Japan's Tax System

Japan's Tax System

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.

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Japan's tax reforms

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.

Japan's tax system quick facts

  • Under the new system, only registered JCT payers can issue qualified tax invoices. On the buyer side, taxpayers will only be eligible to input tax credit where a qualified invoice has been issued
  • Taxpayers must register with Japan’s National Tax Agency (NTA) to issue qualified invoices. Registration began in October 2021 and must be completed before 31 March 2023
  • Invoices must be archived according to Italian-style storage requirements: to be compliant, taxpayers must either timestamp their invoices or draw up a Storage and Maintenance Guideline describing how the invoices are archived and how this meets applicable requirements
  • Invoices should be stored in such a way to guarantee the integrity, authenticity and availability during the storage period
  • Foreign storage is allowed provided it fulfills the requirement for storage under Japanese law
  • Outsourcing of invoice issuance is allowed with no restrictions or requirements

Japan's mandate rollout dates

  • 1 October 2019 – Japan introduces its multiple tax rate system
  • 14 September 2021 – the Japanese Digital Agency obtained PEPPOL Authority status
  • 1 October 2022 –EIPA aims to enable businesses in Japan to issue and receive electronic invoices through PEPPOL
  • 31 March 2023 – Latest date to apply for registration with the NTA to issue qualified invoices
  • 1 October 2023 – Qualified Invoice System will be introduced

Quick facts about Japan's Consumption Tax

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.

How Sovos can help

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.

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.

Release of new regulations

One day before the EIS go-live, the Philippines tax authority, BIR (Bureau of Internal Revenue), published Revenue Regulations n. 6-20228-2022, 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.

Who needs to comply?

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.

Issuing and transmitting

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.

Taxpayers were not ready to comply

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.

What’s next?

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.

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Need to ensure compliance with the latest e-invoicing requirements in the Philippines? Speak with a member of Sovos’ team of tax experts

Indonesia’s VAT requirements

Indonesia’s e-invoicing system and continuous transaction controls

After experiencing challenges in its tax control system, Indonesia adopted an e‑invoicing system, locally known as e‑Faktur. Leveraging data reported in real-time via continuous transaction controls (CTCs) allows the Indonesian tax authorities to reduce occurrences of fraud whilst helping to close the tax gap.

Have questions? Get in touch with a Sovos Indonesia CTC expert.

CTC reforms

Introduced in 2014 and effective from 2016, Indonesia’s e‑invoicing system seeks to combat the tax gap. Indonesia’s solution was the implementation of an invoice clearance system, where invoices must be approved by the local tax authority prior to being sent to a customer.

Quick facts

  • E-invoicing has been mandatory for all corporate VAT taxpayers since July 2016.
  • E-invoices (e-Faktur Pajak or e-FP) should be created by applications and systems prescribed by the Director of Taxation (DGT). These include client desktop, web-based and host-to-host applications.
  • Electronic signatures are required for the issuance of e-invoices.
  • It’s compulsory for all invoices to be processed and issued electronically via the government hosted eFaktur platform. The submission platform for the VAT return has been integrated with the e-invoicing platform.
  • Electronic certificates are required to verify taxpayer identity and are valid for two years.
  • Activation code and password are required for access to e-Nofa to request electronic tax invoice serial numbers.
  • Using e-Faktur, VAT returns are periodically submitted (typically monthly).

Mandate rollout dates

2014 – e-Faktur Pajak introduced

2016 – e-Faktur Pajak became effective

1 October 2020 – New e-Faktur Pajak version 3.0 released

How can Sovos help?

Need help to ensure your business stays compliant with the e-invoicing obligations in Indonesia?

Our experts continually monitor, interpret and codify changes into our software, reducing the compliance burden on your tax and IT teams.

Learn how Sovos’ solution for VAT compliance changes can help companies stay compliant in Indonesia and around the world.

Thailand’s New Approach to Electronic Invoicing

New regulations for e-tax invoicing solutions and receipts expected soon

Thailand’s current e-invoicing legal framework has been in effect since 2012 and follows a post-audit approach.

The Thai Revenue Department and Electronic Transactions Development Agency (ETDA) are working together to improve and further develop the e-tax invoicing system. As a result, new regulations on e-tax invoicing and receipts are expected in the future.

Get in touch with a Sovos Thailand electronic invoicing expert.

E-tax invoicing solutions

From 2017, the Thai Revenue Department issued regulations on electronic tax invoices and receipts. Subject to approval, taxpayers can prepare, deliver and keep their e-tax invoices and receipts in electronic format.

Quick facts about Thailand electronic invoicing

  • E-invoices must be digitally signed using a certificate issued by a certification authority and approved by the Thai Revenue Department.
  • E-invoices must be submitted in XML format to the Revenue Department monthly.
  • Outsourcing of e-invoice issuance is allowed provided the third-party service provider is certified by the Thai Revenue Department.

E-tax invoicing rollout dates

  • 2012 – E-invoicing permitted
  • 2017 – New regulations issued on electronic e-tax and receipts.
  • 2020 – EDTA began a certification process for service providers to assess whether applicants’ solutions are secure and compliant.

How can Sovos help with invoicing solutions?

Need help to ensure your business stays compliant with emerging e-invoicing obligations?

Our experts continually monitor, interpret and codify legal changes and requirements into our software solutions, taking care of your indirect tax compliance so you can focus on your core business.

Learn how Sovos’ solutions for continuous transaction controls and VAT compliance obligations can help companies stay compliant.

The global trend in the e-invoicing sphere for the past decade has shown that legislators and local tax authorities worldwide are rethinking the invoice creation process. By introducing technologically sophisticated continuous transaction control (CTC) platforms tax authorities get immediate and detailed control over VAT, which has proven a very efficient way to reduce the VAT gap.

However, many common law countries, that don’t have a VAT system, including the United States, Australia and New Zealand, haven’t followed the same path. They have stood out in international comparisons by providing little regulation in the field of e-invoicing. The reason why there is no need to have control over the invoices is the lack of a VAT tax regime. Recent developments, however, indicate that also common law countries try to spur e-invoicing, driven by the business process efficiencies rather than the need for tax control. Accordingly, the upcoming developments will be addressed in this blog, focusing on the Unites States e-invoicing pilot program and the Australian and New Zealand initiatives to promote e-invoicing.

United States

E-invoicing has been permitted for a very long time in the United States but is still not widespread business practice. According to some sources, e-invoicing currently only amounts to 25% of all invoices exchanged in the country. With the introduction of the Business Payments Coalition (BPC) e-invoicing pilot program in cooperation with the Federal Reserve, this may be about to change.

The BPC’s e-Invoice Exchange Market Pilot aims to promote faster B2B communication and provide an opportunity for all kinds of businesses to exchange e-invoices in the US.

The BPC e-Invoice Exchange Market Pilot

The pilot program is a standardised e-invoicing network across which structured e-invoices can be exchanged between counterparties using various interoperable invoicing systems to connect and exchange documents. It’s intended to drive efficiency and productivity while reducing data errors. A federated registry services model enables authorised administrators or registrars to register and onboard participants into the e-invoice exchange framework.

The e-invoice exchange framework operates similarly to the email ecosystem. Users can sign up with an email provider to send and receive emails. The provider serves as an access point to email exchanges for their users and delivers emails between them over the internet. It allows multiple registrars to register participants within the e-invoice exchange framework. This is reminiscent of the globally established PEPPOL model, which standardizes the structure of an invoice as well as provides a framework for interoperability.

Future vision

The US is following the European e-invoicing model based on open interoperability functionality. It enables parties using various invoicing systems to connect and exchange documents through the e-invoicing network easily. The digitization process in the e-invoicing sphere will enable large and small organisations in the US to save resources, promote sustainability and provide business efficiency.

Australia and New Zealand

Similarly, to the US, the move towards e-invoicing in Australia and New Zealand is not primarily driven by tax issues but process efficiency. Neither country has any plans concerning a traditional B2B e-invoicing mandate. However, the New Zealand and Australian governments have committed to a joint approach to e-invoicing, and the first steps are ensuring that all government entities can receive e-invoices.

Australia

In Australia, all commonwealth government agencies must be able to receive PEPPOL e-invoices from 1 July 2022. Moreover, the government also seeks to boost e-invoicing in the B2B space without the traditional mandate for businesses to invoice electronically. Instead, the proposal is to implement what is referred to as Business e-Invoicing Right (BER).

Under the government’s proposal, businesses would have the right to request that their trading parties send an e-invoice over the PEPPOL network instead of traditional paper invoices. Businesses need to set up their systems to be able to receive PEPPOL e-invoices. Once a business has this capability, it would be able to exercise its ‘right’ and request other companies to send them PEPPOL e-invoices.

This reform is expected to be introduced in July 2023, by which businesses will be able to request to receive PEPPOL e-invoices only from large businesses, followed by a staged roll-out to eventually cover all businesses by 1 July 2025.

New Zealand

Following the Australian e-invoicing reform from July 2022 for the B2G sector, the New Zealand Government is encouraging businesses and government agencies to adopt e-invoicing. One step in this direction is the possibility for all central government agencies to be able to receive e-invoices based on PEPPOL BIS Billing 3.0 since 31 March 2022.

Outside of these B2G requirements, there are currently no published plans to move the full economy to mandatory e-invoicing.

To find out more about what we believe the future holds, download Trends 13th Edition.

Take Action

Need help ensuring your business stays updated on the changes in the US, Australia and New Zealand e-invoicing systems? Get in touch with our team of experts to learn how Sovos’ solutions can help.

Vietnam’s VAT Requirements

VAT in Vietnam

Over the last 10 years, the Vietnamese government has worked on developing a solution to tackle the country’s VAT fraud and the VAT gap, introducing an e-invoicing mandate for all companies doing business in Vietnam from 1 July 2022.

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Reforms

The Vietnam e-invoicing mandate was initially slated to be in force by July 2020, but ultimately was delayed. In October 2020, a new timeline was laid out through Decree 123 announcing implementation dates for the new e-invoicing mandate rules that were originally envisaged in the Law on Tax Administration.

An initial rollout will begin from March 2022 to a select number of provinces and cities. The country’s new e-invoicing requirements will come into effect nationwide on 1 July 2022.

Quick facts

  • Applicable taxpayers in Vietnam will be required to issue e-invoices for their transactions from 1 July 2022.
  • Legal framework must be followed for all e-invoice submissions.
  • Enterprises, organisations (economic or otherwise), business households and individuals must register with the local tax administration to start using e-invoicing.
  • There are two types of e-invoicing processes in Vietnam. Authenticated invoices are granted an authentication code by the tax authority before the invoice is transmitted to the buyer, whereas unauthenticated e-invoices do not require the tax authority’s authentication code.
  • Electronic invoices must be issued in XML format.
  • VAT, sales invoices, and the invoices used for selling public assets are among the documents under the scope of the e-invoicing mandate.
  • Ensuring of the integrity and authenticity of the e-invoices is required and must be digitally signed by the supplier.
  • E-invoices must be archived electronically and taxable persons may choose archiving methods guaranteeing security and integrity and authenticity during the entirety of the archiving period.
  • Service providers meeting specific requirements can provide the contracting parties with e-invoicing solutions.

Mandate rollout dates

  • March 2022 – Vietnam General Taxation Department (GTD) will first work with six local tax administrations: Ho Chi Minh City, Hanoi, Binh Dinh, Quang Ning, Hai Phong and Phu Tho to start implementing technical solutions for new e-invoicing requirements and construction of an IT system for connection, data transmission, reception and storage of data.
  • April 2022 – E-invoicing system will be rolled out to the remaining provinces and cities.
  • 1 July 2022 – All cities and provinces must deploy the e-invoicing system based on the rules established in Decree 123 and the Circular that provides guidance and clarification to certain aspects of the new e-invoicing system.

How can Sovos help?

Need help to ensure your business stays compliant with evolving e-invoicing requirements?

Our experts continually monitor, interpret and codify changes into our software, reducing the compliance burden on your tax and IT teams.

Learn how Sovos’ solutions for continuous transaction controls and VAT compliance obligations can help your company stay compliant.

Philippines VAT Requirements

VAT in the Philippines

There have been improvements in recent years to VAT revenue collection in the Philippines, but there are a considerable number of exemptions from the country’s 12% VAT rate.

After receiving funding from South Korea to investigate and adopt a CTC e-invoicing regime, the Philippines is expected to roll out a phased VAT control reform over the coming years.

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CTC reforms

In 2018, the Philippines launched the Tax Reform for Acceleration and Inclusion (TRAIN), which included several tax reform proposals.

The TRAIN proposals included the requirement for large taxable persons who were engaged in e-commerce or export to issue e-invoices, e-receipts and to report sales data to the country’s tax administration, the Bureau of Internal Revenue (BIR).

Quick facts

  • In July 2022, the Department of Finance (DOF) intends to launch a CTC e-reporting system pilot program covering B2B invoicing and B2C receipts per the TRAIN law mandate. By this date, the 100 largest taxpayers in the country must be live with the system.
  • E-invoice data must be reported in JSON format and contain the issuer’s electronic signature.
  • All e-invoice data and e-receipts must be transmitted to the tax authority’s invoice system (EIS) either immediately after issuance or in a batch submission once per day (near real-time).
  • E-invoice data reporting and e-receipt reporting can be done either through dedicated APIs or through the BIR’s web portal.
  • Suppliers can deliver invoices to customers electronically via email in PDF format or as a hard copy.
  • E-invoices must be archived for 10 years.

Mandate rollout dates

2018 – TRAIN law was introduced.

End of January 2022 – Pilot program environment was made available to eligible taxpayers to establish test connectivity and verify file formats.

April 2022 – Six pilot companies will test the system end-to-end by transmitting e-invoices to the EIS.

July 2022 – 100 pilot taxpayers, including the initial six will have to report all their invoicing data to the EIS through the new system.

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Philippines CTC Requirements

Understand more about Philippines’ continuous transaction controls including when businesses need to comply, and how Sovos can help.

How can Sovos help?

Do you need help ensuring your business stays compliant with the upcoming e-invoicing obligations in the Philippines?

Sovos already provides early adopters with a solution connected to the Philippines Tax Authority Platform and helps other taxpayers prepare for the extended rollout of the CTC e-reporting system.

Learn how Sovos’ solution for VAT compliance changes in the Philippines can help your business stay compliant.

China's E-Invoicing Regime

The move to customer facing e‑invoicing grows in China.

China’s VAT digitization journey began nearly two decades ago with the rollout of a tax regime called the Golden Tax System. This created a national taxation platform for reporting and invoicing, as well as legislation regulating the use and legal effect of e-signatures.

With the increase of mobile payment adoption, the push towards customer-facing e-invoicing grows. The Chinese government has taken initiatives to further reform reporting and invoicing with a proposed nationwide e-invoicing service platform to provide an e-invoice issuance service to all taxpayers free of charge.

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Reforms

E-invoicing has been gradually introduced in China, starting with the B2C segment – in some cases by mandating large amounts of taxpayers in the public service sector to issue VAT e-invoices to their customers.

Whilst e-invoicing is not yet fully permitted, the issuance of e-invoices has been widely accepted in B2C instances for several years. They are mandatory in certain core service-based industries including telecommunications and public transportation. Invoices are issued via the national system with hardware and software certified by the state authority.

A pilot program was launched in September 2020, which enables specific taxpayers operating within China to voluntarily issue VAT special e-invoices. Special invoices are used to claim input VAT and are generally used in B2B transactions.

Quick facts

  • E-invoices must have an electronic signature instead of the original invoice stamp.
  • Taxpayers can use the tax authority’s platform for VAT services to check and verify the electronic signature of e-invoices.
  • Accounting documents, including invoices, may be stored electronically provided that the e-archive meets integrity and authenticity criteria, and the processing system adheres to requirements on functionality and security.

Mandate rollout dates

  • September 2020 – China’s e-invoicing pilot program began allowing e-invoice issuance for B2B purposes. It initially only included Ningbo, Shijiazhuang and Hangzhou.
  • December 2020 – Pilot expanded to include Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui, Guangdong, Chongqing, Sichuan and Shenzhen.
  • January 2021 – Pilot further expanded to include Beijing, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Fujian, Jiangxi, Shandong, Henan, Hunan, Guangxi, Hainan Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Dalian, Xiamen and Qingdao.
  • December 2021 – A new pilot program, only for selected taxpayers, started in Shanghai, Inner Mongolia and Guangdong, introducing the so called “fully digitized e-invoice”, a new type of e-invoice that simplifies the e-invoice issuance for both B2B and B2C purposes.

How can Sovos help?

As China’s new e-invoicing program will shortly expand to include most companies, we inch ever closer to full scale e-invoicing possibilities in China.

Our experts continually monitor, interpret and codify changes into our software, reducing the compliance burden on your tax and IT teams.

Register your interest now to learn how Sovos’ solution for tackling this major VAT reform in China will help your company stay compliant.

Unlike many other country initiatives that we have seen in the e-invoicing space recently, Australia does not seem to have any immediate plans to introduce continuous transaction controls (CTC) or government-portal involvement in their B2B invoicing.

Judging from the recent public consultation, current efforts are focused on ways to accelerate business adoption of electronic invoicing. This consultation builds on the government’s previous outreach undertaken in November 2020 on “Options for the mandatory adoption of e-invoicing by businesses”, which led to a serious government effort to enhance the value of e-invoicing for businesses and increase business awareness and adoption.

In addition to a decision to make it mandatory for all commonwealth government agencies to receive PEPPOL e-invoices from 1 July 2022, the Australian government seeks to also boost e-invoicing in the B2B space, but without the traditional mandate for businesses to invoice electronically. Instead, the proposal is to implement the Business e-Invoicing Right (BER).

What Is Business E-invoicing Right (BER)?

Under the government’s proposal, businesses would have the right to request that their trading parties send an e-invoice over the PEPPOL network instead of paper invoices.

To make and receive these requests, businesses need to set up their systems to receive PEPPOL e-invoices. Once a business has this capability, it would be able to exercise its ‘right’ and request other companies to send them PEPPOL e-invoices.

According to the current proposal, BER would be delivered in three phases, with the first phase to include large businesses, and the later stages to include small and medium-sized businesses. The possible rollout of BER would be as follows:

Further measures to support e-invoicing adoption

The objective of the Australian BER initiative to boost the adoption of B2B e-invoicing is complemented by a proposal for several other initiatives supporting businesses in this direction. One measure would be the enabling of PEPPOL-compatible EDI networks. As EDI networks represent a barrier to broader adoption of PEPPOL e-invoicing, particularly for small businesses that interact with large businesses that use multiple EDI systems, the proposal to enable PEPPOL-compatible EDI networks could ultimately reduce costs for businesses currently interacting with multiple EDI networks. Furthermore, the government is contemplating expanding e-invoicing into Procure-to-Pay. Businesses may realise more value from adopting e-invoicing if the focus grows to embrace an efficient and standardised P2P process that includes e-invoicing.

Finally, integrating e-invoicing with payments is another proposed means to boost e-invoicing. This would allow businesses to efficiently receive invoices from suppliers directly into their accounting software and then pay those invoices through their payment systems.

How efficient the proposed measures will be in accelerating adoption of e-invoicing, and whether the Australian government will feel it was the right decision not to introduce a proper e-invoicing mandate, as is becoming more and more common globally, remains to be seen.

Take Action

Need help staying up to date with the latest VAT and compliance updates in Australia that may impact your business? Get in touch with Sovos’ team of experts today.

During the last decade, the Vietnamese government has been developing a feasible solution to reduce VAT fraud in the country by adopting an e-invoice requirement for companies carrying out economic activities in Vietnam. Finally, on 1 July 2022, a mandatory e-invoicing requirement is scheduled to enter into force nationwide.

2020 e-invoicing mandate postponement 

Despite the postponement of the original starting date for the mandatory nationwide e-invoicing obligation, which was first intended to enter into force in July 2020, the Vietnamese government quickly established a new deadline.

Later that year, in October 2020, the new timeline was communicated through Decree 123, delaying the e-invoicing mandate until 1 July 2022. This new deadline is also in line with the implementation dates for the rules concerning the e-invoicing system envisaged in the Law on Tax Administration.

Ongoing regional readiness plan

Vietnam’s General Taxation Department (GTD) announced its plan to work first with the local tax administrations of six provinces and cities: Ho Chi Minh City Hanoi, Binh Dinh, Quang Ninh, Hai Phong and Phu Tho to start implementing technical solutions for the new e-invoice requirements and the construction of an information technology system that allows the connection, data transmission, reception, and storage of data. According to the GTD’s action plan, by March 2022, these six cities and provinces should be ready for the e-invoice system’s activation.

The GTD announced that, from April 2022, the new e-invoicing system will continue to be deployed in the remaining provinces and cities.

Finally, under this local implementation plan, by July 2022, all cities and provinces in Vietnam must deploy the e-invoicing system based on the rules established in Decree 123 and the Circular that provides guidance and clarification to certain aspects of the new e-invoicing system.

Next steps for businesses

Taxable persons operating in Vietnam will be required to issue e-invoices for their transactions from 1 July 2022 and must be ready to comply with the new legal framework. Enterprises, economic organisations, other organisations, business households and individuals must register with the local tax administration to start using e-invoices according to the rules established in the mentioned Decree 123.

Vietnam is finally moving forward to adopt mandatory e-invoicing. However, there is plenty of work related to the necessary technical documentation and local implementation of the new e-invoicing system. We will continue to monitor the latest developments to determine whether the GTD can meet all the requirements in time for the mandatory e-invoicing roll-out.

Take Action

Need help staying up to date with the latest VAT and compliance updates that may impact your business? Get in touch with our team of experts today.

The Tax Bureaus of Shanghai, Guangdong Province and Inner Mongolia Autonomous Region have all issued announcements stating they intend to carry out a new pilot program for selected taxpayers based in some areas of the provinces. The pilot program will involve adopting a new e-invoice type, known as a fully digitized e-invoice.

Introduction of a new e-invoice type

Many regions in China are currently part of a pilot program that enables newly registered taxpayers operating in China to voluntarily issue VAT special electronic invoices to claim input VAT, mostly for B2B purposes.

The new fully digitized e-invoice is a simplified and upgraded version of current electronic invoices in China. The issuance and characteristics of the fully digitized invoice are different from other e-invoices previously used in the country.

Characteristics of the fully digitized e-invoice

Verification of fully digitized e-invoices

Relying on the national unified electronic invoice service platform, tax authorities will provide selected taxpayers for this pilot program with services such as issuance, delivery, and inspection of fully digitized e-invoices 24 hours a day. Taxpayers will be able to verify the information of all electronic invoices through the electronic invoice service platform or the national VAT invoice inspection platform (https://inv-veri.chinatax.gov.cn ).

What’s next for e-invoicing in China?

This new pilot program has been effective in Shanghai, Guangzhou, Foshan, Guangdong-Macao Intensive Cooperation Zone, and Hohhot since 1 December 2021. Despite the lack of an official timeline for implementation, it’s expected that the scope of this pilot program will be extended in 2022 to cover new taxpayers and regions in China, paving the way for nationwide adoption of the fully digitized e-invoice.

Take Action

To find out more about what we believe the future holds for VAT, download the 13th edition of Trends. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.

Saudi Arabia - E-Invoicing

Saudi Arabia leads the way to continuous transaction controls in the Gulf

Saudi Arabia e-invoicing from December 2021

Saudi Arabia will introduce an e-invoicing regime in a phased approach starting in December 2021. Having only introduced VAT on 1 January 2018, the country is leading the way in digitizing tax compliance in the Gulf Region.

The finalised rules published by Saudi Arabia’s tax authority, Zakat, Tax and Customs Authority (ZATCA) confirm the go-live date of the second phase from 1 January 2023.

In addition to other requirements, phase two also introduces integration with a digital ZATCA platform for continuous transaction controls (CTCs), requiring taxpayers to clear invoices ahead of transmission to buyers.

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Mandate Quick Facts

Phase 1 – Mandatory e-invoicing generation with post audit controls: Starts on 4 December 2021

  • Applies to all resident taxable persons in Saudi Arabia.
  • Requires taxpayers to generate, amend and store e-invoices and electronic notes (credit and debit notes) across B2B, B2C and B2G transactions, including exports.
  • Businesses must generate e-invoices and their associated notes in a structured electronic format.
  • Electronic invoices and notes must contain all necessary information.
  • Any structured electronic format permitted.
  • B2C invoices must include a QR code.
  • All invoices must contain a time-stamp.
  • Integrity of e-invoices is explicitly required.
  • Storage requirements same in phase 1 and 2 (must be archived in a system or server that is physically located within the territory of Saudi Arabia. Upon meeting certain additional requirements, taxpayers who have a subsidiary in Saudi Arabia may have their central computer systems located outside Saudi Arabia).
  • Suppliers must store e-invoices in structured format regardless of how they’re exchanged with buyers.
  • Certain prohibited functionalities for e-invoicing solutions.

Phase 2 – CTC regime: Starts on 1 January 2023 requiring taxpayers to transmit e-invoices in addition to electronic notes to the tax authority, ZATCA, for clearance.

  • A phased approach across different taxpayers is anticipated.
  • B2B invoices will operate under a clearance regime while B2C invoices must be reported to ZATCA’s platform within 24 hours of issuance.
  • All e-invoices must be issued in the mandatory XML format.
  • Tax invoices can be sent in XML or PDF/A-3 (with embedded XML) format to buyers. B2C invoices must be presented in paper form, however, based on mutual agreement by the parties, B2C invoices can be shared electronically or through any other way where the buyer can read it.
  • A compliant e-invoicing solution must have the following features:
    • Generation of a universally unique identified (UUID) plus invoice sequential number.
    • Tamper-resistant invoice counter.
    • Some ability to save and archive e-invoices and electronic notes.
    • Generation of a cryptographic stamp for B2C invoices, a hash, and a QR code for each e-invoice and electronic note.

Important dates

Phase 1: 4 December 2021 – all resident taxable persons in the Kingdom to generate, amend and store e-invoices and electronic notes (credit and debit notes).

Phase 2: 1 January 2023 – additional requirements for taxable persons to transmit e-invoices as well as electronic notes to the ZATCA. This will be a phased adoption starting with larger companies with gradually more coming into scope of the mandate. Companies can expect six months’ notice ahead of the deadline by which they must comply.

INFOGRAPHIC

Saudi Arabia CTC Requirements

Understand more about Saudi Arabia’s continuous transaction controls including when businesses need to comply, phase one and two compliance and how Sovos can help.

How Sovos can help

Need help to ensure your business is VAT compliant in Saudi Arabia? Sovos serves as a true one-stop-shop for managing all e-invoicing compliance obligations in Saudi Arabia and across the globe. Sovos uniquely combines local expertise with a seamless, global customer experience.

India’s Continuous Transaction Control e-invoicing model applies to both domestic and cross-border transactions

India E-Invoicing

Under the new Goods and Services Tax (GST) framework, the Indian e-invoicing system falls under the category of continuous transaction controls (CTCs). The invoice data reporting obligation to the governmental portal is a mandatory step before an invoice can be issued.

The legal validity of the invoice is conditional on the Invoice Registration Portal (IRP) digitally signing the invoice and providing an Invoice Registration Number (IRN). If the IRN is not included in an invoice, the invoice will not be legally valid.

The scope covers both domestic and cross-border transactions. The IRP process is mandatory for B2B, B2G and export transactions. So, taxpayers in scope must issue their invoices (as well as other documents that need an IRN e.g. associated eWaybills) according to the new system for all B2B, B2G or export transactions. India has made multiple changes to the initial regulation and future changes are inevitable.

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Mandate Quick Facts

  • Invoice data should be transmitted to the IRP in JSON format.
  • The IRN obtained from the IRP is a validity requirement for invoices.
  • Invoices can be exchanged in JSON or PDF format as well as in paper form between the supplier and buyer.
  • Archiving is mandated (storage period of eight years).

Mandate Rollout Dates

  • 1 January 2020: Voluntary period for businesses with a turnover of Rs.500 Crore or more.

  • 1 February 2020: Voluntary period for businesses with a turnover of Rs.100 Crore or more.

  • 1 October 2020: Beginning of the mandatory period for businesses with a turnover of Rs.500 Crore or more (six months later than previously intended). For the first 30 days, there was a grace period during which invoices could be reported after they had been issued.

  • 1 January 2021: Beginning of the mandatory period for businesses with a turnover of Rs.100 Crore or more.

  • 1 April 2021: Threshold for mandatory e-invoicing lowered to taxpayers with  turnover between Rs. 100 Crore to Rs. 50 Crore.

  • 1 April 2022: Threshold lowered from Rs. 50 Crore to Rs. 20 Crore. Taxpayers above Rs. 20 Crore must implement e-invoicing.
  • 1 October 2022: Threshold lowered to taxpayers with an annual threshold of Rs. 10 Crore.

Penalties

If an invoice is not registered on the IRP, it will be considered unissued and will result in penalties of at least 10,000 Rupees for each instance of noncompliance. Penalties under various sections of GST will be levied with interest.

Sovos Helps Companies Stay Compliant with India E-invoicing

By February 2021 the initial specifications published by the Indian tax authority in December 2019 had already been revised three times. Future changes are inevitable.

Our experts continually monitor, interpret, and codify these changes into our software, reducing the compliance burden on your tax and IT teams.

Find out how Sovos can help you to meet your clearance e-invoicing obligations in India.

South Korea's Long Standing e-Tax Invoice System

South Korea E-Invoices

South Korea introduced its Electronic Tax Invoice System i.e. e-Tax in 2010. Since 2011, this has become a mandatory e-invoicing requirement alongside the obligation to report e-tax invoices shortly after issuance. This requirement means South Korea has a continuous transaction controls (CTCs) reporting obligation. The scope of the mandate has been expanded to cover more taxpayers, however the initial workflows and requirements of the mandate have remained relatively stable.

E-invoicing in South Korea has been mandatory for all corporations since 2011 and for individual taxable persons when exceeding a certain turnover threshold.

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Mandate quick facts

  • Mandatory e-invoicing with CTC reporting model: An issued e-tax invoice must be transmitted to the National Tax Service (NTS) within one day of the invoice being issued
  • Invoice data is reported to the NTS in XML format
  • Invoices and amended invoices (credit and debit notes) are in scope
  • E-invoicing in South Korea applies to domestic transactions only. Cross border transactions are out of scope

Mandate rollout dates

  • January 2011: The electronic issuance of VAT invoices and next day reporting became mandatory for all Korean corporate taxpayers
  • January 2012: : In addition to the first category, sole proprietors with a supply value of 1 billion KRW and above must issue e-tax invoices
  • July 2014: The threshold changed from 1 billion KRW to 0.3 billion KRW and above
  • July 2019: Introduction of the tax-free portion of the income to be included when calculating the threshold of 0.3 billion KRW
  • July 2022: The threshold was updated from 0.3 billion KRW to 0.2 billon KRW and above
  • July 2023: The threshold will be updated from 0.2 billion KRW to 0.1 billon KRW and above

Penalties

Penalties vary between 0.3-1% of the supply price based on the failure type e.g. non-issuance, issuance form, delayed issuance, non-transmission, late transmission.

INFOGRAPHIC

South Korea CTC Requirements

Understand more about South Korea’s continuous transaction controls including when businesses need to comply and how Sovos can help.

Good to Know

Yes, VAT is South Korea’s consumption tax and is charged on virtually everything sold throughout the country.

Yes, e-invoicing in South Korea is mandatory for all corporations and for certain individuals with supplies over a certain amount.

VAT is charged on all supplies of goods and services. There are some exemptions and also zero-rated supplies of goods and services.

Here’s further information about some of the countries within Asia that require e-invoicing.

How Sovos can help

As countries around the globe digitize their tax systems to close VAT gaps, our experts continually monitor, interpret and codify these changes into our software, reducing the compliance burden on your tax and IT teams.

Discover how the Sovos solution is tailored to manage all e-invoicing and related VAT obligations in South Korea.

For companies operating in Turkey, 2019 was an eventful year for tax regulatory change and in particular, e-invoicing reform. Since it was first introduced in 2012, the e-invoicing mandate has grown, and companies are having to adapt in order to comply with requirements in 2020 and beyond. Turkey’s digital transformation and e-invoicing landscape continues to evolve.

According to the General Communique on the Tax Procedure Law (General Communique), more taxpayers now need to comply with the mandatory e-invoicing framework. The General Communique published on 19 October 2019 covers other e-documents such as e-arşiv, e-delivery note, e-self-employment receipts, e-producer receipts, e-tickets, e-note of expenses, e-Insurance Commission Expense Documents, e-Insurance Policies, eDocument of Currency Exchange, and e-Bank Receipts.

The scope of e-invoicing

From 1 July 2020, taxpayers with a gross sales revenue of TL 5 million or above in fiscal years 2018 or 2019 must switch to the e-invoice system. Taxpayers who meet these requirements in 2020 or later, should switch to the e-invoice system at the beginning of the seventh month of the following accounting year.

Mandatory e-invoicing is not only based on the threshold

Turkey’s tax authority has set some sector-based parameters for businesses operating in Turkey. Companies licensed by the Turkish Energy Market Regulatory Authority, middlemen or fruits or vegetable traders, online service providers facilitating online trade, importers and dealers are some of the taxpayers also required to switch to e-invoices, irrespective of their turnover.

The scope of E-Arşiv invoice

E-arsiv fatura documents B2C transactions. But also in case the transacting counterparty is not registered with the TRA for e-invoicing. Similar to e-invoice, the e-arşiv invoice, became mandatory for intermediary service providers; online advertisers; and intermediary online advertisers who switched to the system from 1 January 2020.

Taxpayers not in scope for e-invoice and e-arşiv must issue e-arşiv invoices through the Turkish Revenue Administration´s portal. That is if the total amount of an invoice issued, including taxes, exceeds:

Turkey’s Government continues to tackle its VAT gap through digital transformation. By taking greater control of reporting and requiring more granular tax detail.  So, businesses operating in Turkey need powerful e-invoicing strategies to comply with the growing demands for digital tax transformation.

Take Action

Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.

With two weeks to go until the first mandatory phase of the Indian e-invoicing reform go live, the GST Council slammed the breaks. Or at least, bring it to a significant temporary standstill of 6 months. As a result, the India e-invoicing reform is now postponed until 1 October 2020

Following a long list of complaints — both from the private sector toward the GST Council, as well as from the GST Council vis-á-vis the IT infrastructure provider that powers the GST Network, Infosys — the council decided to revisit the 1 April go-live in a recent meeting held today, Saturday 14 March.

GST Council Decisions

The GST council made a number of important decisions, including most notably:

The decisions made in the 39th meeting of the GST Council will require either that the legislative framework (Notifications) published in early December be amended or entirely replaced with new ones to reflect the new reality. However, it wouldn’t be unreasonable to expect even further delays to the roll out of this reform. This given to the recent economic volatility triggered by the ongoing pandemic. Only once both global markets as well as the underlying technical platforms of the GST control reform seem to stabilize will the post-October timeline of the roll out be fully certain.

 

In Turkey, the Revenue Administration (TRA) published the long-awaited e-Delivery Note Application Manual. The manual clarifies how the electronic delivery process will work in addition to answering frequently asked questions. It addresses the application as well as its scope and structure, outlines important scenarios and provides clarity for companies who are unclear about the adoption of e-delivery notes.

What is the e-delivery note application?

The e-delivery note is the electronic version of the “delivery note,” currently printed on paper.  As a result, it allows the TRA to regularly monitor the movements of delivered merchandise in the electronic environment.

Electronic delivery has the same legal qualifications as the delivery note but is issued, forwarded, retained, and submitted digitally.

Who does the e-delivery note mandate affect?

According to the circular published by the TRA at the end of February, taxpayers in scope of the e-delivery note application are;

Taxpayers engaged in fruit and vegetable trade as brokers or merchants completed their transitions of January 1, 2020. Other taxpayers covered by the mandate must be ready by July 1, 2020.

Taxpayers deemed to be risky or at low levels of tax compliance by the TRA must complete their transition to the e-delivery note application within three months after being notified.

Other topics included in the e-delivery note application manual

Besides explaining the basic concepts, the manual also details the previously announced scenarios providing answers to many areas that were confusing for taxpayers.

The main scenarios are:

In addition, other topics covered include:

Full details on the Turkey E-Delivery Application Manual are available in Turkish from the TRA e-Document website.

Take Action

Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.

Is India postponing the mandatory implementation deadline for e-invoicing? For more than a year, India has been on the path to digitizing tax controls, with the first mandatory go-live for transmission of invoice data to a governmental portal scheduled for 1 April 2020. The very high pace of the roll-out of this reform made many taxpayers concerned that they might not realistically be able to meet the implementation deadline. As a result, leading many to hope that the Indian authorities might instead chose to postpone the go live date.

The latest news from India is that it looks as if these authorities may indeed consider a delay. Or at least discuss the possibility of – a delay to the go-live date. According to The Economic Times, the Indian government is going to discuss whether there is a need to defer the implementation deadline in the next meeting of GST Council, which is scheduled for the 14th of March. So far, a 3-month deferral is an option. This means that should the GST Council grant a delay, the first go-live would take place in July 2020.

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Get in touch to find out how Sovos can help your business meet the e-invoicing deadline in India.