E-invoicing was introduced in Peru in 2010, following the continuous transaction controls (CTC) trend in Latin American countries for a more efficient collection of consumption taxes. Since then, the government has rolled out measures to encompass a significant number of taxpayers under the country’s mandatory e-invoicing regime and advance new technical and institutional structures within its System of Electronic Emissions (SEE – Sistema de Emisión Electrónica).

June 2022 marked the final deadline for including the last group of taxpayers in the country’s e-invoicing mandate. However, the government continues to expand its system, with the latest update proposed by a draft resolution introducing important changes to the Peruvian e-transport document, the Guía de Remisión electronica – GRE.

Changes in the E-transport Document

The Peruvian tax authority (SUNAT) published on 2 June 2022 a draft resolution introducing changes to the GRE, the electronic transport document that must be issued in connection to invoices (comprobantes de pagos) for the control of goods under transportation. The GRE is only vital while the goods are in transit but is a document commonly kept by companies to maintain internal controls of transported goods.

The new draft resolution aims to regulate the issuance of the e-transport document further, introducing several changes, mainly to optimise the control of goods and eliminate the use of paper.

Among the many changes introduced by the draft, the main are:

• The GRE remitente (issued by the sender) and transportista (issued by the transporter) must be issued exclusively through the taxpayer’s invoice issuance system (SEE del contribuyente) or the Sunat Portal (SEE-SOL)
• A QR code is introduced as the main support document (sustento de traslado) for transporting goods
• A new type of e-transport document, the guía de remisión por evento is created
• Creation of a new catalogue of measure units and related documents applicable only to GREs
• Rules for electronic issuance of the GRE transportista, previously issued in paper format only

What this means for taxpayers

Taxpayers must be ready to issue GREs remitente and transportista exclusively through their own systems using a software provider (PSE – proveedores de servicios electrónicos) or the SUNAT Portal. This requirement may represent quite the impact on taxpayers that regularly issue a large volume of GREs through the electronic services operator’s channel, the SEE-OSE (Operador de Servicios Electrónicos).

The most impactful change, however, is that taxpayers will only be able to use the GRE as a support document for the transport of goods. Under current legislation, besides the GRE, the factura guía and the liquidacion de compras, which are regular invoices with additional transport information, can also be used to support transporting goods. Issuance of the factura guía is a common practice since it entails the generation of one single document that serves both the sales transaction and transportation. However, the draft resolution only allows the use of the GRE for this purpose.

The introduction of the QR code is the government’s approach to a modern and efficient control method. The bidimensional code is generated by SUNAT once the CDR (constancia de recepción) acquires accepted status and may be presented in either digital or printed format.

Although taxpayers may still support transportation by providing their registration number (RUC), the series and the GRE number, it is expected that the QR code will become the principal method to support transit, and the RUC will only be used as a contingency method.

A new type of e-transport document has also been introduced. The guía de remisión por evento may only be issued through the SUNAT Portal and is used to complement a previously issued GRE in the case of unforeseeable events not attributable to the issuer. In these cases, current regulation supports the transfer with the same document. The draft resolution, however, requires that the GRE por evento is issued before restarting the transportation of goods.

Another change that taxpayers must be aware of, as it might give rise to complex scenarios, is the creation of a new catalogue of measure units applicable only to GREs, found in Annex III. The already existent measure unit catalogues for all other invoices will not apply to the GRE, which is bound to cause a lack of uniformity since the same concept would use two different catalogues.

Rollout Dates

The draft resolution sets 13 July 2022 as its date of entry into force when taxpayers already in the scope of the GRE may start to issue through the appropriate channels and voluntarily start using the QR code as the support for transportation.

However, until 30 September 2022, taxpayers may exceptionally issue GREs remitente through the SEE-OSE, considering the conditions and requirements in place before the publication of the resolution. The draft also establishes a list of certain taxpayers (issuers and transporters) who will become obliged to issue the GRE and the corresponding dates, in Annex X, according to taxpayer types and the goods in transport, starting 1 January 2023.

What’s next?

As this is a draft resolution, the changes only become definite with the official publication of the final version of the resolution. However, as 13 July 2022 approaches, the resolution is expected to be published in the following weeks. Therefore, taxpayers who are already under the obligation to issue GREs must be ready to comply with the new mandates within a month.

SUNAT accepts comments to the draft resolution, which can be sent via email until 16 June 2022, to the following address: RPATRICI@sunat.gob.pe.

Update: 5 February 2024 by Marta Sowinska

On 1 February, 2024, the Belgian Parliament approved the law implementing mandatory domestic B2B e-invoicing in the country, starting from 1 January 2026. The adopted bill can be found here.

This means that starting from 1 January, 2026 all VAT-registered taxpayers established in Belgium will be required to issue/receive structured electronic invoices. Peppol will be the default transmission method, although taxpayers will be able to use other systems provided that they meet the European Standard.

The bill is now awaiting the King’s signature and will later be published in the Official Gazette.

Update: 5 October 2023 by Marta Sowinska

Belgium Proposes New E-invoicing Timeline and Scope

Belgium’s Ministry of Finance has proposed a new plan for the introduction of a mandatory e-invoicing system in the country with a new timeline and scope.

Its previous proposal failed to reach an agreement with the Belgian federal government, but the Council of Ministers – the highest executive authority at a federal level in Belgium – approved the new preliminary draft on 29 September 2023.

The draft proposal introduces changes to the Value Added Tax Code to introduce a requirement for the issuance of structured e-invoices between taxpayers.

The main points are:

• Scope: Taxable persons with a VAT registration and establishment in Belgium will have an obligation to send and/or receive structured e-invoices. In contrast to the earlier draft proposal, it is expected that the real-time reporting will be introduced later, hence the e-invoicing mandate can be seen as the precursor to the implementation of a CTC reporting requirement.
• Format: Taxpayers in scope will be obliged to exchange structured e-invoices following European Standards (EN16931 standard). Other formats such as PDF are no longer allowed. The PEPPOL network is envisaged as the delivery mechanism of the e-invoice to the buyer, though taxpayers can mutually agree to use any other system provided it meets the European Standard.
• Timeline: The expected go-live date of the B2B e-invoicing mandate is January 2026 for all taxpayers in scope. There is no phased implementation, as was previously provided in the initial proposal.

The preliminary draft legislation shall follow the standard legislative process before it becomes law and, as a next step, will be submitted for opinions to the Council of State, the High Council for the Self-Employed and SMEs, Agrofront and ITAA.

The tax authority announced that a broad information campaign will be made available to all stakeholders during the transition period. Taxpayers in scope should use this transition period and start preparing for the e-invoicing obligations to be able to comply in time for the January 2026 go-live date.

Looking for more information on the global adoption of electronic invoices? Our e-invoicing guide can help.

Update: 21 March 2023 by Marta Sowinska

Belgium – tax reform proposal introducing e-invoicing and reporting obligations

On 2 March 2023, the Belgium Minister of Finance (“MoF”), Vincent Van Peteghem, announced the government’s plans for a broad tax reform. Introducing mandatory B2B e-invoicing and e-reporting is part of this tax reform. This proposal follows previous draft legislation on the issue of electronic invoicing, published in 2022, which has not yet been approved.

Belgium’s e-invoicing proposal

A phased roll-out for the B2B electronic invoicing mandate will start in July 2024. The Belgian administration has communicated the following timeline for e-invoicing issuance obligations, based on the company’s turnover:

• 1 July 2024 – large taxpayers established in Belgium, with an annual turnover over €9,000,000.
• 1 January 2025 – small and medium sized taxpayers established in Belgium with an annual turnover of more than €700,000 but not more than €9,000,000.
• 1 July 2025 – all other Belgian taxpayers (likely only those VAT-registered with establishment in Belgium) except for small companies and agricultural companies.
• 1 January 2028 – likely entry into force date for small companies and agricultural companies.

E-Reporting obligations for Belgium

Alongside the electronic invoicing mandate, the MoF proposes the introduction of electronic reporting obligations. According to the tax reform proposal, the new reporting obligations would allow for the elimination of the ‘customer list return’, which taxpayers are obliged to submit annually to record all sales in excess of €250 made to customers that are VAT-registered in Belgium.

The proposal for the broader tax reform is still awaiting further development, namely the publication of draft legislation detailing the invoicing and reporting requirements. Nevertheless, July 2024 looks very likely to be the date when the mandatory B2B e-invoicing roll-out will begin.

Have questions about Belgium’s e-invoicing mandate? Speak to our tax experts.

Update: 9 June 2022 by Marta Sowińska

In line with the obligations set by the European Directive 2014/55 on electronic invoicing in public procurement, Belgium introduced a mandate for public entities to receive and process electronic invoices in 2019.

For Brussels, Flanders, and Wallonia the initiative went beyond the bare minimum of the EU Directive requirements and introduced obligations to also issue e-invoices for suppliers to public sector entities in these regions.

With recent legal changes, Belgium is now preparing to extend the e-invoicing obligation to even more businesses by introducing mandatory e-invoicing in the B2B sector.

Belgium E-invoicing in public procurement

On 31 March 2022, the Belgian Official Gazette published the Royal Decree of 9 March 2022, which intends to expand the obligation to issue electronic invoices to all suppliers of public institutions in the context of public contracts and concession contracts.

As previously mentioned, such obligation was already present in multiple regions including Brussels, Flanders, and Wallonia, however, now the mandate covers suppliers of public bodies in all regions. The dates concerning issuing electronic invoices in the public contracts, based on their value are:

• 1 October 2022: e-invoices for public contracts equal to or greater than the European threshold of €214,000 must be issued six months after the publication of the decree in the Belgian Official Gazette and on the first day of each month.
• 1 April 2023: e-invoices for public contracts equal to or greater than €30,000 must be issued 12 months after the publication of the decree in the Belgian Official Gazette, and on the first day of each month.
• 1 October 2023: e-invoices for public contracts less than €30,000 must be issued 18 months after the publication of the decree in the Belgian Official Gazette and on the first day of each month.

Only public contracts and concessions, which estimated value is less or equal to €3,000 excluding VAT are exempt.

Belgium E-invoicing in the private sector

As reported previously, Belgian authorities have indicated the ambition to move beyond B2G e-invoicing. On 11 May 2022, the Belgium Chamber of Representatives published a draft law amending the law of 2 August 2002 on combating late payment in commercial transactions, as last amended by the law of 28 May 2019, with the aim to implement electronic invoicing between private companies (B2B).

The rationale behind the proposal is the need to enable companies to invest in electronic invoicing, after already supporting the digitalization of invoicing in the B2G sector. The benefits that will follow are a much faster invoicing process, which is more secure and minimises the risk of errors and missing data.

Moreover, the chances of fraud will decrease while privacy protection increases, without the need for human intervention in the invoicing process.

Lastly, the environmental aspect concerning less paper consumption is highlighted. In terms of financial gain, as calculated by the Administrative Simplification Service (DAV), full digitalization of invoices in Belgium could reduce the administrative burden by €3.37 billion.

Based on the draft law, companies (with the exception of micro-enterprises) will be obliged to send their invoices in structured electronic form (in line with the European standard for electronic invoicing EN 16931-1:2017 and CEN/TS 16931-2:2017) as well as receive and process invoices electronically.

Nothing in the draft law describes the involvement of a centralised clearance platform, or the reporting of e-invoice data to the tax authorities. At this time, there is therefore no formal indication that the proposed mandate would be designed as a Continuous Transactions Control (CTC) e-invoicing system, however it is possible that the system will evolve to connect with PEPPOL.

The law will come into effect on 1 January 2025 regarding SMEs, thereby ensuring that companies have adequate time to prepare for the transition. If it comes to large enterprises, it is expected that mandatory e-invoicing will be present from January 2024. Originally the date concerning large taxpayers was July 2023, and small taxpayers from 2024, therefore those dates will most likely be postponed.

Our previous articles covered audit trends we have noticed at Sovos and common triggers of a VAT audit. This article discusses the best practices on how to prepare for a VAT audit.

Each country and jurisdiction may have different laws and requirements related to the VAT audit process. Tax authorities can carry out audits in person or by correspondence, the latter often being the case for non-established businesses in the country in question.

A business may be audited at random or because there are reasons for the tax authority to believe that there is a problem with the company’s VAT return.

Generally speaking, authorities use audits and inspections to verify the accuracy of taxpayers’ declarations, identify possible errors or underpayments, and approve refunds.

As discussed in our previous article, to understand how to best prepare for a VAT audit, it’s essential to identify the reason why the audit was initiated.

What items are needed for a VAT audit?

Although specific checklists are available depending on the country of the audit, there are several actions that a business can carry out to prepare for an VAT audit. The most important of which is to collect documents and answers in advance. Frequently requested items during an audit include:

• VAT ledgers containing details of the transactions reported
• Related copies of incoming and outgoing invoices and pro-forma for intra-community movement of own goods
• Proof of transport of the goods: Two independent items should be provided in particular for intra-community dispatches, proving the right to apply the 0% tax rate (such as signed CMR consignment notes, bill of lading, carrier invoices, insurance policies, warehouse receipts, proof of payment for the transport of the goods, etc.)
• Proof of payment of the transactions reported, with particular attention to the payment of purchase invoices and the repayment of credit notes issued to clients and customers
• Contracts with suppliers
• Description of the business activities and goods flow

It is important that records of the above-listed documents, where applicable, are kept in line with local record keeping requirements. The need to prepare these documents in advance and the ability to produce them quickly becomes essential when a company is, for example, due to request the refund of VAT credits, to submit a de-registration or has, in general, any reason to expect for an audit to be initiated.

Authorities can open a cross check of activities with the company’s customers and suppliers, which will be initiated in parallel to the audit to verify that the information provided from both sides is consistent. Therefore, it is recommended to inform suppliers about any ongoing audit, communicate any questions or clarify outstanding queries. If, for example, a correction of invoices appears to be necessary, these should be finalised already in preparation for the VAT audit.

The tax authorities may impose very short and strict deadlines once an audit is initiated. Although it may be possible to request an extension, it is not necessarily guaranteed to be granted. In certain circumstances, authorities may impose penalties for late responses. Providing a clear and understandable set of documents to the tax office queries is essential to avoid any detrimental effects.

Why it makes sense to plan ahead

The advantages of preparing for a VAT audit can be summarised as follows:

• Minimise the resources required to collect the necessary documents once an audit is initiated
• Quicker completion of the audit, avoiding the necessity to request deadline extensions and delays in receiving VAT refund, if applicable
• Ability to identify, rectify and voluntarily disclose any error that might emerge from preliminary reviews of the documents collected ahead of the audit initiation
• Potential penalties reduction

Whether a business decides to handle the audit in-house or request the support of an external advisor, it is essential to consider the consequences of the audit, especially if high amounts of VAT to recover are at stake. In the event of an audit, the main objective should be to resolve it successfully and quickly, limiting as much as possible any detrimental impact to the business.

The most recent update to the Portuguese Stamp Duty system has included some of the most comprehensive tax reporting changes seen in recent years. Stamp Duty is the oldest tax in Portugal and has been around since the Royal Decree in 1660. Considering its age, updates to bring it in line with the global standard of tax reporting were much needed. Although the tax rates within Portugal have remained unchanged, the reporting process to incorporate the provincial liabilities within one return has been greatly appreciated.

Portuguese Stamp Duty – Required information

The additional information that insurers are obliged to collect, disclose and submit in their Stamp Duty Declaration is as follows:

• Territoriality: The precise location the risk has been issued from (i.e., within or outside Portugal)
• Insured name (Tax ID): The policyholder’s tax ID
• Insured country code: The policyholder’s country code to which the tax ID resides
• Location of the risk insured in Portugal: The postcode to which the contract relates, due to the requirement by the Portuguese authorities to file Stamp Duty on a provincial level, or at least whether the risk is located in Mainland Portugal, Azores, or Madeira.

Negative impacts of Portugal’s stamp duty reporting changes

It’s important to note that the ability to offset taxes relating to previous periods has been revoked by Law Decree no. 119/2019, which allowed insurers to report reduced tax amounts for overpaid liabilities. The modifications to the reporting procedure enable companies to amend previous periods through their internal system. Consequently, this permits adjustments to prior periods and the reclaiming of overdeclared liabilities directly from the Portuguese tax authority. It is our understanding that reclaims will be reimbursed to the client two months after an amended return is submitted.

How can Sovos help with reporting?

Sovos has developed a unique relationship with the Portuguese tax authority, allowing for comprehensive reporting between Sovos systems and the Portuguese API. The reporting procedure can confirm validated IDs to ease data validation and reporting. This collaborative process has allowed Sovos to provide our customers with a smoother and more fluid submission process for Stamp Duty reporting.

There are many taxes (IPT) and parafiscal charges levied on insurance premiums throughout Europe. As a consequence of the lack of tax harmonisation, no general rules can be applied to establish which taxes exist in which countries and how to calculate the correct IPT amounts.

Some insurers do not have a dedicated IPT team; this is usually the case with smaller insurers. This could lead to IPT miscalculation and can trigger penalties. Without the proper and up-to-date knowledge, it is easy to be lost in the rules and regulations.

IPT amount calculation methods

There are two basic tax calculation methods in the European IPT world

1. Percentage of the premium
2. Fixed amounts

In the first instance, there is a tax rate. For example in Bulgaria (2%) businesses can easily determine the tax amount by multiplying the taxable basis with this tax rate. Fortunately, several IPT calculations are based on this so-called basic rate model.

While in the second case, the local regulations determine the tax amount which needs to be settled on the insurance policies. Irish Stamp Duty can be mentioned as an example.

One can say that this is not rocket science. Furthermore, it is easy. These calculation models are just the basics. IPT regulations are built on these basic models adding several specific rules making the IPT calculations fairly complex.

Rules for IPT amount calculation

Here are some examples of these specific rules:

• Sliding scale rate model: This method is a variation of the “Percentage of the Premium” basic calculation model. The difficulties arise when the premium exceeds a specific limit, which will lead to a different tax rate being applied. Usually, a higher tax rate is applicable for the premium exceeding the threshold. Further variation can be that the taxable premium is not determined at the policy level but as an aggregated premium amount collected by the insurer in the reporting period. The most notable sliding scale model is applied in the Hungarian IPT calculation.

• Tax rates vary by class of businesses. Various tax rates are applied for business classes in certain countries such as Italy or France.To determine the IPT for a policy, first, the risks covered by that policy need to be clarified. Once the class of business has been determined, businesses should use the appropriate rate for that class of business during the IPT calculation.

• Additional parafiscal charges. It is not enough to know the IPT rate(s), but it is crucial to understand whether further parafiscal charges are applicable. If this is the case, then at what rate. The IPT rates and parafiscal charges rates can vary.

• The taxable basis can also vary. The taxable basis used by countries to calculate IPT and parafiscal charges can vary. It can be the net premium, the premium plus some charges such as broker commission and administrative costs or the sum insured amount. Though there are others, these are the main ones. It can also be the case that a different taxable basis is applied for IPT and parafiscal charges on the same insurance policy.

• The sliding scale fixed amount model. The fixed tax amount can vary depending on the taxable basis level. A good example of this model is Malta which levies stamp duty instead of IPT on insurance premiums. The calculation is even trickier for Malta as it mixes the sliding scale rate and the sliding scale fixed amount calculation models.

• Rounding in tax calculation. In the case of certain countries, such as Hungary, the Netherlands,or France, there are specific rules to round the tax amount declared on the tax return.

• Exemptions. There can be exemptions where businesses shall not pay the tax for specific risks or below a certain taxable premium or tax amount. Examples are the Irish Stamp Duty and the Polish Ombudsman Levy.

Reverse tax calculation

To add further colour to this topic, we can mention that reversing a policy line in the calculation does not always result in the same tax amount in a negative position. The best example is Malta, where the same amount of Stamp Duty is not refunded when the policy is cancelled after the cooling-off period. Instead of getting back the same stamp duty paid, an additional EUR 2.33 Stamp duty is triggered if certain conditions are met.

Check the rules before IPT amount calculation

Although this is a unique regulation this highlights that when it comes to reversing a policy line, it is strongly recommended to check the rules beforehand and clarify whether or not the negative IPT can be offset or reclaimed and adjust the calculation method accordingly.

Update: 26 March 2024 by Carolina Silva

The implementation of the qualified electronic signature requirement to establish the presumption of integrity and authenticity for e-invoices has been postponed, as announced in the 2024 State Budget. It had already been postponed several times in recent years.

This requirement was initially expected to be enforced on 1 January 2024. However, after the latest postponement, the eSignature requirement is now expected to be enforced from 1 January 2025.

Find out more about e-invoicing in Portugal with our dedicated overview.

Update: 19 December 2022 by Carolina Silva

New grace period for invoice reporting and postponement of stricter integrity and authenticity requirements

The Portuguese State Secretary of Fiscal Affairs (SEAF) recently issued issued Order 8/2022 XXIII, which introduces a grace period for reporting obligations, as well as yet another of the stricter integrity and authenticity (I&A) requirements for electronic invoices.

The Order aims to highlight and promote Portugal’s plans to reduce the invoice data reporting obligations time window, as established by article 3 of Decree-law 198/2012. The Order also aims to establish the constant move towards real-time transmission of invoice data, as observed in other countries throughout the world.

Additionally, the Order affects the requirements of Decree-law 28/2019, by which the Portuguese government enacted a series of measures concerning invoice issuance, processing, and archiving, with the aim of simplifying and digitizing invoicing compliance in the country.

Changes in invoice reporting obligations

Since 2019, the Portuguese government has continuously reduced the time window for the invoice data reporting obligation. Starting 1 January 2023, the deadline for the monthly communication of invoice data will be until the 5^th day of the month following the issuance of the invoice.

The new Order introduces a grace period concerning this obligation, with no penalties applied if reporting is carried out until the 8^th day of the month following the invoice issuance. This is also applicable for cases where there is non-issuance of invoices during the relevant time period, where a nil monthly submission should also be made until the 8^th day of each month.

The Portuguese government has also decided to implement a system of informative alerts by the tax authority in 2023. The aim is to promote voluntary compliance within the 5-day deadline by notifying taxpayers who don’t communicate invoice data until the 5^th of the month following the issuance of the invoice.

Postponement of the stricter e-invoice integrity and authenticity requirements

Decree-law no. 28/2019 established several measures regarding invoicing, including a stricter integrity and authenticity requirement for invoices and fiscally relevant documents issued electronically. One of these requirements is the obligation to apply a qualified electronic signature (QES) or seal or use electronic data exchange system (EDI) for e-invoices, as per the European model.

This requirement has been postponed multiple times since enacted and was due to become mandatory on 1 January 2023. The newly published Order, however, explicitly states that until the 31 December 2023 all PDF invoices are considered electronic invoices for all fiscal effects.

Therefore, from the 1 January 2024, taxpayers must comply with the requirement of applying a QES or use EDI per the European Model to ensure integrity and authenticity of e-invoices.

Additional upcoming Portuguese requirements

Besides the stricter integrity and authenticity requirement and the grace period for communication of invoice data, taxpayers are expected to comply with new e-invoicing mandates underway in Portugal.

Namely, the mandatory B2G invoicing in the CIUS-PT format starting on 1 January 2023 for medium, small and micro enterprises. No further guidance has been issued at this time regarding a postponement of the adoption of the CIUS-PT format for these last taxpayer groups, meaning that public entities may reject invoices issued in other formats after the go-live date.

Still have questions about Portugal’s e-invoicing requirements? Speak to our tax experts.

Update 31 May 2022 by Kelly Muniz

Portugal: Postponement of the Stricter Authenticity and Integrity Requirements

In 2019, the Portuguese government enacted Law Decree n. 28/2019, introducing a full reform of the rules concerning the issuance, processing and archiving of invoices, with the main goals of implementing electronic invoicing, simplifying compliance for taxpayers and reducing the VAT gap.

The expanded scope of those obliged to use a billing software certified by the Portuguese Tax Authority, the inclusion of a QR code and a sequential unique number code (ATCUD – código único de documento) and the stricter integrity and authenticity requirements when issuing invoices and other relevant fiscal documents were some of the most impactful mandates introduced by this law.

However, many taxpayers struggled to comply with the new requirements. As such, the tax authority has delayed the launch of different components of the Decree, and some of them remain to be implemented.

In a recent Ministerial Decision from 26 May 2022, the goal line for implementing the stricter integrity and authenticity requirement, this article’s focal point, has been moved yet again, now to 1 January 2023.

The stricter integrity and authenticity requirement

The Decree from 2019 established that in order to guarantee the requirements of authenticity and integrity of electronic invoices and other relevant fiscal documents have been met (per article 233 of the EU VAT Directive 2006/112/EC), taxpayers must use a qualified electronic signature, a qualified electronic seal (QES) or an electronic data exchange system (EDI) with security measures per the European Model EDI Agreement. This change is important as it limits the choice of compliance methods generally recognised within the EU to one between only QES and EDI.

To achieve this goal, the Decree determined that taxpayers would only be able to use previously accepted advanced electronic signatures or seals (the lower level of signature security) until 31 December 2020. After that, all invoices would be required to incorporate a qualified signature or seal or be issued through EDI.

When is the new deadline?

The original deadline for implementing the stricter integrity and authenticity requirements has been postponed many times. The first delay was ordained through Despacho n. 437/2020-XXII of 9 November 2020 of the State Secretary for Fiscal Matters (SEAF – Secretário de Estado dos Assuntos Fiscais). According to this, PDF invoices without a QES would be accepted until 31 March 2021 and considered electronic invoices for all fiscal purposes.

Since then, the mandate has been postponed four additional times, with the last one taking place on 26 May 2022, by Despacho n. 49/2022-XXIII of the SEAF. According to this act, PDF invoices with no specific security measures must be recognised as electronic invoices for fiscal effects until 31 December 2022, instead of the previously established date, 30 June 2022.

Therefore, from 1 January 2023, taxpayers covered by Law Decree n. 28/2019 must comply with the requirement to ensure authenticity and integrity either by applying a Qualified Electronic Signature/Seal or by using “EDI by-the-book” (EDI under the European Model EDI Agreement).

Additional upcoming requirements

Besides the stricter authenticity and integrity requirement, taxpayers must be ready to comply with additional new invoicing mandates underway in Portugal. On 1 July 2022, it will be required to only use structured electronic invoices in CIUS-PT format for B2G transactions. The B2G mandatory e-invoicing is already under implementation through a phased roll-out. It is set to be finalised and become compulsory for small and medium companies and microenterprises on 1 July 2022. Furthermore, the inclusion of the ATCUD code on invoices and other fiscal relevant documents, which has also been previously postponed, is set to become mandatory on 1 January 2023.

Since becoming the first EU country to make electronic invoicing mandatory through a clearance process in 2019, Italy has kept a steady pace in improving its continuous transaction controls (CTC) system to close the gaps in VAT compliance.

Over recent years, Italy has gradually expanded its system by introducing various mandates. The following changes reflect the government’s efforts to tie up loose ends and assert more far-reaching control mechanisms to achieve an efficient and well-rounded system.

The changes listed below become effective on 1 July 2022, with some already available on a voluntary basis and others allowing a short grace period for adjustment.

Mandatory cross-border invoice reporting through the SDI

The retirement of the tax reporting scheme, Esterometro, will require Italian taxpayers to report all cross-border transactions through the Sistema di Interscambio (SDI). Since the clearance of cross-border invoices is not within the Italian CTC system’s scope, this is a clear step towards centralisation.

Taxpayers may continue to exchange invoices in any agreed way, including the FatturaPA format. The reporting, however, must be done through the SDI using the FatturaPA format. This has been optional since January 2022.

New taxpayers in scope for the e-invoicing mandate

Italy has recently expanded the scope of its e-invoicing mandate bringing in new groups of taxpayers:

• Taxpayers who adopt the flat-rate tax regime (regime forfettario)
• Amateur sports associations and third sector entities with revenue up to €65,000

A short grace period has been established from 1 July 2022 until 30 September 2022. During this period these taxpayers may issue e-invoices within the following month from when they carried out the transaction without any penalties being applied.

The new mandate also states that microenterprises with revenues or fees up to €25,000 per year will be required to issue and clear e-invoices with the SDI, but this only starts in January 2024.

Mandatory e-invoicing between Italy and San Marino

Following the Italian CTC mandate, Italy and San Marino began negotiations to accommodate invoice exchange between the two countries through the more modern clearance-based system, which requires taxpayers to issue and clear e-invoices using the FatturaPA format. This was established by creating a “four-corner” model with the Italian SDI as the access point for Italian taxpayers and the HUB-SM platform as the SDI counterpart on San Marino’s side.

The mandate covers the sale of goods shipped to San Marino for taxpayers who are residents, established or identified in Italy. For sales of goods to Italy, an e-invoice must be issued by the economic operators with identification attributed to them by the Republic of San Marino. A significant effect of this mandate is that the reporting obligations through Esterometro will come to an end.

The voluntary transition phase started in October 2021.

Getting ready for change

The start of the second semester of 2022 will bring significant changes, and taxpayers have limited time to conform as July approaches. Understanding how these new requirements can affect your company will ensure compliance and avoid unnecessary mistakes.

Update: 30 May 2024 by Dilara İnal

Implementation waves of Phase 2 of E-invoicing in Saudi Arabia

Implementation of Phase 2 of Saudi Arabia’s e-invoicing initiative started in January 2023 with the first wave of taxpayers. Subsequent waves – which are announced by Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) – are based on the generated revenue subject to VAR in Saudi Arabia.

In addition to announcements on ZATCA’s website, ZATCA notifies taxpayers at least six months before the enforcement date of their new e-invoicing requirements.

Current timeline for Phase 2 waves

Waves dictate when taxpayers of particular revenue statures are required to take part in Saudi Arabia’s e-invoicing program. The table below details the waves, revenue threshold and applicable dates for the initiative’s second phase.

Read our overview for more information regarding Saudi Arabia’s push towards e-invoicing.

Update: 20 January 2023 by Dilara İnal

Voluntary participation in Phase 2

Taxpayers now have the option to start complying with the Phase 2 requirements on a voluntary basis before the integration enforcement date arrives.

Companies were previously not allowed to voluntarily start the implementation of Phase 2. ZATCA changed its approach to voluntary participation in December 2022.

Looking for further clarification on Phase 2 of Saudi Arabia’s e-invoicing system? Contact our experts now.

Update: 24 October 2022 by Dilara Inal

Upcoming phase 2 requirements for e-invoicing in Saudi Arabia

Phase 2 of Saudi Arabia’s e-invoicing system rollout is fast approaching. See below for details about the timeline and the requirements for the integration stage of implementation.

Rollout and timeline of Phase 2

Implementation will begin in January 2023 and taxpayers will need to issue and submit e-invoices in a specific format.

Phase 2 is planned as a gradual implementation. The first wave of implementation covers taxpayers with an annual turnover of 3 billion riyals (approximately 800 million USD) or more for the 2021 period.

Taxpayers who are in the scope of the first wave are notified by the tax and customs authority (ZATCA) about their obligations under Phase 2 – these obligations start six months after this notification, even though the official date has been announced as 1 January 2023.

The second wave of taxpayers are businesses with revenue subject to VAT which exceed half a billion riyals during 2021. Taxpayers in this group will be notified during the first six months of 2023 and their Phase 2 obligations start six months after this notification. The second wave of Phase 2 will be implemented during the period of 1 July 2023 to 31 December 2023.

Integration phase requirements

Firstly, all invoices must be issued in UBL 2.1 format. B2B invoices are subject to a CTC clearance regime, whilst B2C invoices are reported to the tax authority within 24 hours.

Under the new regime, B2B invoices can only be sent to the buyer after the tax authority’s approval which gives legal validity to invoices.

Each invoice must be generated in a single sequence and include a hash value computed from previous invoices’ elements. This hash function ensures that invoice data isn’t modified or tampered with.

Also, an invoice counter value and a globally unified identification number (UUID) must be included. The QR code is generated by ZATCA during the clearance of an invoice, and it must be shown in case B2B and B2G invoices are sent to the buyer in human-readable form. For B2C invoices, the QR Code is generated and applied by the taxpayer during issuance of the invoice. In addition, self-billing is permitted for domestic B2B transactions and the invoice must contain a statement declaring it is self-billed.

Taxpayers who are yet to be notified by ZATCA for phase 2 implementation should continue to comply with phase 1 requirements without any change.

How to prepare for the changes

We advise all taxpayers to follow upcoming updates to ensure they are prepared for phase 2’s complex requirements. Considering the impact of this CTC regime, other e-invoicing initiatives are expected to be implemented in the Gulf region in the near future

Still have questions about Saudi Arabia’s e-invoicing phase 2 implementation? Speak to our tax experts.

Update: 30 May 2022 by Selin Adler Ring

ZATCA launches e-invoicing developer portal for e-invoicing phase 2

Saudi Arabia´s e-invoicing system is being rolled out in two phases; the second phase’s requirements differ from the first phase. The first phase started as of 4 December 2021 for all resident taxable persons. The second phase will go live on 1 January 2023, and the impacted taxpayer group has not yet been announced. However, the Zakat, Tax and Customs Authority (ZATCA) has made considerable progress in kicking off phase 2.

Launch of the e-invoicing portal

Phase 2 will introduce a Continuous Transaction Controls (CTC) regime in which e-invoices, electronic credit and debit notes will be transmitted to the ZATCA platform in real-time. A clearance regime is prescribed for B2B invoices, while B2C invoices must be reported to the tax authority platform within 24 hours of issuance. Therefore, ZATCA was expected to introduce its e-invoicing platform well in advance of the launch of phase 2.

As expected, the ZATCA recently announced the launch of an E-Invoicing Developer Portal (Sandbox). Users will use the Sandbox to simulate the integration with ZATCA’s platform and can access details on the APIs and other requirements through this platform upon registration.

Proposed changes to e-invoicing rules

ZATCA has proposed specific changes to e-invoicing rules. The proposed changes are under public consultation and interested parties may submit their feedback until 10 June 2022.

The changes aim to clarify some requirements (e.g. Cryptographic Stamp, hash, counter etc.) rather than introducing new ones.

The next steps

The last clarifying changes to the e-invoicing rules are underway, and the developer portal has been launched. We’re now expecting ZATCA’s announcement of the taxpayer groups in the scope of the mandate and expect it to happen at least six months before the go-live date. As the ZATCA plans to roll out phase 2, there will be different timelines for different taxpayer groups. We expect this information within the coming months.

Israel e-invoicing

Israel is set to implement a continuous transaction controls (CTC) model that will require businesses to submit invoice data in electronic format for the tax authority to validate.

The mandate, set to come into force in May 2024, will require invoice data to be validated by the country’s tax authority before being sent to the final recipient. Read on for an overview of Israel e-invoicing requirements – we encourage you to bookmark the page to stay updated as the mandate develops.

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Table of contents

1. At a glance: Characteristics of invoicing data submission in Israel

2. Electronic invoicing laws in Israel

3. Benefits of using e-invoicing in Israel

4. Timeline of e-invoicing clearance in Israel

5. What is the future of e-invoicing in Israel?

6. What happens if I don’t comply?

7. Setting up e-invoicing in Israel with Sovos

8. FAQ

9. Additional resources

At a glance: Characteristics of invoicing data submission in Israel

CTC Type 
CTC Clearance

Format 
JSON

Allocation Number 
Assigned by the ITA

 

E-invoicing 
Not mandatory

Electronic Signature 
Not applicable (though needed in case of e-invoicing)

Archiving 
Not applicable

Electronic invoicing laws in Israel

From 5 May 2024, Israel will make clearance CTC clearance mandatory. Authorised dealers (taxpayers) will have to clear invoices above a threshold of NIS 25,000 (before VAT), obtaining an allocation number acquired by the SHAAM – a computer system provided by the Israeli Tax Authority (ITA).

The invoice value threshold will be gradually reduced annually until 2028, ending at NIS 5,000 pre-VAT. Nevertheless, suppliers may report invoice data to the tax authority for clearance and request an allocation number for any amount.

Besides CTC clearance, e-invoicing rules remain in place and do not change with the new CTC requirements. Electronic invoices are still optional.

Since 2019, public entities in Poland have been mandated to receive and process e-invoices. While currently optional for suppliers of public entities, the transmission of e-invoices will be required for B2G and B2B transactions when the mandate is implemented (this was planned for 1 July 2024 until it was postponed in January 2024).

CTC clearance model

Israel’s model will include a clearance system from 5 May 2024. Businesses that exceed a specific threshold will be required to obtain an allocation number for invoices regarding B2B transactions. They can do so by issuing the invoice to the tax authority before sending it to the final customer.

Without receiving this number and including it on invoices, businesses will not be able to deduct input VAT.

Israel B2B e-invoicing

Israeli CTC clearance covers B2B transactions between authorised dealers.

However, e-invoicing is not mandatory under the new CTC clearance system. In case invoices are issued in electronic format (structured or unstructured format, including PDF), they must be cleared by the ITA and assigned with an allocation number before exchanged with the trading party.

Without receiving this number and including it on invoices, businesses will not be able to deduct input VAT.

Benefits of using e-invoicing in Israel

Although CTC Clearance mandate does not require e-invoicing, there are numerous benefits for businesses that electronically issue and receive invoices, including:

• Cost savings through the reduction of paper, postage and manual labour
• Saving time by using automated and structured processes
• Streamlining operations through interoperable, uniformed initiatives and systems
• Fewer issues and risks through the validation and authentication of data

Timeline of e-invoicing clearance in Israel

While combating fraudulent invoices has been discussed in Israel for a long time, the implementation of the upcoming CTC model is a relatively recent development.

• February 2023: The 2023-2024 state budget and economic plan are approved, outlining a clearance CTC model
• June 2023: The ITA announces plan for CTC implementation
• July 2023: The ITA publishes technical specifications for the upcoming CTC model
• October 2023: Clearance model is postponed from 1 January 2024
• 1 January 2024: The original date that the clearance e-invoicing model would be implemented
• 1 January 2024: The ITA platform becomes operational
• 5 May 2024: CTC clearance comes into effect
• January 2025: Invoice threshold lowers to NIS 20,000 pre-VAT
• January 2026: Invoice threshold lowers to NIS 15,000 pre-VAT
• January 2027: Invoice threshold lowers to NIS 10,000 pre-VAT
• January 2028: Invoice threshold lowers to NIS 5,000 pre-VAT

What is the future of e-invoicing in Israel?

While electronic invoice data will be required as part of the CTC initiative, Israel does not yet have a specific electronic invoicing mandate requiring dealers to issue invoices electronically.

Currently, Israel’s e-invoicing rules – which are classified as post-audit – include e-signing, content remarks and prior notification to the tax authority.

Israel has the potential to go the way of countries like Romania and Spain, mandating the use of e-invoices across transactions with governments and businesses. There is no official word on Israel’s future e-invoicing plans beyond the current CTC mandate.

What happens if I don’t comply?

If an allocation number is not requested for the invoice by the supplier, the buyer cannot deduct its VAT based on that invoice.

Setting up e-invoicing in Israel with Sovos

Sovos’ continuous transaction controls (CTC) software was purpose-built to help customers stay on top of their obligations wherever they do business, even as the rules change.

Currently, e-invoicing is permitted in Israel, provided it is prominently stated on the invoice that it is a ‘computerized document’ and prior notification is made to the ITA. A digital signature compliant with the local law is required to ensure the integrity and authenticity of the electronic invoice.

Storage of e-invoices must be within Israel – unless derogation has been granted. Both issuance and storage of e-invoices can be outsourced to third parties like Sovos.

Taxpayers opting to use e-invoices must comply with the abovementioned rules, as well as the CTC clearance requirements rolling out in 2024.

As CTCs and e-invoicing continue to grow in global adoption, it is vital to partner with a provider that closely monitors the decisions of tax administrations and understands the regulations you face. Sovos can help to stay compliant wherever you do business.

Get in touch today.

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Israel CTC Clearance and E-invoicing FAQ

Is e-invoicing mandatory in Israel?

No, e-invoicing is not mandatory in Israel. Israel’s continuous transaction controls (CTC) mandate involves the electronic submission of invoice data and is set to come into effect on 5 May 2024.

What do I need for an invoice in Israel?

Electronic invoice data must include specific information when submitted to the tax authority, including invoice ID, VAT number, invoice date, invoice amount and accounting software number. They also need to be given an allocation number by the ITA for the buyer to use this invoice for a tax deduction, as per the CTC clearance mandate.

Sovos has the first global solution for e-invoicing compliance, including e-reporting functionality.

Is there a contingency measure to address potential failures in systems?

Within the CTC mandate, the use of emergency allocation numbers is instituted as a contingency measure to address potential failures in its computer systems. In anticipation of such events, taxpayers must acquire and store these emergency numbers.

Do I need to sign the e-invoice?

In case the taxpayer chooses e-invoicing, electronic invoices in Israel must be signed with a digital signature compliant with the local law.

How does Israel’s CTC clearance platform work?

Israel’s mandated CTC clearance platform requires electronic invoice data to be submitted to and approved by the Israeli Tax Authority in real time. The authority will assign an allocation number and verify or reject the invoice data. Once validated, the allocation number will be returned to the seller so it can be issued to the buyer (in electronic or paper format).

Additional resources for e-invoicing compliance

E-Invoicing: A Guide

Use this guide about e-invoicing in Europe to learn more about e-invoicing compliance in general.

Read now

E-invoicing Strategy with SAP

Learn how to solve the e-invoicing dilemma.

Download now

Continuous Transaction Controls Software

Discover how continuous transaction control software can help businesses remain compliant with global tax requirements

Learn more

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 new regulatory changes and the latest developments on tax regimes across the world, to support you in your tax compliance.

We spoke to Hooda Greig, compliance services manager about ways insurers can make the Insurance Premium Tax (IPT) process more efficient.

Can you tell me about your role and what it involves?

I lead an IPT team that delivers compliance services in Europe. I oversee the day-to-day management and delivery of IPT compliance for an extensive portfolio of global clients. We are the first point of contact between Sovos and our clients. My focus is ensuring all tax requirements for the clients are met, that is filing and paying their liabilities to the various territories they are registered in. I also work closely with other departments within our company, particularly our consulting team to assist with more technical aspects of IPT compliance.

How can insurers make the IPT process more efficient? What are your top tips?

Modernising the tax process will help insurers operate efficiently. There are still many insurers reliant on manual reporting methods for IPT. Strategic management of the end-to-end process is key to improving efficiencies, with a focus on managing risks by investing in digitization. Tax technology tools will make compliance for insurers simple, as will collaborating with tax teams with specialised IPT knowledge at a local level.

My top tip to manage risk is the use of tax technology. Tax authorities are introducing more demanding reporting requirements and digitization of filing and reporting processes can result in efficiency, accuracy, and cost reductions.

What are some of the issues insurers face with IPT?

Efficiency, accuracy, and the costs of getting it wrong are concerns for insurers. The consequences of IPT non-compliance are not limited to statutory or legal penalties, the indirect costs to insurers are often more significant, the cost of correcting a mistake and non-compliance could also have an impact on the company’s reputation. Tax authorities are becoming more stringent in their reporting requirements. It’s important for insurers to work closely with a managed services team to help meet all their tax obligations and in preparation for future IPT requirements to ensure compliance now and in the future.

How can Sovos help insurers with their IPT requirements?

To minimise risks, we’re seeing an increasing number of insurers looking to technology solutions to change the way they operate. Sovos’ mission is to solve tax for good and we specialise in tax technology and data analysis with specialised knowledge at a local level, ensuring insurers’ compliance requirements are met. Keeping abreast of all regulatory changes can be difficult, Sovos issues regular tax alerts, newsletters and hosts webinars to keep clients up to date with the latest IPT updates.

It’s no surprise that inflation is on the forefront of everyone’s mind, with prices continuing to sky-rocket month by month. Data from the United Kingdom shows that the Consumer Prices Index (CPI) inflation jumped to a 40-year high of 9% in the past 12 months. Governments around the world are looking for ways to reduce the burden for consumers to keep global economies afloat. One method – implementing VAT rate cuts to certain goods and services – looks to be coming out on top as multiple countries around the world announced emergency budget sessions or introduced proposals to temporarily cut VAT rates.

Temporary VAT rate cuts are generally quick and easy to implement, which is why they are favored by governments globally. These cuts essentially allow for a boost to the economy by providing consumers with an overall higher amount to spend, incentivizing consumers to spend now while rates are lower.

Country proposals for VAT rate cuts

As expected, many countries have already announced VAT rate cuts or measures to stimulate their economies:

• United Kingdom: Reports indicate that the Labour Party is pushing for an emergency budget session to demand VAT rate cuts for the hospitality industry. Previously, due to Covid-19, the UK implemented a temporary reduced rate of 13.5% on hospitality services which ended last month. Leaders suggest that the temporary rate reversal has cost the industry and should be re-implemented.
• Slovenia: The Slovenian Parliament is currently reviewing a proposal to reduce energy and digital newspapers and journals from the standard VAT rate to 5%. This comes as inflation in Slovenia hits 6.9%.
• Germany: German consumer groups are calling for VAT rate cuts on food, which had been previously ruled out due to restrictions in the EU VAT Directive.
• Bulgaria: The Bulgarian government has proposed temporarily reducing VAT rates on domestic heating and bread for one-year, effective 1 July 2022.
• Poland: Earlier this year Poland enacted VAT rate cuts for energy and certain basic food products. However, these rate cuts are only in place until 31 July 2022. The Polish government has indicated that these measures may be extended to continue to combat inflation.
• Bahrain: A group of ten MPs are advocating for a suspension of the 10% VAT rate in Bahrain to help ease inflation rises, which was presented to the Bahrani government earlier this week.
• Ireland: The Irish government has agreed to an extension for the reduced 9% VAT rate for the hospitality sector, now ending on 1 March 2023.

Additional countries such as Estonia, Netherlands, Latvia, Greece, and Turkey are also taking measures to implement VAT rate cuts to fight the ever-rising costs for consumers.

These VAT rate cuts coincide with new measures passed recently by the European Commission allowing Member States to apply reduced rates to more items, including food. Though many Member States seem to be moving towards taking advantage of this new flexibility on VAT rate reductions, it’s expected that as costs continue to rise more Member States and countries around the world will introduce VAT rate cuts to ensure consumer spending doesn’t continue to trend downward.

Since many audits seem to occur at random, it’s not always possible to identify the reason why a tax office would decide to initiate one.

We’ve previously spoken about an increased interest in audits from the EU and audits for e-commerce. This article covers the most common reasons behind a VAT audit to help businesses anticipate and prepare for one when possible.

Trigger events for VAT audits

There are specific “trigger” events among the most common reasons that could cause further queries from the tax office. Generally speaking, these are changes in the company’s status such as a new registration, a de-registration, or structural changes within the company.

VAT refund requests also fall into this category. In some countries (Italy and Spain, for example) a refund request is almost certainly a reason for an audit to be initiated since the local tax office cannot release the funds before checks are completed. In this case, the likelihood of an audit increases when a refund is particularly substantial and the business requesting it is newly VAT registered. However, it doesn’t mean that the tax authority will not initiate an audit if the amount requested in a refund is relatively small.

Business model

Certain types of businesses are naturally more subject to audits due to their structure and business model. Groups commonly selected for scrutiny include, for example, large companies, exporters, retailers and dealers in high-volume goods. Therefore, elements such as a high number of transactions, high amounts involved and complexity of the business structure could be another common reason for an investigation to be initiated by the local tax authorities.

Taxpayer metrics

Tax authorities often identify individual taxpayers based on past compliance and how their information compares with specific risk parameters. This would include comparing previous data and trading patterns with other businesses in the same sector. Therefore, unusual patterns of trading, discrepancies between input and output VAT reported, and many refund requests may appear unusual from the tax office perspective and give rise to questions.

Cross checks

Another common reason for the tax authorities to request further information from taxpayers is the so-called “cross check of activities”. In this case, either a business supplier or client is likely to be subjected to an audit. The tax office will contact their counterparts to verify that the information provided is consistent on both sides. For example, if a business is being audited following its refund request, the tax office will likely contact the suppliers to verify the audited company didn’t cancel the purchase invoices and that they have been paid.

This category also includes cross checking activities on Intra-Community transactions reported by a business. In this scenario, the cross check would be based on information exchanges between local tax authorities through the VAT information exchange system (VIES). The tax authorities can check Intra-Community transactions reported to and from specific VAT numbers in each EU Member State and then cross check this information with what has been reported by a business on their respective VAT return. If any discrepancy arises, the tax office will likely contact the business to ask why they have (or haven’t) reported the transactions declared by their counterparts.

As we’ve already seen in an earlier article, audit triggers are also influenced by changes in legislation or shifts in the tax authorities’ attention to specific business sectors.

Regardless of whether it’s possible to identify the actual reason the tax authority initiated an audit, a business can undertake several actions in preparation for a check of activities, which will be covered in the next article of this series.

Update: 29 February 2024 by Inês Carvalho

Since January 2023, Romania‘s mandatory e-transport system has monitored the transport of certain goods in the national territory. The e-transport system operates in parallel with Romania’s e-invoicing system.

This blog answers frequently asked questions about Romania’s e-transport system including what and who is in scope, document format and fines for non-compliance.

What transportation is in scope?

From January 2023, the Romanian e-transport system monitors the transport of high fiscal risk goods on the national territory.

Transportation in scope includes:

• Intra-community acquisitions
• Intra-community deliveries
• Imports and exports
• Domestic transportation between different economic operators
• Domestic transportation between two locations belonging to the same economic operator
• Transport of goods subject to intra-community transactions in transit through Romania

In addition to the transportation type, the categories of road vehicles in scope are as follows:

1. Road vehicles with a maximum authorised mass (MAM) of at least 3.5 tons, and
2. Loaded with high fiscal risk goods with a total gross mass of a minimum of 500 kg or a total value of more than 10,000 Leu (appx. €2,000)

Transportation of high fiscal risk goods that don’t fall within this scope do not need to be declared in Romania’s e-transport system.

The carriage of goods intended for diplomatic missions, consular posts, international organisations, the armed forces of foreign NATO Member States or as a result of the execution of contracts, are not in the scope of the RO e-Transport system.

From December 15^th, 2023, the scope of the e-transport mandate was expanded to include the international transport of all goods. Whilst the change was effective immediately, there is a grace period in place until 1 July 2024, after which, penalties will be imposed.

What are the high fiscal risk products that must be declared in Romania’s e-transport system?

Romania’s National Agency for Fiscal Administration (ANAF) established a list of high fiscal risk products using the same criteria as the e-invoicing system (E-Factura), with a few differences.

The product categories of high fiscal risk products for the e-transport system are:

1. Vegetables, plants, roots and tubers, foodstuffs
2. Edible fruits; peel of citrus fruits or melons
3. Beverages, spirits, and vinegar
4. Salt; sulfur; earths and stones; plaster, lime, and cement
5. Knitted or crocheted garments and clothing accessories
6. Clothing and clothing accessories, other than knitted or crocheted
7. Footwear, gaiters
8. Cast iron, iron, and steel

If the transportation includes both goods with high fiscal risk and goods outside the high fiscal risk category, transportation must be declared in the Romanian e-transport system.

How does the Romanian e-transport system work?

Romania’s e-transport system is operational through the Virtual Private Space (SPV), the tax authority portal used for tax purposes, including the Romanian e-invoicing system. The e-transport system can be used through an API or a free application provided by the Ministry of Finance.

• Taxpayers declare transportation by transmitting an XML file in the e-transport system a maximum of three calendar days before the start of the transport, in advance of the movement of goods from one location to another.
• Following the transmission of the file, the system performs checks (structure, syntax, and semantics), and the Ministry of Finance applies its signature confirming receipt of the declaration.
• The system generates a unique code (ITU code) if the XML file complies with the requirements. This code must accompany the goods in physical or electronic format with the transport document to enable the competent authorities to verify the declaration and the goods while enroute.
• The ITU code is valid for five calendar days, or 15 calendar days in the case of intra-community acquisitions, starting with the date declared when the transport begins. It’s prohibited to use the ITU code once it has expired.

Who is required to report to the e-transport platform in Romania?

The entities required to report transport data in the e-transport platform are as follows:

1. the importer mentioned in the customs import declaration;
2. the exporter mentioned in the customs export declaration;
3. the recipient in Romania, in case of intra-community acquisitions of goods;
4. the supplier in Romania, in case of domestic transactions (high fiscal risk products only) or intra-community supplies of goods;
5. the depositary, in the case of goods subject to intra-community transactions in transit, both for goods unloaded in Romania for storage or to create a new consignment from one or more consignments of goods, and for goods loaded after storage or after the formation of a new consignment on the national territory from one or more consignments of goods.

What information needs to be sent to the RO e-transport system?

The declarant must submit an XML format file following the official schema including the following:

• Data relating to the consignor and the beneficiary
• The name, characteristics, quantities, and value of the goods transported
• Places of loading and unloading
• Details of the means of transport and the carrier

What are the fines for non-compliance with the e-transport system in Romania?

Noncompliance with the e-transport system rules will result in a fine reaching RON 50,000 (approx. €10,000) for individuals and RON 100,000 (approx. €20,000) for legal persons. In addition, the value of undeclared goods will be confiscated.

Concerning the international transport of goods, other than goods falling under the ‘high fiscal risk’ category, fines will only apply from July 2024, after the established grace period ends.

Automating RO e-transport reporting

Stay on top of your obligations with Sovos. Map, clear, correct, confirm and delete outbound eWaybill and much more with our specialist solution.

Continuing our series on VAT audits, we take a closer look at the trends we’ve seen emerging in the activities of the EU Member States’ independent tax administrations throughout the European Union.

In a recent report from the European Commission (EC) specific guidelines were published not only on best practices but also on how EU Member States can harmonise the focus of their VAT audit projects. We’ve seen a significant shift away from scrutiny of historically complex businesses in sectors such as automotive and chemicals to the other sectors such as online retailers and distance selling.

The report released by the EC in April noted that there should be a conscious effort from the local tax authorities to increase the efficiency of audit practices and outcomes, by indicating how complex projects can be directed to solve industry specific issues.

Speaking about EU Member States they noted:

“They should also put in place more complex audit projects (for specific groups of taxpayers, an industry or a line of business such as retail, to address a particular risk or to establish the degree of non-compliance in a particular sector) and perform comprehensive audits and fraud investigations.”

VAT audits across Europe

We’ve seen this already happening in some countries, such as the Netherlands and Germany, with a greater shift towards auditing of previously neglected companies in the e-commerce industry as a result of Brexit and the E-commerce VAT Package implemented in July 2021. Our own audit team here at Sovos has seen a 45% increase in audits opened on our e-commerce clients in the second half of the year – driven both by changing activity post-Brexit and the One-Stop-Shop (OSS) regime commencing.

Looking in more detail at different tax administrations’ approach to auditing, we’ve observed a greater focus in VAT refund audits in the Netherlands, whilst Germany has scrutinised e-commerce retailers on more specific matters. These polarisations both reflect the individual interests of EU Member States and also the activities of the businesses operating across the EU, but it’s clear that the tax administrations in all countries are taking note of the importance of conducting audits to close the VAT gap.

It’s recommended to involve administrative agencies and governmental bodies to assist with the more complex audit projects embarked upon by EU Member States. With changes to how goods move cross-border between the United Kingdom and the EU taking centre stage in 2021 there has been an increased importance placed on the information transfer between customs offices and their tax administration counterparts. As mentioned earlier, the implementation of the OSS regime has led to a greater shift in the reporting of e-commerce businesses operating in the EU and the impact on the audit process is yet to be revealed.

It’s clear that the major shifts in the VAT landscape in 2021 created a different set of challenges for businesses and tax administrations but encouraging accurate record keeping is still a central goal of most EU Member States. In our next article in this VAT audit series we’ll explore the common triggers of a VAT audit.

France is known for its challenging Insurance Premium Tax (IPT) filing system. Understanding which tax authorities you need to register with, file with and talk to when you have questions is essential to meeting your business’s IPT compliance obligations. In this blog, we identify France’s IPT tax authorities and explain what makes IPT so different in this European country.

IPT tax authorities in France

There are three different tax bodies in France in charge of collecting IPT. They are the Business Tax Department (Service des Impôts des Entreprises) (SIE), the Compulsory Damage Insurance Guarantee Fund (Fonds de Garantie des Assurances Obligatoires de Dommages) (FGaO), and the Union for the Collection of Social Security Contributions and Family Allowances (Union de Recouvrement des Cotisations de Sécurité sociale et D’allocations Familiales) (URSSAF).

Dealing with France’s tax authorities can be challenging, especially once an insurance company obtains authorisation from the Prudential Control and Resolution Authority (Autorite de Controle Prudentiel et de Resolution) (ACPR).

Why is France a challenging territory for insurance companies?

1. Registration: Each insurance company needs to be registered with all three tax authorities, starting with the SIE, who releases a Tax ID number (Numero SIRET). Once the Tax ID is obtained, the insurer can ask to be registered with the FGaO if its policies cover risks from insurance classes 3 to 10. In cases where the client sells insurance class 2 sickness products, then registration with the URSSAF is required, and a second Tax ID is issued.
2. Location of Risk: When it comes to the location of risk, the mainland office is also in charge of IPT collection for some of the overseas territories while others have their own tax offices.
3. Tax Settlement and reporting process:

• • • The SIE collects all the IPT where it’s due. Reporting is made through the SD-2787 module. This paper version of this module is sent to SIE monthly although this process will change to a mandatory online submission with a direct debit from the 1 February 2023.
    • The FGaO is in charge of collecting the Terrorism Contribution for the National Guarantee Fund and the Automobile Annuity Contribution due on Motor Third Party Liability policies. Submission is made through the FGaO portal monthly.
    • The URSSAF is the body in charge of collecting the taxes due on insurance class 2 sickness. An online submission is due quarterly.

4. A different tax rate is used ranging from 6.27% to 35% and a different fixed charge from €5.90 to €25.00 depending on the type of insurance policy.
5. Cancellation and mid-term adjustments are allowed. The treatment differs from one office to another.

Update: 21 June 2023

Changes are coming to VAT on virtual events. To ensure taxation in the Member State of consumption, all services supplied to a customer electronically will be taxable where the customer is established, has his permanent address or usually resides.

Member States must adopt and publish the required laws, regulations and administrative provisions by 31 December 2024 and must apply these from 1 January 2025. This blog will consider some of the issues that may arise from the impending changes.

Current VAT position regarding events with physical attendance

Where there is physical attendance at an event then the place of supply is the place where the event takes place for all delegates.

Current VAT position regarding events with virtual attendance

For B2B delegates the current rules mean that virtual admission will be classified as a general rule service so VAT is due where the customer is established.

For B2C delegates the current rules depend on whether the virtual attendance can be considered an electronically delivered service or a general rule service. For electronically delivered services supplied, the place of supply is where the customer normally resides and for other services the place of supply is where the supplier is established.

Future tax position for events with virtual attendance

The changes apply to “services that can be supplied by electronic means” but this is not defined. It would appear, from the following to be wider than “electronically delivered”.

To achieve this the current law governing attendance by B2B delegates which results in VAT being due where the event is held will specifically exclude admission where the attendance is virtual.

This suggests that “supplied to a customer by electronic means” occurs when attendance is virtual. This has the effect of removing the distinction of “human intervention” in respect of electronically delivered services.

The law governing B2C sales will state that where activities are “streamed or otherwise made virtually available”, the place of supply is where the customer is established.

These changes suggest that “supplied to a customer by electronic means” occurs when the service is streamed or available virtually. The possibility of streaming (which can be live or recorded) does not appear in the amendment to the B2B rule.

An update to the law governing use and enjoyment reflects these additions.

Exemption from VAT

Many hosts currently use the available educational or fundraising exemptions, especially where the delegates are private individuals without the right of deduction, e.g., doctors. For events with physical attendance the host must consider the rules of the Member State where the event is held since that is where the VAT is due.

Under the new rules, a VAT exemption will be less relevant for B2B virtual events where the reverse charge applies as the attendee assesses the charge to tax themselves. However, it will remain relevant where delegates are unable to apply the reverse charge and unable to deduct the VAT charged – e.g. doctors. In such circumstances, VAT is due where the doctor normally resides and that is where the exemption must be considered.

These new rules may require the host to assess the availability of the exemption in several Member States and may also require multiple ruling request submissions. This is likely to increase operating costs substantially, and the (unintended) consequence could be that exemptions are not considered to the detriment of delegates.

Hybrid events

Many future events are likely to include virtual attendees since it increases overall attendance at an event, requiring the host to manage two invoicing regimes.

There could be issues where one taxpayer has both physical and virtual attendees. In this case, the host will need to issue two invoices – one with local VAT for the physical attendance (and where the exemption may apply) and one where VAT is due in the customer’s Member State and the general reverse charge may apply. The attendance of B2C delegates will further increase this complexity for the host.

What happens if a delegate is invoiced for physical attendance, but changes to virtual attendance at the last minute?

When the host provides the login details for virtual attendance, this may change the place of supply. If the place of supply changes, the host must cancel the original invoice and issue a new invoice with the amended VAT treatment.

Non-EU hosts with B2C events

Where a host currently holds an event with virtual admission for non-taxable EU delegates (e.g. doctors) then the place of supply is where the supplier is established. For a host established outside the EU, no EU VAT is due (ignoring the possibility of use and enjoyment), and it is also likely that no local VAT is due in the host’s own country.

Implementation of the new rules will mean that the host must charge VAT in the Member State where the doctor normally resides. This will not only result in unrecoverable VAT for the doctor but will also increase the compliance costs of the host. Virtually attending such an event in 2025 may become significantly more expensive than in previous years.

Transposition

The article governing the transposition of these changes requires Member States to “adopt and publish” the necessary laws, regulations etc., by 31 December 2024. The changes will then apply from 1 January 2025.

Member States must not break rank and apply these rules before this date. A situation where some Member States adopt and apply the rules early could lead to double taxation, particularly in B2C transactions.

Once the rules are in force on 1 January 2025, several issues could arise. What happens for an event in January 2025 where delegates must pay for admission ahead of time in 2024? Where is VAT accounted for, and under which rules?

For B2B, there should be no issue since the service remains a general rule, but there is a real issue for non-taxable delegates, e.g. doctors.

For example, a US host holds an event where a German doctor will attend virtually. The event is in January 2025, but the delegate must pay the admission fee by 30 November 2024 to secure a place. Under current rules, applicable in 2024, the place of supply is where the supplier is established, so no VAT is due on the invoice. But when the event happens in January 2025, the new rules say that German VAT is due.

The time of supply rules are not affected by these changes but could a tax authority seek to change these to increase its tax revenue? For example, Greek VAT law says that the tax point is when the event takes place – not when the invoice is issued/payment received. So, in the above example, Greek VAT would be due for a Greek B2C delegate.

Reduced rates for VAT on virtual events

When considering the taxation of virtual events, the new rules state it should be possible for Member States to provide the same treatment of live-streamed activities, including events, as those which are eligible for reduced rates when attended in person.

To enable this, amendments to the annex detailing which services can benefit from a reduced rate will include admission to:

• Shows
• Theatres
• Circuses
• Fairs
• Amusement parks
• Concerts
• Museums
• Zoos
• Cinemas
• Exhibitions
• Cultural events or facilities
• Live streaming of any of these events/visits

This change means that events that are live streamed can benefit from a reduced VAT rate. Though the changes to the place of supply rules refer to “virtual attendance” for B2B and “streamed or made virtually available” for B2C.

Are we to assume that “virtual attendance” = “live streamed”? But “streaming” can be live or recorded. Do these changes also cause an issue for VAT rate determination?

If a delegate watches an event live, then a reduced rate is possible. If the same event is watched via downloading a recording later, then the reduced rate is not possible. If one fee gives a delegate the right to attend the event virtually and download the event for future reference, then the concept of a mixed supply may be relevant.

Summary of future VAT on virtual events rules

For events attended virtually, the place of supply for both B2B and B2C will be where the customer is established – although this can be amended by application of the use and enjoyment rules.

For B2B attendees, the host will not charge local VAT as the reverse charge will apply unless the host and attendee are established in the same Member State.

For B2C attendees the host will charge local VAT according to the location of the attendee. The Union and non-Union One-Stop Shop (OSS) will be available to assist reporting where the attendee is in the EU.

Take Action

Get in touch to discuss your VAT compliance needs or download our guide, Understanding VAT Obligations: European Events.

A recent report released by the European Commission has stressed the need for Member States to increase the number of audits they undertake, particularly in e-commerce businesses. The European Commission specifically highlighted the need for Malta, Austria and France to make additional efforts to improve their value-added tax audit practices. They highlighted the seriousness of the issue and that the consequences of inaccurate VAT reporting can be severe. VAT audits, therefore, promote accurate reporting and mitigate fraud, and as such, they are being encouraged by the Commission.

A strategic approach to VAT Audits

The European Commission specifically stated that tax authorities should have a strategic approach which must observe multiple elements, including:

• The VAT audit activity must be based on an integrated annual plan that is reviewed by senior management;
• Specific procedures and, preferably, an audit manual should exist and be used;
• Specific instructions adapted to the specificities of different industries/sectors (e.g. tourism, construction, telecommunications) must be in place;
• The VAT audit process should be documented and monitored for quality;
• The audit activity should make use of specific software adapted for VAT audit purposes;
• The audit process should use technology that allows cross-checking of the amounts reported in tax declarations against information obtained from third parties on a large scale;
• The audit must sometimes be carried out in co-operation with other administrative agencies and governmental bodies.

The report notes some of the positive actions taken by Member States. Generally, they pay close attention to the audit process, with Finland and Sweden highlighted as particularly good. Furthermore, the report notes that some Member States have established special “VAT task forces” to deal with audits.

Following this report, the European Commission also announced that Norway should be authorised to participate in joint audits with their counterparts in the EU as a further measure to crack down on fraud.

Approach and scope of audits to be extended

E-commerce is a good example of an area that continues to grow, with the VAT stake ever increasing. With tax authorities globally struggling to keep pace with new technology and consumer offerings, local tax authorities are implementing further measures to ensure that fraud is combatted at an EU-wide level. Whether further changes occur through a difference in how VAT is reported or new forms of reporting such as continuous transaction controls (CTCs) that are in place in some Member States already, VAT audits are at the heart of this strategic plan. In this report, the European Commission has clarified that the approach and scope of audits should be extended.

With increased Member States co-operation and new measures adopted by the European Commission, such as the implementing regulation that provides details on how payment providers should start providing harmonised data to tax authorities from 2024, businesses should ensure that they have adequate controls in place to be able to handle any audit request. Future blogs in this series will focus on the audit trends we’ve noticed at Sovos and how businesses should prepare for an audit.

The Belgian taxation landscape can be challenging for insurers if they are not well versed in the rules and requirements for ongoing compliance. Belgium ranks as one of the somewhat trickier countries to deal with in the Insurance Premium Tax (IPT) sphere with a plethora of different taxes due dependant on the class of business as well as IPT prepayment requirements.

There are two different tax bodies Belgium insurers should be aware of: the Service Public Fédéral Finances which covers IPT and the National Institute for Health & Disability (INAMI) which covers a vast range of parafiscal charges.

IPT in Belgium

The standard rate of IPT in Belgium is 9.25% which is due on the total amount paid by the policyholder to obtain cover, inclusive of any third-party fees. Goods in Transit risks as well as specific motor risks are subject to a different rate, whilst certain life cover can also have varying rates.

The tax point is the date which triggers the tax, and in Belgium for all taxes it is triggered on the maturity date. This is formally defined as the contractual date when the policyholder pays the premium to the insurer.

Something which sometimes causes issues for insurers is the existence and application of the Belgian prepayment. The prepayment is based on the IPT figures for the October declaration and is due by 15 December.

Similarly to the Italian prepayment the rate stands at 100% but that is where the similarities end. Initially prepayment was only allowed to be offset against the IPT liabilities in the December declaration. However, we did experience some issues in receiving monies from the tax authority where the December liability exceeded the prepayment, thus resulting in a reclaim due.

In 2021 an exercise was undertaken whereby insurers were able to offset any excess prepayment not received in the previous four years against current IPT liabilities. In 2022 insurers have been able to utilise the prepayment up until the March declaration i.e four periods in total (December-March), thereafter if there is any prepayment remaining, in theory a reclaim should be received.

In certain circumstances an exemption was granted to not pay the prepayment. This was often with Captive insurers where they were paying liabilities solely in October on a yearly basis and didn’t expect any further liabilities until the following October. Such exemptions were negotiated directly with the tax office.

To ease the burden for insurers covering solely life insurance, such coverage is exempt from IPT prepayment.

INAMI in Belgium

There are seven different taxes covered by INAMI, five of which are due monthly, these are:

• Fire
• Civil Motor Liability
• Red Cross
• Motor Hull
• Ownership Motor Liability

Taxes are due on certain motor and motor liability risks dependant on what the contract is covering, with the exception of fire. Some insurance policies are taxed with an element charged to the insured and an element charged to the insurer.

Fire risk is the most common parafiscal we see from the above and care should be taken in its application. Unlike other countries where the fire element percentage is largely determined by the insurer and the scope of the contract, fire risks in Belgium must be apportioned according to a predetermined set rate.

The hospitalisation INAMI charge is due on a biannual basis for ‘Sickness – Pre & Post Hospitalisation Costs’ on an individual and group level. For the charge to apply the insured must receive the benefits of Belgian healthcare insurance (not applicable to doctors, dentists, optician’s fees etc). The applicable rate is 10% on the taxable premium unless the insured’s benefit is less than EUR 12.39 per day, in which case a de minimis limit exemption applies.

Finally, we have the Security Fund for Fire & Explosion due annually, which is currently 3% on the taxable premium. This applies on compulsory liability insurance for fire and explosion in premises open to the public.

Navigating the rules and requirements in Belgium can be demanding for even the most experienced insurer. Sovos has a dedicated team of compliance experts to walk you through even the most challenging problems and ensure you are on the right compliance path.