coverage across more than 60 countries, contact us to discuss your VAT e-invoicing requirements.
The Philippines continuous transaction controls (CTC) Electronic Invoicing/Receipting System (EIS) has been officially kicked off for the 100 large taxpayers selected by the government to inaugurate the mandate. Although taxpayers were still struggling to meet the new e-invoicing system’s technical requirements just before the go-live date, the Philippines upheld its planned deadline and went live with this pilot on 1 July 2022.
The Philippines roll-out has once again highlighted the challenges of complying with new mandates and shown that readiness is vital.
Together with one of the six initial pilot companies, which started testing early this year, Sovos has developed the first software solution to obtain approval by the EIS to operate e-invoice transmission through the government’s transmission platform. Sovos’ solution is up and running in the Philippines.
One day before the EIS go-live, the Philippines tax authority, BIR (Bureau of Internal Revenue), published Revenue Regulations n. 6-2022, 8-2022, and 9-2022, containing the new system’s policies and guidelines and documenting the rules and procedures adopted by the EIS.
While the regulations do not represent news for pilot taxpayers who have successfully implemented their CTC e-invoice reporting systems, the same might not be accurate for those preparing to comply with the new mandate. The legislation officially establishes the country’s e-invoice/receipt issuance and reporting initiative, first introduced in 2018 by the Tax Reform for Acceleration and Inclusion Act (TRAIN), and documents relevant information.
As of 1 July 2022, 100 selected pilot taxpayers have been obliged to issue and transmit e-invoices and e-receipts through the EIS. The BIR is planning a phased roll-out for other taxpayers within the scope of the mandate, starting in 2023, but no official calendar has been announced yet.
Taxpayers covered by the mandate are:
The mandate requires electronic issuance of invoices (B2B), receipts (B2C), debit and credit notes and transmission through the EIS platform in near real-time, that is, in up to three (3) calendar days counted from issuance date. Documents must be transmitted using the JSON (JavaScript Object Notation) file format.
Issuance and transmission can be done through the EIS taxpayer portal or using API (Application Programming Interface), in which taxpayers must develop a Sales Data Transmission System and secure certification before operating through the EIS. This entails the application for the EIS Certification and a Permit to Transmit (PTT) by submitting documentation with detailed information about the taxpayer’s system.
Although the regulations state that the submission of printed invoices and receipts is no longer required for taxpayers operating under the EIS, archiving requirements have not been modified. This means that during the 10-year archiving period, taxpayers must retain hard copies of transmitted documents for the first five (5) years, after which exclusive electronic storage is allowed for the remaining time.
Additionally, the legislation states that only the invoices successfully transmitted through the EIS will be accepted for VAT deduction purposes.
Many of the 100 pilot taxpayers struggled to comply with the country’s deadline. For this reason, the EIS has allowed alternations to the deadline for certain taxpayers, provided they submit a Sworn Statement detailing the reasons why they are not able to meet the requirement on time and a schedule with the date they intend to comply by, which are subject to the EIS’ approval.
Regarding non-compliance, the regulations state that the tax authority shall impose a penalty for delayed or non-transmission of e-invoices/receipts to the EIS and that unreported sales will be subject to further investigation.
After the pilot program kick-off and legally establishing the CTC framework, the government plans to gradually roll out the mandate to all taxpayers included in the scope in 2023. However, taxpayers who are not in the mandatory scope of the EIS may already opt to enrol in the system and be ready to comply beforehand.
Sovos was the first software provider to become certified, in conjunction with one of the pilot taxpayers, to transmit through the EIS, and is ready to comply with the Philippines CTC e-invoice reporting. Our powerful software combined with our extensive knowledge of the Philippines tax landscape helps companies solve tax for good.
Need to ensure compliance with the latest e-invoicing requirements in the Philippines? Speak with a member of Sovos’ team of tax experts
Update: 20 May 2024 by Edit Buliczka
In May 2023, the Hungarian government extended the extra profit tax on insurance premium amounts (EPTIPT) for another year.
It updated the regulations again in January 2024, adding the fourth amendment to the two-and-a-half-year history of this tax (this tax was supposed to be repealed from 2025). This time, the final settlement and prepayment declaration and payment rules were modified.
According to the new rules, both the final settlement and prepayment must be paid in two installments. The same exact amount should be settled four times over the year – as follows:
Both the final settlement and the prepayment installments should be equally split between these deadlines.
If an insurance company needs to correct the declared premium amount for 2023, for example, in August 2024, it must submit four corrective tax returns in a row:
If such an error is discovered after 15 November 2024, the number of corrective returns will rise to five. Taxpayers would also need to submit the corrective 2024 EPTIPT second installment prepayment return.
Do these changes add administrative burden to your organisation? Speak to Sovos about how we can help.
Update: 26 January 2023 by Edit Buliczka
The Hungarian Tax Office (HUTA) released the 2023 insurance premium tax (IPT) return template last month.
According to the government decree of 465/2017, return templates must be made available at least 30 days before the due date. The first IPT return of the year is due by 20 February 2023, pertaining to the monthly IPT liabilities for January 2023.
The new IPT return template replicates the template from 2022, though the code, rates and scales for 2023 extra profit tax (EPTIPT) are different.
Coding of the tax returns in Hungary are usually formatted so that the first two digits indicate the tax year – in this case, 23 for 2023 – and the remaining digits, which are typically numbers, specify the type of tax. IPT and EPTIPT fall under the same tax code of 20. Therefore, the IPT/EPTIPT return code for 2023 is 2320.
Based on advice obtained from HUTA, it was confirmed to Sovos that the return template will not refer to the declared EPTIPT prepayment. Instead, the difference between the final EPTIPT liability and the declared EPTIPT prepayment will be recorded as an additional debt or overpayment on the HUTA tax account. As a result, insurers must manually calculate the payable EPTIPT and make their payments accordingly.
Download our free IPT compliance eBook for additional information or read our guide to Insurance Premium Tax.
Update: 30 December 2022 by Edit Buliczka
It’s been less than a month since the Hungarian Tax Office (HUTA) published instructions for insurance premium tax (IPT) for 2023 and the rules have already been amended.
The amendment is in line with the recently issued government decree (No. 582/2022) published on 24 December 2022. This alters the tax rates for 2023.
The update affects the final scale (premium collected in 2023 exceeding 36 billion Hungarian Forints) in relation to non-life and life insurance premiums.
The rates for premium amounts collected from non-life policies climbed from 7% to 12%. Rates for premium amounts collected from life policies grew from 3% to 5%.
Need more information about Hungary’s Extra Profit Tax? Speak with our Insurance Premium Tax experts.
Update: 15 December 2022 by Edit Buliczka
On 29 November 2022 the Hungarian Tax Office (HUTA) published instructions for the insurance premium tax (IPT) rules applicable for 2023 liabilities. This guidance includes the rules for extra profit tax and extra profit tax prepayment payable for 2023.
The information provided for 2022, including the section about the overpayment of the extra profit tax prepayment, is essentially repeated in this guidance. It states that reclaims are possible for any overpaid prepayment. The question is how? Even if the HUTA hasn’t released the referenced 2320 declaration form yet, if the 2320-04 additional profit tax settlement page of the return doesn’t change, the oddity we highlighted in our earlier update on 14 November 2022 still exists. The anomaly is: Is the entire declared extra profit tax payable again? Can we deduct the prepayment that was previously made? If yes, how?
Another notable piece of information in the new guidance is the date of the extra profit declaration for 2023. It states that the due date is 30 January 2024. This date is 31 January 2024 according to the government decree.
We are hoping these anomalies will be cleared before the extra profit tax for 2022 is due, that is by 31 January 2023. We are going to update this blog once new information is available.
Read our IPT compliance guide for further information.
Update: 15 November 2022 by Edit Buliczka
On 2 November 2022 the Hungarian Tax Office (HUTA) published the declaration form for settling the insurance premium extra profit tax or supplemental insurance premium tax (EPTIPT) prepayment and the extra profit tax.
In this update we will be discussing anomalies around the declaration form’s publish date, its content, and its guidance.
1. In its guidance issued to Sovos, HUTA confirmed that if an insurance company with Hungarian tax registration terminates its taxable activity in Hungary, deregistering between July 2022 and the issuance of the declaration form, the company is liable to declare its extra profit tax liabilities at the date of the deregistration. HUTA adds that since the Decree determined a final settlement deadline of 30 November for extra profit tax prepayment and 31 January 2023 for extra profit tax, the deregistering insurer can and should fulfil its obligation before these final deadlines. The compliant approach for the date of deregistration in Hungary is 15 days following the termination of the activity.
Anomaly: How it is possible to settle extra profit tax liabilities and submit a declaration (online submission is compulsory in Hungary), for example on 15 September, if the declaration form has not been published by that date?
2. According to a government decree (No. 465/2017 on the detailed rules of tax administration) the declaration forms should be published at least 30 days before the tax due dates unless there were adjustments in the regulation during this period.
Anomaly: Although both 31 October and 1 November were public holidays in Hungary in 2022, the phrase “at least” suggests the form was published before the public holidays, leaving more than 30 days for taxpayers to prepare rather than less.
1. Separate sheets were created in the declaration form for ‘normal’ or monthly insurance premium tax (IPT), the insurance premium extra profit tax prepayment and the insurance premium extra profit tax. The sheet for the settlement of extra profit tax does not include a line to deduct the amount of the prepayment.
In the guidance issued by HUTA to Sovos, it states that as the monthly insurance premium tax, the extra profit tax prepayment and the extra profit tax have the same tax code (No. 200), all payments can be automatically offset against each other.
Anomalies:
2. Based on the guidance and as per the declaration form, corrective/substitute return should be submitted in relation to ‘normal’ IPT, extra profit tax prepayment and extra profit tax if the amount of these liabilities appears to be incorrect following the submission of the return.
Anomalies
The above anomalies are just examples around the extra profit tax prepayment and extra profit tax declaration. Sovos submitted queries to HUTA to clarify these anomalies. We predict some of these anomalies will be clarified soon with the issue of an adjusted declaration form and an amended guidance.
Still have questions about Hungary’s supplemental insurance premium tax? Get in touch with our Insurance Premium Tax experts.
Update: 11 July 2022 by Edit Buliczka
As of 1 July 2022, Hungary introduced an Extra Profit Tax scheme, which levies supplemental Insurance Premium Tax (IPT) on insurance premiums. The introduction of the Extra Profit Tax scheme is a temporary measure and aims to cover the increased governmental costs caused by the conflict in Ukraine. The Extra Profit Tax scheme is applicable not only for the insurance sector but also for other sectors, including airlines, medical, energy, telecommunications and banking.
The following blog gives an overview of this tax, highlighting some interesting features and anomalies around this tax.
On 4 June 2022, a Government Decree was published in the Hungarian Official Gazette, numbered 197/2022, with the title “About Extra Profit Taxes”. One may wonder why a government decree regulates a new tax method. To answer this question, we need to research and read the Hungarian Constitution and another law about special measurements in case of catastrophes. Adding two new sections to the mentioned law on 25 May 2022 made it possible for the government to introduce the Extra Profit Taxes in a government decree instead of adjusting the relevant laws. The Extra Profit Tax scheme includes the Supplemental IPT. Although the Government Decree refers to particular tax laws, such as the 102/2012 IPT Law, the Extra Profit Tax regulations are not and will not be built into these tax laws.
Hungary’s Supplemental Insurance Premium Tax is a temporary tax effective as of 1 July 2022 for 18 months and will end on 31 December 2023. This tax is due on non-life and life insurance policies written by both Freedom of Establishment and Freedom of Services insurers. A similar sliding scale system on the income collected is applicable for this new supplemental IPT as it is for the existing IPT. The scales for 2022 are as follows:
While for 2023, the scales are the following:
The rates vary depending on when the taxpayer collected the premium and the type of insurance policies. In 2022 the rates are higher for non-life and life insurance policies than in 2023, also noting that the life rates are half of those applied to non-life policies. For further details about the rates, please read our tax alert, Hungary: Supplemental IPT Introduced Due to Ukraine Conflict.
The declaration and the payment are due by 31 January 2023 and 31 January 2024, respectively. There is also a prepayment obligation for both years with due dates of 30 November 2022 and 31 May 2023. For further details about the prepayment, please also refer to the above mentioned tax alert.
The introduction of this tax is one of the features which is unique in taxation. In Hungary, in normal circumstances, taxes are introduced, or the existing taxes are modified via laws. Generally, tax laws should be published at least 30 days before they come into effect. In the case of the Extra Profit Tax scheme, the legislative body fulfilled none of the above.
Another interesting feature to mention is that although it is called supplemental insurance premium tax, it is also due on life insurance policies. In Hungary, there is no existing insurance premium tax on life policies as these policies are exempt.
No prepayment is due for the existing IPT, but prepayment is due to be paid for the supplemental IPT.
Supplemental IPT is a type of Extra Profit Tax, but it seems that there is no separate tax code given to it. The Supplemental IPT should be declared on the IPT declaration form and paid to the same Hungarian Tax Office account as the existing IPT.
The base period to calculate 2022 prepayment is one year, although Hungary’s supplemental insurance premium tax is due only for the second half of 2022. On the other hand, the prepayment for the whole 2023 year is equal to the amount of the half-yearly 2022 supplemental tax. As such, insurance companies will likely overpay the tax with the 2022 prepayment. This overpaid tax will then need to be reclaimed or can be offset against the existing IPT or used for the 2023 prepayment or 2023 supplemental IPT. Is it for purpose or just a mistake and it will be amended?
In the guidance issued by the Hungarian Tax Office on 1 July 2022 on supplemental insurance tax rules for 2022, the tax authority mentioned that taxpayers should declare the supplemental tax on the standard IPT tax declaration form, 2220. However, the tax authority did not update the form by 1 July 2022. As the due date of the prepayment and the supplemental tax differ from that of the existing IPT, there is still an open question of how the form will look to make the distinction between the existing IPT, the prepayment and the supplemental tax. Hopefully, a new return template will be published soon to answer these questions.
As explained above, there is still ambiguity and questions around this new tax. Sovos is dedicated to keeping our clients up to date and informing you as soon as the clarified information is available. Please contact our dedicated IPT compliance team if you have any questions.
Still have questions about Insurance Premium Tax? Download our IPT Guide, written by our team of IPT experts.
The EU and the UK use the Economic Operators Registration and Identification System (EORI) to identify traders.
Businesses and people wishing to trade in the EU and the UK must use the EORI number as an identification number in all customs procedures when exchanging information with customs administrations. The EU has one standard identification number across the EU, while the UK requires a separate GB EORI number for trade in the UK post-Brexit.
The purpose of having one standard ID in the EU is that it creates efficiency for both traders and the customs authorities. However, it’s vital to ensure all aspects of the system are considered.
The primary need for an EORI number is to be able to lodge a customs declaration for both imports and exports. Guidance is that a trader should obtain an EORI number in the first country of import or export. Carriers will also require an EORI number.
The EORI number exists in two parts:
The UK has also adopted this format, with both GB EORI numbers for trade into Great Britain (GB) and an XI EORI number for trade via the Northern Ireland protocol. The UK and EU have online databases where it is possible to check the status of an EORI number.
Since the UK left the EU, it is now required to have a separate GB EORI number to import and export from GB. This number will not be valid in the EU. However, should businesses be trading from Northern Ireland, then due to the Northern Ireland protocol, it is possible to apply for an XI EORI number to import into the EU.
Initially, after the introduction of the XI prefix, there were several reported issues. They included tax authorities being unable to recognise XI EORI numbers or link them to existing EU VAT numbers. Often it is the case that businesses have found it simpler to cancel an XI EORI number and apply for an EU EORI number in a Member State, particularly if that Member State is the main point of entry for imports into the EU.
Some of the most common issues we see at Sovos include:
Sovos provides an EORI registration service for traders who must apply for an EORI number. We can also link any existing EU VAT numbers to the EORI to ensure that customs declarations can be logged correctly, ensuring a smooth process and avoiding delays. You can find more information about EU VAT and the EU VAT e-commerce package here.
Contact us if you need help with VAT compliance.
The complexities of Spain’s insurance premium tax regulations can be daunting for anyone responsible for IPT reporting and compliance for this country.
Apart from the different tax authorities involved with Spanish IPT reporting and various submission processes, there are also many different declarations that tax compliance teams must be aware of.
Here we’ll look at some of the more challenging aspects of IPT reporting.
Although the Spanish tax authorities receive declarations monthly for insurance premium tax they also require an annual declaration. The annual declaration form is referred to as a Modelo 480. This form contains a monthly summary of information by class of business and a section to provide exempt premiums. Modelo 480 is also due to the four tax authorities for the Basque region provinces, which are different formats but contain the same information. The deadline remains in January alongside the December declarations.
Most of the insurance classes include a charge for the Fund for Winding up of Insurers (or the Modelo 50) even if the policy is exempt from IPT. The Modelo 480 acts as another form of review by the Spanish authorities to ensure they receive the correct amount of tax. They can cross reference the premium amount declared for the Fund for Winding up of Insurers against the premium reported on Modelo 480.
Another of the more notorious annual reports is the Fire Brigade Charge. The Fire Brigade Charge report can take around four years to complete one tax period. With prepayments and adjustments, incorrect submissions can take equally as long to fix. Reports require careful attention to detail as taxpayers cannot make corrections after submission.
Historically, an insurer could apply either a 2.5% for a multi-risk policy or a 5% rate for pure fire and be confident that the total requested by the tax authority would be around that number. More recently, this is no longer the case with the change in economic climates and more instances where the claims are higher.
The process begins with a report concerning Property and Fire policies written in the previous year. At the beginning of the following year, the taxpayer makes a prepayment based on that report. The year after, the taxpayer submits a report with the actual premiums written during the previous year. Finally, in the fourth year, the difference between the prepayment and actual premiums written is confirmed and adjusted should there be any discrepancies. Simply put, the 2022 Fire Brigade tax period will be closed in 2026!
Another of the more complicated annual reports was the Modelo 0-6, which became obsolete with the introduction of the new reporting system. This report focused on the Extraordinary Risk taxes due on Property Damage, Fire, Business Interruption and Accident. The new system allows real-time information to be accessed should a claim against a policy be made.
Still have questions about IPT in Spain? Get in touch with Sovos’ team of IPT experts or watch our webinar on The Complexity of Insurance Premium Tax in Spain.
On 1 January every year, taxpayers operating in Peru must assess their monthly income over a certain period determined by law to verify if they fall under the obligation to keep electronic ledgers. Taxpayers above the established threshold or who wish to voluntarily keep their ledgers electronically may do so by using the Electronic Ledgers Program (Programa de Libros Electrónicos – PLE), which covers all electronic books, or through the System of Electronic Ledgers (Sistema de Libros Electrónicos Portal – SLE), exclusively for the records of sales and purchases.
Earlier this year, however, the Peruvian tax authority (SUNAT) approved a new system specifically for the records of sales and purchases, the Integrated System of Electronic Records (Sistema Integrado de Registros Electrónicos – SIRE). Through the new Resolution 40-2022/SUNAT, the Electronic Record of Purchases (Registro de Compras Electrónico – RCE) was introduced, a module similar to the Electronic Record of Sales and Earnings (Registro de Ventas e Ingresos Eletrónicos – RVIE) created in 2021 and already in use by taxpayers.
The two modules, RVIE and RCE, compose the SIRE. This new system will be rolled out gradually, starting in October 2022, obliging taxpayers to migrate from the PLE and SLE to generate their records of sales and purchases exclusively through SIRE while maintaining the PLE for other ledgers.
The primary purpose of the SIRE is to simplify the generation of records of sales and purchases for taxpayers. Through the SIRE, a proposal for the RVIE and the RCE is automatically generated. It is available from the 2nd calendar day of every month. The taxpayer may accept, modify or replace it with the information they wish to present to SUNAT. If there are no transactions during the monthly period, the taxpayer must still submit a blank file to SUNAT.
Under the current systems (PLE and SLE), SUNAT doesn’t generate a proposal; the taxpayer enters all sales and purchases information and generates the records. With the SIRE, however, SUNAT uses information from its Electronic Invoice System (Sistema de Emisión Eletrónica – SEE) to create a proposal of the RVIE and RCE, which the taxpayer submits in each declaration period. The record is updated daily with the information received on the previous day.
The RCE has certain peculiarities compared with the RVIE, already in use. The RCE requires the generation of two separate files, the records of domestic and cross-border purchases. Even if no cross-border transactions are carried out, a blank RCE must still be submitted to SUNAT. Additionally, taxpayers may exclude specific purchase invoices and include them in the RCE at any time for 12 months from the invoice issuance date.
After the taxpayer’s revision, the RVIE and RCE are filed in conjunction, and a receipt status message (Constancia de Recepcion), containing relevant information, is delivered to the taxpayer’s electronic mailbox.
The SIRE can be accessed through the SUNAT portal, using the SIRE application installed on the taxpayer’s computer or through SUNAT’s API web service.
Once taxpayers become obliged to the exclusive maintenance of sales and purchase records through the SIRE, they must discontinue keeping such records in the PLE, SLE or paper ledgers. However, because the SIRE covers the RVIE and RCE exclusively, taxpayers will still need to maintain the PLE, which contains all other ledgers.
This means taxpayers must be aware of the distinct set of rules applied to the PLE and the SIRE. An example is that the SIRE allows modification of an already “closed” record from a previous period without waiting until the next period, as with the PLE and SLE. In the SIRE, adjustments can be made at any time using the different annexes provided by SUNAT, with no limitations on the year the record was generated.
Another significant change is that taxpayers will no longer have to store, file and preserve electronic records since SUNAT will do this for them.
Implementation of the SIRE will happen gradually, according to the following schedule:
Taxpayers may also start using the SIRE voluntarily if they are obliged to keep the Records of Sales and Purchases and are enrolled in the SUNAT operations portal (clave SOL), according to the following calendar:
Resolution 40-2022/SUNAT becomes effective on 1 October 2022. However, because most companies in Peru are already obliged to keep Records of Sales and Purchases, the largest groups of taxpayers must be ready to comply with the new mandate starting 1 January 2023.
Speak to our team if you have any questions about the latest tax requirements in Peru. Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
According to European Customs Law, non-EU established businesses must appoint a representative for customs purposes when importing goods into the EU. In particular, the Union Customs Code establishes that non-EU resident businesses must appoint an indirect representative.
At the end of the Brexit transitionary period, many UK businesses suddenly needed to appoint an indirect representative to clear goods into the EU. In this article, we will look in further detail at this requirement’s challenges.
Indirect representation implies that agents are jointly and severally liable for any customs debt (import or export duties), which is why it’s harder for businesses to find freight companies and customs brokers willing to act on their behalf than for direct representation imports.
The conditions to be an indirect representative are that the customs agent must have a registered office or permanent establishment in the EU. An agent would require a Power of Attorney that enables them to act for the company. The main characteristic of indirect representation is that the agent will act in their own name but on behalf of the company that appointed them, essentially transferring the rights and obligations of customs procedures to the representative.
On the other hand, agents act in the name and on behalf of the company in direct representation.
In addition to the customs implications, agents acting as the importer of record or declarant may also be considered liable for complying with regulatory requirements. For example, any error in the declarations (ex. Article 77 paragraph 3 Union Customs Code (UCC), if the agent was aware of incorrect information or if they “should have known better”).
The European Court of Justice recently expressed its opinion on this matter with the ruling on the case C-714/20, UI Srl. This ruling determined that the indirect representative is jointly and severally liable from a customs law perspective, but not for VAT (contrary to a previous interpretation of Article 77 (3) UCC). The court specified that it’s up to the Member States to expressly determine if other persons, such as indirect representatives, may be considered jointly and severally liable for VAT of their importer clients. However, according to the principle of legal certainty, this should be clearly expressed in the local legislation before courts can enforce said responsibility.
For these options, each alternative solution will have economic and administrative implications to be considered. It is recommended that businesses carefully review their overall strategy before deciding what can be adjusted to comply with customs formalities.
Contact Sovos’ team of VAT experts for help with meeting VAT compliance obligations.
Romania has been taking steps toward introducing a continuous transaction controls (CTC) mandate since 2021. Although the Romanian tax authority only established the legal framework for implementing the e-invoicing system less than a year ago, it is set to go live soon. At the same time, the e-transport system, introduced even later, will also be rolled-out. Both systems will become mandatory as of 1 July; however, there are still open questions that taxpayers hope will be addressed by the Romanian authorities. By international comparison, taxpayers in Romania have a relatively short time window to comply with the new obligations.
For more information see this overview about e-invoicing in Romania.
Suppliers of high-fiscal risk goods are obliged to use the RO E-Factura system as of 1 July 2022. Suppliers must transmit structured invoices issued in XML format to the system. The Ministry of Finance will apply its electronic seal as proof of clearance. This XML with the Ministry of Finance’s seal is considered the legal invoice according to Romanian regulation.
Romania requested a derogation from EU VAT Directive 2006/112/EC to introduce mandatory e-invoicing. ANAF (The National Agency for Fiscal Administration) is authorised with Law no. 139 to issue an order in 30 days following the expected derogation decision from the EU VAT Directive to establish the scope and the timeline of the B2B e-invoicing mandate according to Law No. 139. However, the Romanian authorities are silent on whether the 1 July mandate to use the e-Factura system for high fiscal risk B2B supplies also requires a derogation decision from EU VAT Directive.
Regarding the technical documentation, ANAF recently published the OAUTH (Open Authorization) 2.0 procedure within SPV (Virtual Private Space), allowing taxpayers to produce an authentication token and pass it to third-party applications, which will enable third-party applications to authenticate towards the SPV. However, even if the complications with the authentication process seem resolved after the recent documentation, the May date of these documents’ publication raised questions on whether the Romanian authorities gave reasonable time to businesses to comply by 1 July.
The RO E-transport system is another Romanian digitalization project. It requires taxpayers to use an IT system and issue an e-transport document before transporting of certain goods begins. Just like e-invoicing, taxpayers are required to issue an XML file and send it to the tax authority through SPV.
The requirement to issue e-transport documents concerns categories of high fiscal risk products; as mentioned above, this also comes into force on 1 July 2022. While the mandatory go-live date for the e-transport system is imminent, the legislative process has not been completed by ANAF yet. In addition, the technical documentation, including the APIs, schema, and validation rules, was completed only two weeks ago.
The emergency ordinances that introduced the obligation of e-invoicing and e-transport system for high fiscal risk products as of 1 July have not yet been approved by law.
However, as both systems are currently due to become mandatory on 1 July 2022, businesses have been preparing to comply with the requirements while trying to deal with many uncertainties.
We’ll see in the coming days how Romanian authorities will manage the implementation of both systems, either by keeping the 1 July deadline or by postponing the mandates until further clarification and guidance on open questions are provided.
Need to ensure compliance with the latest regulations in Romania? Get in touch with our tax experts. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.
Following other Eastern European countries such as Poland and Romania, Serbia is on its way to implementing the mandatory e-invoicing system for the B2B (business to business) and B2G (business to government) sectors.
The Law on Electronic Invoicing that came into force in May 2021, introduces the clearance e-invoicing system and presents the centralised continuous transaction controls (CTCs) platform called SEF (Sistem E‑Faktura) for sending, receiving, capturing, processing and storing structured electronic invoices. Additionally, there is a system to help taxpayers with the processing and storage of invoices called the Sistem za Upravljanje Fakturama (SUF).
The new legislation aims to replace paper invoices with electronic invoices and outlines the requirements for the issuance of e-invoices in B2B and B2G transactions.
Under the new e-invoicing framework, e-invoices must be sent and received in accordance with Serbian e‑invoicing standards (custom application of the standard EN 16931-1). All e‑invoices must be submitted via a centralised platform to the recipient who must accept or reject the invoice.
Currently in scope are resident taxpayers in the private and public sector and non-resident businesses with a local fiscal representative in Serbia.
May 2021: Law on Electronic Invoicing entered into force
1 May 2022: All suppliers in the public sector must send invoices electronically and the Serbian government must be able to receive and store them. (G2G/B2G)
1 July 2022: Serbian public entities are obliged to send e‑invoices to companies, who must be able to receive and process them. (G2B)
1 January 2023: E‑invoicing will be extended to the entire B2B sector. (B2B)
Need help to ensure your business stays compliant with the emerging mandatory e‑invoicing for all taxpayers in Serbia?
Our experts continually monitor, interpret and codify legal changes into our software, reducing the compliance burden on your tax and IT teams.
Learn how Sovos’ solution to address the changing VAT compliance requirements in Serbia can help companies stay compliant.
In 2020, the Zakat, Tax and Customs Authority (ZATCA) in Saudi Arabia announced the introduction of an e-invoicing mandate consisting of two phases. The first phase of Saudi e-invoicing requires all resident taxable persons in the Kingdom to generate and store invoices electronically and has been enforced since 4 December 2021. The second phase, which ZATCA will roll out as of 1 January 2023, brings additional requirements and will not be mandatory for all taxpayers to begin with. However, the ZATCA plans to gradually roll out and require all resident taxpayers to comply with phase-2 e-invoicing requirements.
The ZATCA is set to roll out phase 2 in stages, starting with a smaller taxpayer group. Just a few days ago, on 24 June 2022, the first group of taxpayers who must comply with e-invoicing rules beginning on 1 January 2023 was published. According to the ZATCA announcement, taxpayers whose annual revenue exceeds 3 billion riyals (approximately 800 million USD) for the 2021 period are in scope.
So far, only the first group threshold has been revealed. The ZATCA will announce other taxpayer groups and new deadlines later. The ZATCA will notify each taxpayer group at least six months in advance.
In phase 2, taxpayers must generate all e-invoices and electronic notes (credit and debit notes) in XML format (UBL 2.0). There are unique invoice content requirements. All e-invoices and e-notes must include:
However, the e-invoicing requirements concerning tax invoices (B2B) and simplified invoices (B2C) are different, and as a result, different APIs have been made available for different types of invoices.
Tax invoices will be subject to a Continuous Transaction Controls (CTC) regime. More specifically, the system can be categorised as clearance e-invoicing. After generating the XML invoice, including all necessary content, the invoice will be transmitted to the tax authority portal (the ZATCA platform) for clearance through the clearance API. The ZATCA platform will apply ZATCA’s seal as proof of clearance, after which the invoice will gain legal validity. The signed XML will be returned to the supplier, allowing the supplier to choose whether to send the signed XML invoice or a human-readable version, including the XML (PDF A-3 with embedded XML). The human-readable version must be PDF A-3 (with embedded XML) format.
Simplified invoices will be subject to a CTC reporting regime. After generating the XML invoice, including all necessary content, the invoice will be signed using the cryptographic stamp of the supplier. Afterwards the seller will present a paper copy of the invoice to the buyer. Within 24 hours, the taxpayer must report the signed XML to the ZATCA platform through the reporting API
Taxpayers must store e-invoices in electronic form. There are specific requirements concerning the storage, including, for example, mandatory local storage as a main rule and storage abroad only being permitted under certain conditions. E-invoicing solutions must further allow taxpayers to download e-invoices for offline storage.
Need to ensure compliance with the latest VAT and e-invoicing requirements in Saudi Arabia? Get in touch with Sovos’ team of tax experts.
A diverse workforce brings unique perspectives and experiences, helping a company’s overall growth. Embracing differences, being open to learning and being comfortable with the unknown is both enriching…and absolutely necessary.
“Sovos is committed to a culture that values the opinions and contributions of everyone. If you have talent and drive, you will succeed here in growing your career and our company.”
– Sovos CEO Kevin Akeroyd
We are committed to creating and sustaining an environment where employees can safely bring their whole selves to work. To Be Inclusive is a Sovos core value – one that we see as essential to achieving our purpose as a business. DEI initiatives are not static, and we are continuously evolving our inclusive environment at Sovos. Inclusion is a way of thinking that carries over to how we engage with others. We believe in empowering every Sovosian with DEI awareness that allows them to think, engage and act in a way that promotes a sense of inclusion and belonging for their co-workers.
Sovos has joined a unique collaborative of over 2,000 of the world’s leading companies and organizations, all of whom share our conviction that diversity and inclusion is a societal issue that the business community can and should address. CEO signatories commit to cultivating workplace environments where diverse experiences and perspectives are welcomed and appreciated, and where employees feel comfortable and empowered to discuss diversity and inclusion. Find out more here.
Sovos supports the professional development of women. The Sovos Women’s Alliance is an opportunity for our female employees to connect, expand their internal networks globally and exchange stories, learning and guidance in a supportive space.
Identifying the location of risk for Insurance Premium Tax (IPT) purposes is the first step to ensuring IPT compliance in a given territory. This area perhaps isn’t as straightforward as it first seems for marine insurance.
As with the location of risk rules for all classes of insurance in Europe, the starting point for marine insurance is the Solvency II Directive (2009/138/EC), in particular Article 13(13). Article 13(13)(b) refers to ‘vehicles of any type’, which is generally understood to include not just motor vehicles but also ships, yachts and aircraft within its scope. Based on this, the location of risk for marine insurance is identified by the ‘Member State of registration’. As this phrase is not defined in the Directive, there has been some confusion about what ‘registration’ refers to in this context. This is illustrated nicely by a case heard in the European Court of Justice (ECJ) in April last year.
This case involved insurance contracts with companies established in Germany and entered into the register of companies held by the District Court in Hamburg. The owners entered the vessels into the shipping register maintained by the same court in Germany. The case arose because the vessels were temporarily authorised to fly the national flags of Malta and Liberia. The German tax authority argued that German IPT was due on these contracts because the vessels remained on the German shipping register throughout the flagging out period.
In contrast, the insurer contested that the risk location should be determined by the Member State that certified that the ship is fit for use and whose flag the ship flies. Malta treats marine insurance as exempt from its Stamp Duty regime, so if the insurer was successful with its argument, then no taxes on its insurance premiums would be due in the European Union.
The ECJ held that the location of risk was in Germany despite the temporary flagging out of the vessels. This decision was because the vessels remained on the Hamburg District Court’s register, which had the primary function of proving ownership. As the owner has the primary interest in insuring the vessel to protect their financial interest in it, the register evidencing ownership was key.
It is worth highlighting that it is unclear how much weight should be placed on this case. This is for a couple of reasons. Firstly, the Ordinance for the implementation of the relevant German legislation refers specifically to ‘shipping registers kept by the local courts’ as being determinative, which differs from the position of other territories. Additionally, a significant issue not addressed by the case is what happens when a Member State doesn’t have a shipping register.
We at Sovos haven’t seen a major shift in the approach taken by insurers since the judgment, meaning in many instances that the ship’s flag is continuing to be seen as pertinent by the market. It will be interesting how the ECJ deals with similar future cases.
We’re happy to help any insurers writing business in Europe that have questions about the location of risk rules, whether concerning marine insurance or any other insurance to ensure taxes are correctly declared.
Contact Sovos’ team of experts for help complying with marine location of risk rules or download our Location of Risk Rules for IPT eBook for more information.
Meet the Expert is our series of blogs where we share more about the team behind our innovative software and managed 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 Manisha Patel, senior compliance services representative – Insurance Premium Tax (IPT), about their role, how they support Sovos clients and their top compliance tips for captives.
I’m a senior compliance services representative – IPT at Sovos. I joined the company over five years ago.
My role at Sovos is multi-faceted. My primary responsibility is to oversee IPT compliance for an extensive portfolio of clients, specifically within the captives practice.
I help ensure that all clients’ tax requirements are met, including checking and signing off tax returns and ensuring that correct payments are made to relevant tax authorities within specified statutory deadlines. Additionally, I help advise clients on more complex or urgent queries that have been escalated within the team.
A P&I Club is a non-profit cooperative association of marine insurance providers that provides P&I insurance to all its member companies. A P&I Club covers a broad range of liabilities, including loss of life, personal injury, cargo loss or damage, pollution via hazardous substances, wreck removal, collision and property damage.
These clubs offer ship owners the highest limits and broadest ranges of coverage. Through their participation in a P&I Club, the member clubs share claims above an individual’s retention via a pooling structure. Pooling together allows members to provide the insurance
cover needed by ship owners and their ships to trade while meeting compulsory insurance and financial security requirements.
Increasing numbers of global tax authorities are switching to digital submissions and, in some cases, require more detailed information to complete these submissions.
My tip for captives would be to invest time learning about these ever-changing requirements for your relevant territories and organise yourself in a way that you can easily and readily have the information you need to hand. This will reduce your business’s risk of errors and non-compliance when settling IPT.
Sovos’ Captives Team caters to the specific needs of captive insurers. Our team can review any program a client may have before the program’s renewal, where we can assist with premium tax calculations, validate applicable country tax rates and prepare payment summaries. Due to limited in-house expertise, we recognise that sometimes additional guidance is needed.
Our IPT Managed Services Team offers a vast amount of knowledge, providing the expertise to our Captive clients through webinars, tax alerts and newsletters to boost their confidence with tax filing and reporting. Additionally, our Consultancy Team can assist with any further queries.
Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.
Update: 7 May 2023 by Andrés Landerretche
Ecuador’s Internal Revenue Service (SRI) has published an updated version of its Guide for Taxpayers on Cancellation of Electronic Receipts. The guide details how to cancel electronic receipts already authorised by the tax entity.
The improved and updated version of the previous edition, which the SRI published in 2018, is part of the body’s work to gradually expand its visibility of taxpayers’ activity over taxpayers and optimise the country’s tax practices.
The functionality highlighted in the guide allows taxpayers to carry out the entire process of annulling electronic receipts, including:
The updated guide includes details of how to request cancellation of a purchase settlement – adding to other electronic vouchers which taxpayers can also cancel such as invoices, withholding vouchers, credit notes, debit notes and remittance guides.
The SRI has established that any request for cancellation from the issuer through the portal must be accepted by the same means by the taxpayer receiving the electronic receipt. They must consent to the status change from “Authorised” to “Cancelled” once the issuer has complied with the annulment process.
The ruling excludes invoices, purchase settlements and delivery notes, as the SRI will cancel them directly if there are errors or the transaction or withholding has not been effective.
Those looking to submit an annulment request must do so exclusively online. The taxpayer issuing electronic receipts and the recipient of the electronic receipt must have an access code to the online SRI portal.
An additional relevant change is an extension of the term to request a cancellation to 90 days after the date of issuance of the proof of sale, withholding or complementary document.
It is important to consider that once somebody starts the annulment process, no procedure allows for the withdrawal of the annulment. If the recipient rejects a cancellation request due to “error”, then the issuer can commence another cancellation request.
Finally, documents with the “Pending Cancellation” status have tax validity, while those in the “Cancelled” status do not.
Interested in learning more about tax compliance in Ecuador? Contact our team of experts.
Update: 21 June 2022 by Victor Duarte
Due to the economic crisis and the necessity of the government to take measures aimed at economic growth and efficient tax collection, on 29 November 2021, the Organic Law for Economic Development and Fiscal Sustainability after the COVID-19 Pandemic was published in Ecuador’s Official Gazette. According to this law, taxpayers obliged to issue invoices must be incorporated into the electronic invoicing system within one year from the publication.
To comply with such measure, on 27 May 2022, the Internal Revenue Service (SRI) published Resolution NAC-DGERCGC22-00000024. It establishes the obligation to issue e-invoices to taxpayers who are required to issue invoices, and the obligation for these taxpayers, qualified as agents of withholding, to issue the Simplified Transactional Annex (ATS) version of withholding documents. These taxpayers will have to adopt the e-invoicing scheme.
1. Income Tax taxpayers who are obliged to invoice but not obliged to issue invoices, sales receipts, withholding and complementary documents in the electronic modality must adopt the e-invoicing scheme into their activity until 29 November 2022, at the latest.
2. Natural persons and companies that are not considered taxpayers of the Income Tax and are obliged to invoice – but not obliged to issue invoices, withholding and complementary documents in the electronic modality – must adopt the e-invoicing scheme into their activity until 29 November 2022, at the latest.
3. Taxpayers required to issue invoices, withholding and complementary documents under the electronic modality, according to numerals 1. and 2. who are qualified as withholding agents by the SRI, must implement the ATS version of withholding documents, following the technical documentation made available by the SRI, until 29 November 2022.
For purposes of the application of this resolution, the subjects obliged to invoice are all taxpayers registered in the Single Taxpayer Registry (RUC) and who must issue and deliver invoices, withholding and complementary documents according to current tax regulations.
Persons with an annual gross turnover below USD 20,000 are not in the scope of this resolution. These taxpayers are known in Ecuador as Popular Businesses (Negocios Populares).
• As of 30 November 2022, only taxpayers responsible for issuing bills of sale (notas de venta) may request authorisations, modifications or renewals for the issuance of receipts through registering machines.
• As of 30 November 2022, taxpayers required to issue invoices, retention and complementary documents in the electronic modality may request authorisations for pre-printed documents only after they have obtained the authorisation to issue electronic documents in the production environment of the e-invoicing system.
The resolution introduces a limit for invoices or receipts issued under the pre-printed modality, which may not exceed 1% of the total receipts issued in the previous fiscal year.
Pre-printed documents should only be issued in exceptional cases of contingency when, due to force majeure or fortuitous event, taxpayers authorised to issue documents under the electronic modality cannot generate them electronically.
According to this resolution, the SRI may keep a free tool available for taxpayers to generate electronic documents without prejudice to taxpayers using their computer systems. There was a significant change compared with the previous resolution, which established that the SRI will “maintain” this free tool, indicating that the maintenance of said tool is now optional for the SRI.
According to the original plan of implementation, the SRI had plans to gradually expand the e-invoice mandate for all taxpayers in the country, with more taxpayers scheduled to start issuing e-invoices from 2023 and 2024. However, with this resolution, the schedule of mandatory e-invoicing implementation has been modified. All these taxpayers must start adopting the e-invoicing system this year until 29 November 2022 at the latest.
Need help ensuring your business stays compliant with the evolving e-invoicing obligations in Ecuador? Contact us today to learn how Sovos’ solution for VAT compliance changes can help companies stay compliant in Ecuador and around the world.
The recent popularity of non-fungible tokens (NFTs) has captivated investors, governments and tax authorities. An NFT is a digital asset that represents real-world objects such as a piece of digital art, an audio clip, an online game or anything else. NFTs are purchased and sold online and are typically encoded with the same software as cryptocurrencies. They are stored in the blockchain to authenticate and track ownership of the NFT.
NFTs are generally one of a kind and can fetch tens of millions of dollars for a single NFT. The total market value of NFT sales skyrocketed into the billions in 2021. The high values and increase in sales have inspired several governments to introduce VAT legislation to define and tax these digital assets.
Multiple countries have announced specific VAT measures for the treatment of NFTs:
Spain: Spain is the first country in the EU to apply VAT to NFTs. The General Directorate of Taxes in Spain issued a ruling stating the supply of NFTs is an electronically supplied service subject to the standard VAT rate of 21%.
Belgium: The Belgian Finance Minister confirmed that the supply of NFTs is an electronically supplied service subject to the standard VAT rate of 21%.
Norway: The Norwegian tax administration defines the supply of NFTs as an electronically supplied service. It’s important to note that the creation or mining of an NFT will not attract VAT in contrast to a sale.
Washington State (U.S.): The Washington Department of Revenue is expected to announce that NFTs are subject to the state’s sales and business taxes as a digital product. This ruling will make Washington the first state to issue sales tax policies on NFTs.
In other countries, such as Switzerland, the supply of NFTs is generally considered an electronic service; however, there is a Swiss VAT exemption for electronic works of art directly sold by a creator that may apply to NFTs. VAT treatment of works of art may create implications for tax authorities when classifying NFTs.
Another area of VAT concern surrounding NFT transactions is the place of supply. Place of supply for VAT purposes typically requires buyers and sellers to exchange domicile information such as a billing address. NFT transactions conducted through blockchain can avoid sharing personal information with intermediaries via an anonymous ‘wallet,’ which may lead to privacy concerns and other issues for tax authorities as they attempt to bring these transactions within the scope of VAT.
The VAT treatment of NFTs is still in its infancy and will continue to evolve alongside the digital asset industry. More insight into the classification of NFTs and the determination of the place of supply of such transactions will come as more tax authorities issue rulings analysing these unique digital assets.
To find out more about what the future holds, download the 13th Annual VAT Trends whitepaper. Follow us on LinkedIn and Twitter to keep up to date with regulatory news and updates.
Insurance Premium Tax in Italy is complex. This blog helps insurers navigate challenges in Italy, from IPT rates to reporting requirements. You can find all recent updates on IPT in Italy below in the update section.
Read our Insurance Premium Tax guide for an overview of IPT in general.
Update: 1 September 2023 by Edit Buliczka
The Italian Tax Reform Bill went into effect on 29 August 2023. The bill was adopted by the Italian Parliament on 9 August and published in the Italian official gazette on 14 August.
Only the general principles of the execution of the tax reform were laid down in this bill; no specifics or changes to existing tax legislation were made. On the other hand, the bill includes information about the timeline for these changes, stating: “The Government is delegated to issue, within twenty-four months from the date of entry into force of this law, … one or more legislative decrees that revise the tax system.”
Among other key taxes, such as VAT and the Corporation Income Tax (CIT), Article 17 featured a change in the timeframes for assessing IPT. The revision’s goal is to bring it in line with other indirect taxes. It also necessitates changes to the IPT penalty structure, as well as the procedures and criteria for tax application. Finally, it is said that the new guidelines should rationalise the applicable IPT rates.
The bill also includes generic principles that are applicable to all taxes, such as:
Article 21 envisages an Italian Unified Tax Code to be implemented by 29 August 2024. It will reorganise and combine existing tax legislation into a comprehensive tax code.
This tax code will be divided into two parts: a general part with unified regulations for the common elements of tax systems and a particular section with regulations for individual taxes.
Sovos will keep a close eye on the Italian Tax Reform process, so stay tuned for updates or contact our experts if you have any special queries.
Update: 28 June 2023 by Edit Buliczka
Different IPT rates are applicable in Italy, depending on the type of insured risk provided to the policyholder. The rates vary from 0.05% to 21.5%.
For example, the highest IPT rate applies to legal expenses, whilst payments received from insurance policies covering risks of navigation of ships registered in Italy are subject to 0.05%. Some premium amounts are exempt from IPT.
It is important to note that the Italian class of business does not correspond to the European Solvency II Directive class of business. There are 33 business classes in Italy, numbered from AB1 to AB33.
Italy is known for its strict application of laws and harsh penalty regime, charging up to 400% of the tax liabilities due. Penalties and interest for late payments are time-sensitive, calculated daily and payable alongside tax liabilities.
The taxable premium is the income generated under an insurance contract, comprised of the premium plus any accessory fee stated in the contract of insurance (without any deductions). Any amount paid by the policyholder to the insurer is a taxable premium.
Beyond IPT, premium amounts derived from various risks trigger parafiscal charges. The most significant parafiscal charge is the CONSAP (Solidarity Fund for Extortion and Usury Victims) with a rate of 1%.
Parafiscal charges are also due on risks such as:
If an insurance company receives a premium, IPT is due even if the insured is subsequently reimbursed.
IPT credits relating to policy cancellations or adjustments are not permitted and should not be reclaimed from the Italian tax authorities, nor offset against current liabilities. According to art. 4. Law 1216/1960, IPT “does not cease to be due even if the premium is fully or partially returned to the policyholder for any reasons”.
Italian trade body ANIA clarified the applicability of this provision, permitting tax reclaims only if the tax has not been fairly collected. This provision includes clerical errors or an incorrect qualification of the risk or scope of the insurance contract based on the information available when the policy was written.
For example: if the insurer mistakenly overcharged the policyholder and the policyholder overpaid the tax, the overpaid IPT can be deducted from tax liabilities arising in the same reporting period, i.e., the calendar year.
Italian IPT is payable monthly, whereas the return is due annually. Prepayment is also necessary with a deadline of November and equals 100% of the IPT plus CONSAP paid in the previous calendar year.
Some parafiscal charges such as EMER are declared and paid alongside the IPT, whilst others like RAVF and HAVF have different deadlines.
Although insurers pay tax liabilities monthly, and file declarations annually, there is a legal obligation to maintain IPT books. IPT books are chronological ledgers on a policy level that must be readily available should the Italian tax authorities request the company records. The authorities mainly request IPT books for tax office audits, investigations or to support formal requests by an insurer.
Insurers are required to make an annual prepayment to the Italian tax authorities in anticipation of future tax liabilities. Prepayment is due by 16th November each year. It is calculated as a percentage (100% for 2022) of total IPT and Consap contribution made in the previous year, deducting any IPT paid in respect of Motor Third-Party Liability business.
Once settled, this prepayment can be offset against IPT liabilities (excluding Motor Third-Party liabilities) arising from February, when the January tax liabilities are due.
Life plans are exempt from IPT in Italy unless they have been written prior to 1 January 2001. If the life insurance policy was purchased before this date, the premium is subject to a 2.5% IPT rate.
On top of the annual IPT return, insurance companies must file a variety of reports to several governmental agencies including the Italian Tax Office. The Motor report is embodied in the annual IPT return. There is an obligation for domestic and EU and EEA-based foreign insurance companies to submit separate reports about written insurance contracts, premiums and claims.
There are also a growing number of reports that foreign insurance companies need to submit to the Italian Supervisory Authority (IVASS).
Learn more about additional reporting requirements in Italy.
Many factors make IPT in Italy unique and one of the most challenging jurisdictions from a compliance perspective. This includes monthly tax settlements, an annual declaration, prepayment rules, treatment of negative premiums and the various reports that need submitting to the Tax Office, regional municipalities or IVASS.
28 June 2023
The Italian Tax Office released a new circular on 19 April 2023 granting the opportunity to benefit from the 1/18 penalty regime. This follows the Legislative Decree n. 34/2023 from 30 March 2023.
With Circular No. 9/E, the Italian Tax Office has clarified the procedure, the extent of the measure and the ways of access. The circular emphasises that payments can be made in instalments, up to 20 equal payments over a five-year period.
The application date has been pushed out from 31 March 2023 to 30 September 2023.
22 March 2023
The 2022 Italian Budget (Law 197/2022) introduced new measures under the ‘tax break’ scheme (“tregua fiscale”) to promote the settlement of tax irregularities and pending tax assessments.
The Italian tax authority (Agenzia delle Entrate) issued Circular letter no. 02/2023 to provide further clarification and guidance on the new tax measures.
The new regulation allows taxpayers the choice to regularise their tax positions for prior years up to 2021. If they choose to do so, the penalty associated with the regularisation decreases to 1/18th of the minimum penalty – provided that they complete the regularisation by 31 March 2023. In addition to submitting the corrective tax returns, taxpayers must pay the outstanding taxes, penalties and interest by this date.
The law allows taxpayers to make the payments in eight quarterly instalments, with the first due by 31 March 2023. An interest rate of 2% per year applies to the following instalments, which they must pay by 30 June, 30 September, 20 December and 31 March each year.
Additionally, the legislator extended the application of the reduced penalty regime to tax assessments and tax notifications (“avvisi di accertamento, rettifica o liquidazione”) which are already submitted. This ruling applies if the submitted regularisation was not appealed before 1 January 2023, when the regulation came into force, as long as payment is made by 31 March 2023.
12 December 2018
The Italian Parliament approved the 2019 Budget Act on 30 December 2018. As anticipated, the approved budget includes increased IPT prepayment rates. The approved rates are as follows:
For completeness, these new rates overrule those approved in last year’s Budget Act. However, the deadline remains 16 November each year.
At Sovos, our experienced IPT specialists can help your business ensure compliance in Italy. Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.
Sovos recently hosted an online webinar on VAT recovery where we covered reciprocity agreements between the UK and EU Member States when making 13th Directive VAT refund claims. One of the questions that kept coming up is what are reciprocity agreements and why do they matter?
When making 13th Directive refund claims, each EU Member State has different rules or conditions to meet before agreeing to a VAT refund. One of the conditions that EU Member States may require is a reciprocity agreement. A reciprocity agreement is a deal to reciprocate VAT refunds between two countries.
Therefore, VAT is only refundable when a similar tax is refundable for local businesses in the applicant’s country. For example, suppose a Spanish business was allowed to obtain a VAT refund in Norway through a similar scheme to the 13 Directive. In that case, Spain would likely have reciprocity with Norway and will allow the Norwegian businesses to make a 13th Directive Refund Claim in Spain.
There are currently around 19 EU Member States that require reciprocity agreements for non-EU businesses to make VAT refund claims. Of those, Greece and Slovenia currently only have reciprocity agreements with two countries (Norway and Switzerland), whilst Italy has three (Norway, Switzerland and Israel). When making EU VAT refund claims, businesses should review reciprocity and not assume they will automatically be approved.
Before Brexit, UK businesses could make VAT refund claims through the EU VAT Refund Directive (also known as the 8th Directive) which was built to allow reciprocity freedom for all EU Member States. However, post-Brexit, this mechanism for VAT refund claims no longer applied, and the UK fell within the 13th Directive Refund Scheme as a non-EU business.
Whilst the UK and EU have a Free Trade and Cooperation Agreement in place, there was no specific mention of reciprocity in VAT refund claims as these should be agreed between those particular EU Member States and the UK. Therefore, it may be more difficult for UK businesses, that make refund claims around the EU, to recover VAT incurred in some countries.
Regarding current reciprocity agreements with the UK, the only official announcements we have seen to date have been from Germany, Spain and Hungary. However, we are aware of ongoing discussions between the UK and other EU Member States.
HMRC states they will only refuse a claim if the reciprocal country has a scheme for refunding taxes but refuses to allow UK traders a refund. Therefore, HMRC is willing to allow VAT recovery in the UK for EU businesses providing UK businesses receive the same treatment as the EU. It would therefore be in the interests of EU Member States to allow VAT recovery for UK businesses for businesses in their own country to benefit from the same treatment.
Most EU Member States require reciprocity when making VAT refund claims. Therefore, the law of reciprocity is an integral factor when looking to make a VAT refund claim in any jurisdiction. It’s important to understand these reciprocity laws to prevent wasting time and money on making a VAT refund claim from a country that doesn’t allow it.
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