In 2020, the Zakat, Tax and Customs Authority (ZATCA) in Saudi Arabia announced the introduction of an e-invoicing mandate consisting of two phases. The first phase of Saudi e-invoicing requires all resident taxable persons in the Kingdom to generate and store invoices electronically and has been enforced since 4 December 2021. The second phase, which ZATCA will roll out as of 1 January 2023, brings additional requirements and will not be mandatory for all taxpayers to begin with. However, the ZATCA plans to gradually roll out and require all resident taxpayers to comply with phase-2 e-invoicing requirements.
The ZATCA is set to roll out phase 2 in stages, starting with a smaller taxpayer group. Just a few days ago, on 24 June 2022, the first group of taxpayers who must comply with e-invoicing rules beginning on 1 January 2023 was published. According to the ZATCA announcement, taxpayers whose annual revenue exceeds 3 billion riyals (approximately 800 million USD) for the 2021 period are in scope.
So far, only the first group threshold has been revealed. The ZATCA will announce other taxpayer groups and new deadlines later. The ZATCA will notify each taxpayer group at least six months in advance.
In phase 2, taxpayers must generate all e-invoices and electronic notes (credit and debit notes) in XML format (UBL 2.0). There are unique invoice content requirements. All e-invoices and e-notes must include:
However, the e-invoicing requirements concerning tax invoices (B2B) and simplified invoices (B2C) are different, and as a result, different APIs have been made available for different types of invoices.
Tax invoices will be subject to a Continuous Transaction Controls (CTC) regime. More specifically, the system can be categorised as clearance e-invoicing. After generating the XML invoice, including all necessary content, the invoice will be transmitted to the tax authority portal (the ZATCA platform) for clearance through the clearance API. The ZATCA platform will apply ZATCA’s seal as proof of clearance, after which the invoice will gain legal validity. The signed XML will be returned to the supplier, allowing the supplier to choose whether to send the signed XML invoice or a human-readable version, including the XML (PDF A-3 with embedded XML). The human-readable version must be PDF A-3 (with embedded XML) format.
Simplified invoices will be subject to a CTC reporting regime. After generating the XML invoice, including all necessary content, the invoice will be signed using the cryptographic stamp of the supplier. Afterwards the seller will present a paper copy of the invoice to the buyer. Within 24 hours, the taxpayer must report the signed XML to the ZATCA platform through the reporting API
Taxpayers must store e-invoices in electronic form. There are specific requirements concerning the storage, including, for example, mandatory local storage as a main rule and storage abroad only being permitted under certain conditions. E-invoicing solutions must further allow taxpayers to download e-invoices for offline storage.
Need to ensure compliance with the latest VAT and e-invoicing requirements in Saudi Arabia? Get in touch with Sovos’ team of tax experts.
Identifying the location of risk for Insurance Premium Tax (IPT) purposes is the first step to ensuring IPT compliance in a given territory. This area perhaps isn’t as straightforward as it first seems for marine insurance.
As with the location of risk rules for all classes of insurance in Europe, the starting point for marine insurance is the Solvency II Directive (2009/138/EC), in particular Article 13(13). Article 13(13)(b) refers to ‘vehicles of any type’, which is generally understood to include not just motor vehicles but also ships, yachts and aircraft within its scope. Based on this, the location of risk for marine insurance is identified by the ‘Member State of registration’. As this phrase is not defined in the Directive, there has been some confusion about what ‘registration’ refers to in this context. This is illustrated nicely by a case heard in the European Court of Justice (ECJ) in April last year.
This case involved insurance contracts with companies established in Germany and entered into the register of companies held by the District Court in Hamburg. The owners entered the vessels into the shipping register maintained by the same court in Germany. The case arose because the vessels were temporarily authorised to fly the national flags of Malta and Liberia. The German tax authority argued that German IPT was due on these contracts because the vessels remained on the German shipping register throughout the flagging out period.
In contrast, the insurer contested that the risk location should be determined by the Member State that certified that the ship is fit for use and whose flag the ship flies. Malta treats marine insurance as exempt from its Stamp Duty regime, so if the insurer was successful with its argument, then no taxes on its insurance premiums would be due in the European Union.
The ECJ held that the location of risk was in Germany despite the temporary flagging out of the vessels. This decision was because the vessels remained on the Hamburg District Court’s register, which had the primary function of proving ownership. As the owner has the primary interest in insuring the vessel to protect their financial interest in it, the register evidencing ownership was key.
It is worth highlighting that it is unclear how much weight should be placed on this case. This is for a couple of reasons. Firstly, the Ordinance for the implementation of the relevant German legislation refers specifically to ‘shipping registers kept by the local courts’ as being determinative, which differs from the position of other territories. Additionally, a significant issue not addressed by the case is what happens when a Member State doesn’t have a shipping register.
We at Sovos haven’t seen a major shift in the approach taken by insurers since the judgment, meaning in many instances that the ship’s flag is continuing to be seen as pertinent by the market. It will be interesting how the ECJ deals with similar future cases.
We’re happy to help any insurers writing business in Europe that have questions about the location of risk rules, whether concerning marine insurance or any other insurance to ensure taxes are correctly declared.
Contact Sovos’ team of experts for help complying with marine location of risk rules or download our Location of Risk Rules for IPT eBook for more information.
Meet the Expert is our series of blogs where we share more about the team behind our innovative software and managed services. As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about regulatory changes and developments in global tax regimes, to support you in your tax compliance.
We spoke with Manisha Patel, senior compliance services representative – Insurance Premium Tax (IPT), about their role, how they support Sovos clients and their top compliance tips for captives.
I’m a senior compliance services representative – IPT at Sovos. I joined the company over five years ago.
My role at Sovos is multi-faceted. My primary responsibility is to oversee IPT compliance for an extensive portfolio of clients, specifically within the captives practice.
I help ensure that all clients’ tax requirements are met, including checking and signing off tax returns and ensuring that correct payments are made to relevant tax authorities within specified statutory deadlines. Additionally, I help advise clients on more complex or urgent queries that have been escalated within the team.
A P&I Club is a non-profit cooperative association of marine insurance providers that provides P&I insurance to all its member companies. A P&I Club covers a broad range of liabilities, including loss of life, personal injury, cargo loss or damage, pollution via hazardous substances, wreck removal, collision and property damage.
These clubs offer ship owners the highest limits and broadest ranges of coverage. Through their participation in a P&I Club, the member clubs share claims above an individual’s retention via a pooling structure. Pooling together allows members to provide the insurance
cover needed by ship owners and their ships to trade while meeting compulsory insurance and financial security requirements.
Increasing numbers of global tax authorities are switching to digital submissions and, in some cases, require more detailed information to complete these submissions.
My tip for captives would be to invest time learning about these ever-changing requirements for your relevant territories and organise yourself in a way that you can easily and readily have the information you need to hand. This will reduce your business’s risk of errors and non-compliance when settling IPT.
Sovos’ Captives Team caters to the specific needs of captive insurers. Our team can review any program a client may have before the program’s renewal, where we can assist with premium tax calculations, validate applicable country tax rates and prepare payment summaries. Due to limited in-house expertise, we recognise that sometimes additional guidance is needed.
Our IPT Managed Services Team offers a vast amount of knowledge, providing the expertise to our Captive clients through webinars, tax alerts and newsletters to boost their confidence with tax filing and reporting. Additionally, our Consultancy Team can assist with any further queries.
Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.
Update: 7 May 2023 by Andrés Landerretche
Ecuador’s Internal Revenue Service (SRI) has published an updated version of its Guide for Taxpayers on Cancellation of Electronic Receipts. The guide details how to cancel electronic receipts already authorised by the tax entity.
The improved and updated version of the previous edition, which the SRI published in 2018, is part of the body’s work to gradually expand its visibility of taxpayers’ activity over taxpayers and optimise the country’s tax practices.
The functionality highlighted in the guide allows taxpayers to carry out the entire process of annulling electronic receipts, including:
The updated guide includes details of how to request cancellation of a purchase settlement – adding to other electronic vouchers which taxpayers can also cancel such as invoices, withholding vouchers, credit notes, debit notes and remittance guides.
The SRI has established that any request for cancellation from the issuer through the portal must be accepted by the same means by the taxpayer receiving the electronic receipt. They must consent to the status change from “Authorised” to “Cancelled” once the issuer has complied with the annulment process.
The ruling excludes invoices, purchase settlements and delivery notes, as the SRI will cancel them directly if there are errors or the transaction or withholding has not been effective.
Those looking to submit an annulment request must do so exclusively online. The taxpayer issuing electronic receipts and the recipient of the electronic receipt must have an access code to the online SRI portal.
An additional relevant change is an extension of the term to request a cancellation to 90 days after the date of issuance of the proof of sale, withholding or complementary document.
It is important to consider that once somebody starts the annulment process, no procedure allows for the withdrawal of the annulment. If the recipient rejects a cancellation request due to “error”, then the issuer can commence another cancellation request.
Finally, documents with the “Pending Cancellation” status have tax validity, while those in the “Cancelled” status do not.
Interested in learning more about tax compliance in Ecuador? Contact our team of experts.
Update: 21 June 2022 by Victor Duarte
Due to the economic crisis and the necessity of the government to take measures aimed at economic growth and efficient tax collection, on 29 November 2021, the Organic Law for Economic Development and Fiscal Sustainability after the COVID-19 Pandemic was published in Ecuador’s Official Gazette. According to this law, taxpayers obliged to issue invoices must be incorporated into the electronic invoicing system within one year from the publication.
To comply with such measure, on 27 May 2022, the Internal Revenue Service (SRI) published Resolution NAC-DGERCGC22-00000024. It establishes the obligation to issue e-invoices to taxpayers who are required to issue invoices, and the obligation for these taxpayers, qualified as agents of withholding, to issue the Simplified Transactional Annex (ATS) version of withholding documents. These taxpayers will have to adopt the e-invoicing scheme.
1. Income Tax taxpayers who are obliged to invoice but not obliged to issue invoices, sales receipts, withholding and complementary documents in the electronic modality must adopt the e-invoicing scheme into their activity until 29 November 2022, at the latest.
2. Natural persons and companies that are not considered taxpayers of the Income Tax and are obliged to invoice – but not obliged to issue invoices, withholding and complementary documents in the electronic modality – must adopt the e-invoicing scheme into their activity until 29 November 2022, at the latest.
3. Taxpayers required to issue invoices, withholding and complementary documents under the electronic modality, according to numerals 1. and 2. who are qualified as withholding agents by the SRI, must implement the ATS version of withholding documents, following the technical documentation made available by the SRI, until 29 November 2022.
For purposes of the application of this resolution, the subjects obliged to invoice are all taxpayers registered in the Single Taxpayer Registry (RUC) and who must issue and deliver invoices, withholding and complementary documents according to current tax regulations.
Persons with an annual gross turnover below USD 20,000 are not in the scope of this resolution. These taxpayers are known in Ecuador as Popular Businesses (Negocios Populares).
• As of 30 November 2022, only taxpayers responsible for issuing bills of sale (notas de venta) may request authorisations, modifications or renewals for the issuance of receipts through registering machines.
• As of 30 November 2022, taxpayers required to issue invoices, retention and complementary documents in the electronic modality may request authorisations for pre-printed documents only after they have obtained the authorisation to issue electronic documents in the production environment of the e-invoicing system.
The resolution introduces a limit for invoices or receipts issued under the pre-printed modality, which may not exceed 1% of the total receipts issued in the previous fiscal year.
Pre-printed documents should only be issued in exceptional cases of contingency when, due to force majeure or fortuitous event, taxpayers authorised to issue documents under the electronic modality cannot generate them electronically.
According to this resolution, the SRI may keep a free tool available for taxpayers to generate electronic documents without prejudice to taxpayers using their computer systems. There was a significant change compared with the previous resolution, which established that the SRI will “maintain” this free tool, indicating that the maintenance of said tool is now optional for the SRI.
According to the original plan of implementation, the SRI had plans to gradually expand the e-invoice mandate for all taxpayers in the country, with more taxpayers scheduled to start issuing e-invoices from 2023 and 2024. However, with this resolution, the schedule of mandatory e-invoicing implementation has been modified. All these taxpayers must start adopting the e-invoicing system this year until 29 November 2022 at the latest.
Need help ensuring your business stays compliant with the evolving e-invoicing obligations in Ecuador? Contact us today to learn how Sovos’ solution for VAT compliance changes can help companies stay compliant in Ecuador and around the world.
The recent popularity of non-fungible tokens (NFTs) has captivated investors, governments and tax authorities. An NFT is a digital asset that represents real-world objects such as a piece of digital art, an audio clip, an online game or anything else. NFTs are purchased and sold online and are typically encoded with the same software as cryptocurrencies. They are stored in the blockchain to authenticate and track ownership of the NFT.
NFTs are generally one of a kind and can fetch tens of millions of dollars for a single NFT. The total market value of NFT sales skyrocketed into the billions in 2021. The high values and increase in sales have inspired several governments to introduce VAT legislation to define and tax these digital assets.
Multiple countries have announced specific VAT measures for the treatment of NFTs:
Spain: Spain is the first country in the EU to apply VAT to NFTs. The General Directorate of Taxes in Spain issued a ruling stating the supply of NFTs is an electronically supplied service subject to the standard VAT rate of 21%.
Belgium: The Belgian Finance Minister confirmed that the supply of NFTs is an electronically supplied service subject to the standard VAT rate of 21%.
Norway: The Norwegian tax administration defines the supply of NFTs as an electronically supplied service. It’s important to note that the creation or mining of an NFT will not attract VAT in contrast to a sale.
Washington State (U.S.): The Washington Department of Revenue is expected to announce that NFTs are subject to the state’s sales and business taxes as a digital product. This ruling will make Washington the first state to issue sales tax policies on NFTs.
In other countries, such as Switzerland, the supply of NFTs is generally considered an electronic service; however, there is a Swiss VAT exemption for electronic works of art directly sold by a creator that may apply to NFTs. VAT treatment of works of art may create implications for tax authorities when classifying NFTs.
Another area of VAT concern surrounding NFT transactions is the place of supply. Place of supply for VAT purposes typically requires buyers and sellers to exchange domicile information such as a billing address. NFT transactions conducted through blockchain can avoid sharing personal information with intermediaries via an anonymous ‘wallet,’ which may lead to privacy concerns and other issues for tax authorities as they attempt to bring these transactions within the scope of VAT.
The VAT treatment of NFTs is still in its infancy and will continue to evolve alongside the digital asset industry. More insight into the classification of NFTs and the determination of the place of supply of such transactions will come as more tax authorities issue rulings analysing these unique digital assets.
To find out more about what the future holds, download the 13th Annual VAT Trends whitepaper. Follow us on LinkedIn and Twitter to keep up to date with regulatory news and updates.
Insurance Premium Tax in Italy is complex. This blog helps insurers navigate challenges in Italy, from IPT rates to reporting requirements. You can find all recent updates on IPT in Italy below in the update section.
Read our Insurance Premium Tax guide for an overview of IPT in general.
Update: 1 September 2023 by Edit Buliczka
The Italian Tax Reform Bill went into effect on 29 August 2023. The bill was adopted by the Italian Parliament on 9 August and published in the Italian official gazette on 14 August.
Only the general principles of the execution of the tax reform were laid down in this bill; no specifics or changes to existing tax legislation were made. On the other hand, the bill includes information about the timeline for these changes, stating: “The Government is delegated to issue, within twenty-four months from the date of entry into force of this law, … one or more legislative decrees that revise the tax system.”
Among other key taxes, such as VAT and the Corporation Income Tax (CIT), Article 17 featured a change in the timeframes for assessing IPT. The revision’s goal is to bring it in line with other indirect taxes. It also necessitates changes to the IPT penalty structure, as well as the procedures and criteria for tax application. Finally, it is said that the new guidelines should rationalise the applicable IPT rates.
The bill also includes generic principles that are applicable to all taxes, such as:
Article 21 envisages an Italian Unified Tax Code to be implemented by 29 August 2024. It will reorganise and combine existing tax legislation into a comprehensive tax code.
This tax code will be divided into two parts: a general part with unified regulations for the common elements of tax systems and a particular section with regulations for individual taxes.
Sovos will keep a close eye on the Italian Tax Reform process, so stay tuned for updates or contact our experts if you have any special queries.
Update: 28 June 2023 by Edit Buliczka
Different IPT rates are applicable in Italy, depending on the type of insured risk provided to the policyholder. The rates vary from 0.05% to 21.5%.
For example, the highest IPT rate applies to legal expenses, whilst payments received from insurance policies covering risks of navigation of ships registered in Italy are subject to 0.05%. Some premium amounts are exempt from IPT.
It is important to note that the Italian class of business does not correspond to the European Solvency II Directive class of business. There are 33 business classes in Italy, numbered from AB1 to AB33.
Italy is known for its strict application of laws and harsh penalty regime, charging up to 400% of the tax liabilities due. Penalties and interest for late payments are time-sensitive, calculated daily and payable alongside tax liabilities.
The taxable premium is the income generated under an insurance contract, comprised of the premium plus any accessory fee stated in the contract of insurance (without any deductions). Any amount paid by the policyholder to the insurer is a taxable premium.
Beyond IPT, premium amounts derived from various risks trigger parafiscal charges. The most significant parafiscal charge is the CONSAP (Solidarity Fund for Extortion and Usury Victims) with a rate of 1%.
Parafiscal charges are also due on risks such as:
If an insurance company receives a premium, IPT is due even if the insured is subsequently reimbursed.
IPT credits relating to policy cancellations or adjustments are not permitted and should not be reclaimed from the Italian tax authorities, nor offset against current liabilities. According to art. 4. Law 1216/1960, IPT “does not cease to be due even if the premium is fully or partially returned to the policyholder for any reasons”.
Italian trade body ANIA clarified the applicability of this provision, permitting tax reclaims only if the tax has not been fairly collected. This provision includes clerical errors or an incorrect qualification of the risk or scope of the insurance contract based on the information available when the policy was written.
For example: if the insurer mistakenly overcharged the policyholder and the policyholder overpaid the tax, the overpaid IPT can be deducted from tax liabilities arising in the same reporting period, i.e., the calendar year.
Italian IPT is payable monthly, whereas the return is due annually. Prepayment is also necessary with a deadline of November and equals 100% of the IPT plus CONSAP paid in the previous calendar year.
Some parafiscal charges such as EMER are declared and paid alongside the IPT, whilst others like RAVF and HAVF have different deadlines.
Although insurers pay tax liabilities monthly, and file declarations annually, there is a legal obligation to maintain IPT books. IPT books are chronological ledgers on a policy level that must be readily available should the Italian tax authorities request the company records. The authorities mainly request IPT books for tax office audits, investigations or to support formal requests by an insurer.
Insurers are required to make an annual prepayment to the Italian tax authorities in anticipation of future tax liabilities. Prepayment is due by 16th November each year. It is calculated as a percentage (100% for 2022) of total IPT and Consap contribution made in the previous year, deducting any IPT paid in respect of Motor Third-Party Liability business.
Once settled, this prepayment can be offset against IPT liabilities (excluding Motor Third-Party liabilities) arising from February, when the January tax liabilities are due.
Life plans are exempt from IPT in Italy unless they have been written prior to 1 January 2001. If the life insurance policy was purchased before this date, the premium is subject to a 2.5% IPT rate.
On top of the annual IPT return, insurance companies must file a variety of reports to several governmental agencies including the Italian Tax Office. The Motor report is embodied in the annual IPT return. There is an obligation for domestic and EU and EEA-based foreign insurance companies to submit separate reports about written insurance contracts, premiums and claims.
There are also a growing number of reports that foreign insurance companies need to submit to the Italian Supervisory Authority (IVASS).
Learn more about additional reporting requirements in Italy.
Many factors make IPT in Italy unique and one of the most challenging jurisdictions from a compliance perspective. This includes monthly tax settlements, an annual declaration, prepayment rules, treatment of negative premiums and the various reports that need submitting to the Tax Office, regional municipalities or IVASS.
28 June 2023
The Italian Tax Office released a new circular on 19 April 2023 granting the opportunity to benefit from the 1/18 penalty regime. This follows the Legislative Decree n. 34/2023 from 30 March 2023.
With Circular No. 9/E, the Italian Tax Office has clarified the procedure, the extent of the measure and the ways of access. The circular emphasises that payments can be made in instalments, up to 20 equal payments over a five-year period.
The application date has been pushed out from 31 March 2023 to 30 September 2023.
22 March 2023
The 2022 Italian Budget (Law 197/2022) introduced new measures under the ‘tax break’ scheme (“tregua fiscale”) to promote the settlement of tax irregularities and pending tax assessments.
The Italian tax authority (Agenzia delle Entrate) issued Circular letter no. 02/2023 to provide further clarification and guidance on the new tax measures.
The new regulation allows taxpayers the choice to regularise their tax positions for prior years up to 2021. If they choose to do so, the penalty associated with the regularisation decreases to 1/18th of the minimum penalty – provided that they complete the regularisation by 31 March 2023. In addition to submitting the corrective tax returns, taxpayers must pay the outstanding taxes, penalties and interest by this date.
The law allows taxpayers to make the payments in eight quarterly instalments, with the first due by 31 March 2023. An interest rate of 2% per year applies to the following instalments, which they must pay by 30 June, 30 September, 20 December and 31 March each year.
Additionally, the legislator extended the application of the reduced penalty regime to tax assessments and tax notifications (“avvisi di accertamento, rettifica o liquidazione”) which are already submitted. This ruling applies if the submitted regularisation was not appealed before 1 January 2023, when the regulation came into force, as long as payment is made by 31 March 2023.
12 December 2018
The Italian Parliament approved the 2019 Budget Act on 30 December 2018. As anticipated, the approved budget includes increased IPT prepayment rates. The approved rates are as follows:
For completeness, these new rates overrule those approved in last year’s Budget Act. However, the deadline remains 16 November each year.
At Sovos, our experienced IPT specialists can help your business ensure compliance in Italy. Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.
Sovos recently hosted an online webinar on VAT recovery where we covered reciprocity agreements between the UK and EU Member States when making 13th Directive VAT refund claims. One of the questions that kept coming up is what are reciprocity agreements and why do they matter?
When making 13th Directive refund claims, each EU Member State has different rules or conditions to meet before agreeing to a VAT refund. One of the conditions that EU Member States may require is a reciprocity agreement. A reciprocity agreement is a deal to reciprocate VAT refunds between two countries.
Therefore, VAT is only refundable when a similar tax is refundable for local businesses in the applicant’s country. For example, suppose a Spanish business was allowed to obtain a VAT refund in Norway through a similar scheme to the 13 Directive. In that case, Spain would likely have reciprocity with Norway and will allow the Norwegian businesses to make a 13th Directive Refund Claim in Spain.
There are currently around 19 EU Member States that require reciprocity agreements for non-EU businesses to make VAT refund claims. Of those, Greece and Slovenia currently only have reciprocity agreements with two countries (Norway and Switzerland), whilst Italy has three (Norway, Switzerland and Israel). When making EU VAT refund claims, businesses should review reciprocity and not assume they will automatically be approved.
Before Brexit, UK businesses could make VAT refund claims through the EU VAT Refund Directive (also known as the 8th Directive) which was built to allow reciprocity freedom for all EU Member States. However, post-Brexit, this mechanism for VAT refund claims no longer applied, and the UK fell within the 13th Directive Refund Scheme as a non-EU business.
Whilst the UK and EU have a Free Trade and Cooperation Agreement in place, there was no specific mention of reciprocity in VAT refund claims as these should be agreed between those particular EU Member States and the UK. Therefore, it may be more difficult for UK businesses, that make refund claims around the EU, to recover VAT incurred in some countries.
Regarding current reciprocity agreements with the UK, the only official announcements we have seen to date have been from Germany, Spain and Hungary. However, we are aware of ongoing discussions between the UK and other EU Member States.
HMRC states they will only refuse a claim if the reciprocal country has a scheme for refunding taxes but refuses to allow UK traders a refund. Therefore, HMRC is willing to allow VAT recovery in the UK for EU businesses providing UK businesses receive the same treatment as the EU. It would therefore be in the interests of EU Member States to allow VAT recovery for UK businesses for businesses in their own country to benefit from the same treatment.
Most EU Member States require reciprocity when making VAT refund claims. Therefore, the law of reciprocity is an integral factor when looking to make a VAT refund claim in any jurisdiction. It’s important to understand these reciprocity laws to prevent wasting time and money on making a VAT refund claim from a country that doesn’t allow it.
To find out more about what we believe the future holds, download the 13th Annual VAT Trends whitepaper. Follow us on LinkedIn and Twitter to keep up to date with regulatory news and updates.
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.
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:
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.
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.
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.
Speak to our team if you have any questions about the latest e-invoicing requirements in Peru. Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world
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’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:
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
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.
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:
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.
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:
Only public contracts and concessions, which estimated value is less or equal to €3,000 excluding VAT are exempt.
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.
Get in touch about how Sovos can help with your e-invoicing compliance challenges.
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.
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:
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.
The advantages of preparing for a VAT audit can be summarised as follows:
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.
Get in touch about the benefits a managed service provider can offer to help ease your VAT compliance burden.
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.
The additional information that insurers are obliged to collect, disclose and submit in their Stamp Duty Declaration is as follows:
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.
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.
To understand more about Portugal’s Stamp Duty and how it impacts your IPT compliance, get in touch with our team of experts.
Learn more about the latest rates, rules and regulation of Insurance Premium Tax in our e-book, IPT Compliance – A Guide for Insurers.
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.
There are two basic tax calculation methods in the European IPT world
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.
Here are some examples of these specific rules:
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.
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.
IPT amount calculation requires detailed knowledge of the rules and regulations. Sovos has a dedicated team of IPT compliance experts to walk you through even the most challenging calculations.
Contact our team today to learn more about how we can help with calculating IPT correctly or take a look at our comprehensive guide about Insurance Premium Tax.
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
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.
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 5th 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 8th 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 8th 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 5th of the month following the issuance of the invoice.
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.
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
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 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.
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).
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.
Need to ensure compliance with the latest e-invoicing requirements in Portugal? Get in touch with Sovos’ tax experts.
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.
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.
Italy has recently expanded the scope of its e-invoicing mandate bringing in new groups of taxpayers:
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.
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.
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.
Speak to our team if you have any questions about the latest e-invoicing requirements in Italy. Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
Update: 30 May 2024 by Dilara İnal
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.
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.
Waves | Threshold (Annual taxable revenue) | Integration date |
Wave 1 | 3 billion Riyals (approx. USD 800m) for 2021 | 1 January 2023 |
Wave 2 | 500m Riyals (approx. USD 133m) for 2021 | 1 July 2023 |
Wave 3 | 250m Riyals (approx. USD 66m) in 2021 or 2022 | 1 October 2023 |
Wave 4 | 150m Riyals (approx. USD 39m) in 2021 or 2022 | 1 November 2023 |
Wave 5 | 100m Riyals (approx. USD 26m) in 2021 or 2022 | 1 December 2023 |
Wave 6 | 70m Riyals (approx. USD 18m) in 2021 or 2022 | 1 January 2024 |
Wave 7 | 50m Riyals (approx. USD 13m) in 2021 or 2022 | 1 February 2024 |
Wave 8 | 40m Riyals (approx. USD 10m) in 2021 or 2022 | 1 March 2024 |
Wave 9 | 30m Riyals (approx. USD 8m) in 2021 or 2022 | 1 June 2024 |
Wave 10 | 25m Riyals (approx. USD 6m) in 2022 or 2023 | 1 October 2024 |
Wave 11 | 15m Riyals (approx. USD 4m) in 2022 or 2023 | 1 November 2024 |
Wave 12 | 10m Riyals (approx. USD 2.6m) in 2022 or 2023 | 1 December 2024 |
Read our overview for more information regarding Saudi Arabia’s push towards e-invoicing.
Update: 20 January 2023 by Dilara İnal
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
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.
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.
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.
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
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.
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.
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 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.
Need to ensure compliance with the latest CTC requirements in Saudi Arabia? Get in touch with Sovos’ team of tax experts.
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.
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.
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.
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.
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.
Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.