Governments throughout the world are introducing continuous transaction control (CTC) systems to improve and strengthen VAT collection while combating tax evasion. Romania, with the largest VAT gap in the EU (34.9% in 2019), is one of the countries moving the fastest when it comes to introducing CTCs. In December 2021 the country announced mandatory usage of the RO e-Factura system for high-fiscal risk products in B2B transactions starting from 1 July 2022, and already now they are taking the next step.

RO e-Transport system

The Ministry of Finance recently published a draft Emergency Ordinance (Ordinance) introducing a mandatory e-transport system for monitoring certain goods on the national territory starting from 1 July 2022. The RO e-Transport system will be interconnected with existing IT systems at the level of the Ministry of Finance, the National Agency for Fiscal Administration (ANAF) or the Romanian Customs Authority.

According to the draft Ordinance, the transportation of high-fiscal risk products will be declared 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.

The system will generate a unique code (ITU code) following the declaration. This code must accompany the goods that are being transported, in physical or electronic format with the transport document. Competent authorities will verify the declaration and the goods on the transport routes.

The first question that comes to mind is what the definition of high-fiscal risk products is. The Romanian Ministry of Finance had already established a list of high-fiscal risk products for mandatory usage of the RO e-Factura system. However, it is still unknown if the high-fiscal risk product list will be the same. The Ministry of Finance will establish a subsequent order defining the high-fiscal risk products in the coming days.

If the transportation includes both goods with high-fiscal risk and other goods that are not in the category of high-fiscal risk, the whole transportation must be declared in the RO e-Transport system.

Which transportations are in scope?

The RO e-Transport system is established to monitor the transportation of high-risk goods on the national territory.

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.

What happens next?

The draft Ordinance is expected to be published in the official gazette in the coming days. Following the publication, the Ministry of Finance will establish subsequent orders to define the categories of road vehicles and the list of high-fiscal risk products for the RO e-Transport system. Moreover, as of 1 July 2022, using the RO e-Transport system will become mandatory for transporting high-fiscal risk products.

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

The European Commission’s “VAT in the Digital Age” initiative reflects on how tax authorities can use technology to fight tax fraud and, at the same time, modernise processes to the benefit of businesses.

A public consultation was launched earlier this year, in which the Commission welcomes feedback on policy options for VAT rules and processes in a digitized economic EU. In an earlier blog post, Sovos explored the aspects of a single EU VAT registration. It’s one of the main initiatives proposed by the Commission to adapt the EU VAT framework to the digital age. Another critical issue is VAT reporting obligations and e-invoicing, discussed in this blog.

Digital Reporting Requirements

The Commission sees a need for modernising VAT reporting obligations and is considering the possibility of further extending e-invoicing. The term Digital Reporting Requirements was introduced by the Commission for any obligation to report transactional data other than the obligation to submit a VAT return, i.e. reporting transaction by transaction. This means that Digital Reporting Requirements include various types of transactional reporting requirements (e.g. VAT listing, Standard Audit File/SAF-T, real-time reporting) and mandatory e-invoicing requirements.

These measures have been implemented in various fashions in different EU Member States over the past couple of years resulting in diverse rules and requirements for VAT reporting and e-invoicing across the EU. The current Commission initiative is an opportunity for the EU to obtain harmonisation in this area. Its public consultation is asking for input as to which road to take.

The route to harmonisation

The public consultation contains several policy options to consider. One would be to leave things as they currently stand with no harmonisation and the continued need for Member States to request a derogation if they wanted to introduce mandatory e-invoicing. At the other end of the scale, a further option would be to introduce full harmonisation of transactional reporting for VAT for both intra-EU and all domestic transactions.

And sitting between these extremes, are several other routes. Instead of making a harmonised solution mandatory such a solution could be simply recommended and voluntary, coupled with the removal of the need to request a derogation ahead of introducing B2B e-invoicing mandates. Another way is to have taxpayers keep all transactional data and make it available on request by the authorities. And one final option could be to adopt partial harmonisation where the VAT reporting for all intra-EU supplies is aligned and mandatory but where domestically it remains optional.

While these policy options formally remain open to public consultation until 5 May here, they must now be viewed in the light of the European Parliament resolution of 10 March 2022 with recommendations to the Commission on fair and simple taxation supporting the recovery strategy.

In its resolution, the European Parliament calls upon the Commission to take actions regarding e-invoicing and reporting, to reduce the tax gap and compliance costs. Among the measures recommended are to set up a harmonised common standard for e-invoicing across the EU without delay and establish the role of e-invoicing in real-time reporting. Furthermore, the European Parliament proposes that the Commission explore the possibility of a gradual introduction of obligatory e-invoicing by 2023, where state-operated or certified systems should administrate the invoice issuance. In both cases focus should be on a significant reduction of costs of compliance, especially for SMEs.

It remains to be seen how the Commission will manage to align the European Parliament’s recommendations with their policy options and Member States where in several cases solutions have already been implemented.

Beginning in April 2022, the requirements for Making Tax Digital (MTD) for VAT will be expanded to all VAT registered businesses. MTD for VAT has been mandatory for all companies with annual turnover above the VAT registration threshold of £85,000 since April 2019. As a result, this year’s expansion is expected to impact smaller businesses whose turnover is below the threshold but who are nonetheless registered for UK VAT.

Under MTD, businesses must digitally file VAT returns using “functional compatible software” which can connect to HMRC’s API. Companies must also use software to keep digital records of specified VAT-related documents. Stored records must include “designatory data,” such as the business name and VAT number, details on sales and purchases, and summary VAT data for the period. The use of multiple pieces of software is permitted. For example, companies can use accounting software to store digital records. Additionally, “bridging software” can be used to establish the connection with HMRC’s API and to submit the VAT returns.

Since April 2021, businesses must also comply with the digital links requirement. Under this requirement, a digital link is required whenever a business uses multiple pieces of software to store and transmit its VAT records and returns under MTD requirements. A digital link occurs when a transfer or exchange of data can be made electronically between software programs, products, or applications without the need for or involvement of any manual intervention.

In 2020, in response to the COVID-19 pandemic, the British government introduced a 5% reduced rate on specified hospitality services. This reduced rate was increased to 12.5% starting 1 October 2021. The reduced rate is currently scheduled to expire at the end of March. As a result, the following services will return to being taxed at the standard rate beginning in April:

In November 2021, a Draft Royal Decree was published by the Chancery of the Prime Minister of Belgium, aiming to expand the scope of the existing e-invoicing mandate for certain business to government (B2G) transactions by implementing mandatory e-invoicing for all transactions with public administrations in Belgium. This obligation was already in place for suppliers of the centralised public entities of certain regions (Brussels, Flanders, Wallonia). However, going forward, it will include all public entities in all Belgian regions.

A phased approach

More specifically, the roll-out for mandatory issuance of e-invoices by the suppliers of public institutions in Belgium will be carried out in the following phased approach:

As a result of the transposition of the Directive 2014/55/EU, all Belgian government bodies are already obliged to be able to receive and process e-invoices within public procurement. This new national legislation expands the Directive’s scope and mandates the issuance of e-invoices by all suppliers to the federal government.

The journey continues towards a B2B e-invoicing mandate

These B2G developments are not the end of the story. They are just the beginning. The Belgian Minister of Finance, Vincent Van Peteghem, announced in October 2021 that the government intends to extend the existing B2G e-invoicing obligation to also cover B2B transactions. Nevertheless, official sources have not yet communicated formal information specifying details of the mandate and its following implementation. Rumour has it that a legislative proposal for the B2B e-invoicing mandate was going to be published during 2022 with the implementation process happening in 2023.

However, considering the European Parliament Resolution last week which strongly favours harmonised and mandatory e-invoicing in the EU, Belgium will likely hold its horses at least until the Commission produces a proposal for how to manage e-invoicing and reporting in the Union.

Registering for Insurance Premium Tax (IPT) with tax authorities across Europe can be challenging and complex, particularly when multiple territories are involved. There are many elements businesses must consider when registering for IPT. What are the required supporting documents? Who can sign? Do documents need to be legalised? Is there a two-step process? These are just a few of the questions you may ask yourself during the registration process.

Based on common pain points we come across with our IPT customers, we’ve put together our five top tips to help make your IPT registration journey easier:

Your company is likely already writing business in the territories you need to register with. Therefore, it’s important the registration is completed promptly to avoid sanctions that some tax authorities may impose. We recommend signing and returning the documents as soon as possible to avoid such complications.

European tax authorities are very specific with their requirements, and depending on the EU Member State, the rules may be different. Generally, supporting documents should be dated within the last six months and clearly legible. Some tax authorities require documents to be notarised and apostilled, some accept electronic signatures and some do not. The registration process can be delayed when supporting documents are incorrect, or templates are completed incorrectly. To avoid delays in your registration submission, be sure to pay close attention to the instructions provided.

Whilst some requested information may seem intrusive and personal, there is always a reason for the request. We will never ask you to provide anything more than what the tax authorities require to complete an IPT registration. Your personal data is always treated with the strictest confidentiality, security and complies with GDPR standards.

Timelines for IPT registration in EU Member States can vary. Some tax authorities, such as Germany, confirm registration within a week of submission, whereas Greece can take 8-12 weeks. Don’t be concerned if your registration is not confirmed as fast as you had expected.

We are keen to have your registration completed as efficiently and swiftly as possible. If you have any queries, your registration representative is always here to help. We can address your questions by email or arrange a call to go over the entire process if this is preferable to you.

Sovos’ IPT Managed Services provides support from our team of experts using software that is updated in real-time. Additionally, our team of regulatory specialists monitor and interpret global IPT regulations, so you don’t have to.

On 10 March, the European Parliament (EP) adopted a Resolution to the Commission’s Action Plan on fair and simple taxation supporting the recovery strategy, which set forth 25 initiatives predominantly related to European Union Value Added Tax (EU VAT). The document includes several general considerations and recommendations to the Commission for the VAT Directive revision proposal (“VAT in the Digital Age”) for 2022.

Changes to the EU VAT tax policy

The EP’s resolution addressed the significant challenges in the European Union (EU) VAT tax policy and placed particular attention on the simplification, modernisation and harmonisation of such rules by uniform adoption of technology tools across all Member States, including digital and e-invoicing requirements and mandates.

The updated resolution highlights a concern around the lack of sufficient support from the Council regarding the definitive VAT regime, that is, the shift from origin to destination principle, still due for implementation. In such a system, VAT will be levied at the place of destination, leaving behind the complex transitional VAT system rules.

EU VAT tax policy challenges

Concerns were also raised on the complexity of the multiple tax regulations across the EU and the constraints this entails, particularly for small and medium enterprise (SME) compliance and for those vulnerable to fraud. Added to these factors are the high costs borne by businesses to conform to the multitude of legislative requirements in the different jurisdictions. The Parliament makes an urgent call for a consistent move towards a more straightforward and modern VAT system.

Moving towards simpler VAT reporting

More specifically, the EP described the Commission’s efforts to harmonise procedural rules across the EU and encourage closer cooperation efforts among tax authorities and businesses through the EU Cooperative compliance program as of “highest importance”.

The objective of various points was to use technology as an effective means for simple and modern tax compliance. Digitization of VAT was utterly welcomed as a means for modern and simplified VAT compliance, where real-time or near real-time reporting and e-invoicing is to be utilised by Member States in a uniform and harmonised manner across EU all jurisdictions.

On the same front, recommendations were for one-time collection of data by the tax authority aligned with utmost protection and respect regarding data security legislation, and the use of artificial intelligence (AI) and various software to ensure maximum effectiveness of data usage and security. Adopting digitization requirements will enhance security, prevent and combat fraud and increase administrative cooperation among Member States.

The resolution also targeted the new Union business and taxation agenda, supporting the design of a new and single Union corporate tax rulebook, which should reflect the OECD Pillar 1 (reallocation of taxing rights) and Pillar 2 (minimum tax on corporate profit) negotiations.

These recommendations are to be followed by the European Commission’s submission of one or more legislative proposals by 2022/2023.

Poland has been moving towards introducing the CTC framework and the system, the Krajowy System e-Faktur (KSeF), since early 2021. As of 1 January 2022, the platform has been available for taxpayers who opt to issue structured invoices through KSeF and to benefit from the introduced incentives.

As the taxpayers have been using KSeF for a while, let’s take a closer look at what has been happening and will happen in the future regarding Poland’s CTC reform.

Publication of regulation on the use of KSeF

Initially presented as a draft act by the Ministry of Finance in November 2021, the regulation on the use of KSEF was finally adopted and published in the Official Gazette on 30 December 2021 after several reiterations.

The regulation covers mainly the categories of authorisations, methods of authentication, and information required to access the structured invoices.

According to the regulation, taxpayers using KSEF are required to authenticate using one of the following methods: Qualified Electronic Signature, Qualified Electronic Seal, Trusted Signature, or Token.

A trusted signature confirms the identity assigned to a specific Polish Identification (PESEL) number. The token method can be used to grant authorisations in the KSeF once the taxpayer has been authenticated.

New information and documentation published by the Polish tax authority

The Polish tax authority has published new information on its website about KSeF features including FAQs and further documentation.

The FAQs include information regarding the scope and operational side of the system, whereas the sample XML files and the information brochure shed light on the logical structure of e-invoices and mapping requirements.

What will happen next?

Although the tax authority continues to make every effort to clarify the many aspects of the new CTC system in Poland, we still have a long way to go regarding the full implementation of KSeF.

For instance, during the public consultation of the draft act the Ministry of Finance stated taxpayers would be able to download structured invoices via API in XML or PDF format. As of today, there is no technical information available regarding the PDF generation within the system using the API. The tax authority has published the technical documentation related to the outbound process but there is still no documentation available on the inbound side.

More importantly, a decision authorising Poland to introduce special measures derogating from Articles of the EU VAT Directive is yet to be obtained from the EU Council for roll-out of the e-invoicing mandate for all B2B transactions. The current Polish VAT Act requires the buyer’s acceptance to receive structured invoices. As the Polish authorities aim to make the KSeF mandatory in 2023 an amendment of this provision is expected once the special measures have been authorized by the EU Council.

The adoption of Pre-Filled VAT Returns so far

The trend of tax authorities pre-filling VAT returns using data gathered in continuous transaction controls (CTCs) is persisting across many countries.

CTCs see transactional data sent in real-time through e-invoices or e-reports auto-populate VAT returns and ledgers. Below is the status of the countries that either make available pre-filled returns or have projects to do so:

Disproving returns created by the tax authorities using transactional data sent by the taxpayer is a challenging task. Tax authorities assume they either have all the data they need for an assessment or the taxpayer has failed to submit it in good time.

Therefore, it is imperative to maintain complete electronic records that pre-filled VAT returns can reconcile. Possessing analytics solutions that can perform such analysis in an automated way might also help taxpayers to identify mismatches and correct errors.

Pre-Filled VAT Returns – New Developments in 2022

We have previously written about the growing trend of tax authorities “pre-filling” VAT Returns using data from electronic invoices – a trend that began in Latin America and has since spread to several European countries. These pre-filled returns, when accurate, can serve as a simplification measure for taxpayers, who can fulfill their reporting obligations simply by approving what has been generated for them. At the end of 2021, two European countries, Italy and Spain, introduced pre-filled VAT Returns, with Hungary and Portugal planning to introduce them in some capacity.

Pre-filled VAT returns across Europe

The landscape for pre-filled VAT Returns has changed significantly in 2022. Hungary and Portugal have both postponed their plans to introduce them. The Hungarian tax authority (NAV) has reversed its decision to introduce pre-filled returns after delaying the eVAT project for several months due to the ongoing COVID pandemic. NAV will instead focus on enhancements to its real time invoice reporting model (RTIR). Because any efforts to pre-fill VAT Returns are dependent on the state of RTIR, it would not be surprising to see NAV revive the eVAT project down the line.

Portugal, meanwhile, had planned to potentially pre-fill sections of its annual VAT Return with data from the so-called “Accounting SAF-T,” which was due to become a mandatory filing in 2022. However, following a rejection of the state budget, the Portuguese tax administration is now stating that Accounting SAF-T will become a mandatory filing from 2024.

On the other side of the ledger, 2022 has seen France introduce pre-populated data into its VAT Returns, while Greece is considering using its myDATA system to pre-fill VAT Returns for taxpayer approval.

France is a particularly interesting case, as it has no e-invoicing regime to pull data from. Instead, auto-population of data on the French VAT Return is limited to information on imports, based on electronic customs declarations. France plans to introduce mandatory B2B e-invoicing in 2024, which may end up widening the scope of pre-population. This new approach was spurred on by a transfer of responsibility from French Customs authorities to French tax authorities for collecting VAT due on imports. Notably, only the VAT due to the authorities, as settled in the VAT Return, is pre-filled; corresponding input VAT amounts must be populated by the taxpayer (likely because some taxpayers won’t be able to claim full deductions).

Greek plans to introduce pre-filled VAT Returns are more undetermined, but some reports claim that a pilot program will be introduced at some point during 2022.

The future of pre-filled VAT returns

It is clear that, despite delays in Hungary and Portugal, European tax authorities are demonstrating a continuing interest in utilising pre-filled VAT returns. In fact, from a tax authority perspective, pre-filled VAT returns are the natural evolution from a mandatory e-invoicing system or a real-time invoice data reporting system – the data is already at their disposal. From the taxpayer standpoint, it is therefore imperative to maintain accurate and complete electronic records that can be reconciled with pre-filled VAT Returns. This will help taxpayers to correct any errors or raise any necessary challenges to VAT assessments. A high-quality accounting software program can be a useful tool to achieve this end.

With a new month comes yet another report due in the Insurance Premium Tax (IPT) sphere. Insurance companies covering risks in Greece must report their insurance policies triggered in 2021 in the form of the Greek annual report. This is due by 31 March 2022.

Let us cast our minds back, in late 2019 this report came to fruition after previously being ratified in legislation released in 2016. At the time, due to the delay in implementation, the report was backdated, and insurers faced the challenge of submitting transactional level details for the period 2016-2018 in a short space of time.

There was however a precedent for such a dramatic change. And those who experienced the change with the Spanish Consorcio de Compensacion de Seguros submission would have experienced a sense of déjà vu with this development. Similarly, some insurers may be experiencing all too familiar issues now with the change in Portuguese Stamp Duty submission.

The market initially struggled with the Greek annual report due to the level of details required. In particular, the VAT/tax registration number was often not being collected from the Insured. Furthermore, with legacy systems still in use some of the other details in the report weren’t readily available. What this meant in a lot of cases for the Insurer was the painstaking and often time consuming process of going back to the policyholder to collect such information.

Greek annual IPT report

What about the report itself? The Greek annual report is a transactional level declaration on excel, which requires the following details to be populated:

The standard IPT rate in Greece is currently 15% with the 20% rate reserved for risks covering fire. Where there is a multi-risk policy covering both rates, the premiums must be apportioned on a per rate basis and therefore split out into two different lines.

Thankfully exempt premiums are not required on the report which somewhat eases the burden.

But what about cases where it was simply not possible to collect this information? This was an issue we’ve seen for some of our IPT customers where incomplete reports were submitted. So far, we haven’t experienced pushback from the tax authority for the omission of certain details, but we cannot guarantee this will continue to be the case.

Easing the pain of IPT reporting in Greece

Preparation is key. And education is key. This annual report is here to stay so the Insurer must be prepared well in advance that such details will be required and they should aim to collect this information on an ongoing basis rather than at the last moment. In some cases, an update in software will be required as the current systems may not have the capability to capture the required data. Furthermore, all relevant parties in the data supply chain should be educated on the importance of collecting the details. We believe that more countries will implement transactional reports in the coming years, so it would be prudent to set up certain controls now, to help prepare and ease the burden later.

As the world of IPT compliance is so fragmented across territories, keeping abreast of changes in reporting requirements can be challenging. Our team of experts can guide you through the details and ensure you are on the right compliance path.

Many businesses will now be involved in “cross border” transactions meaning that a business in one territory will sell and, often, deliver goods to a customer located within another territory. The existence of two or more tax territories in the transaction, and the possibility that there may be a customer in the EU and a supplier in a third country such as the UK, will inevitably lead to VAT challenges with varying degrees of complexity.

Different challenges will be faced by suppliers involved in B2B transactions compared to B2C transactions – although there will also be some common issues. This article will focus on B2B transactions.

Let’s consider a UK supplier with a contract to supply goods manufactured in the UK to customers within the EU.

Importing goods into the EU

The first point to recognise is that to deliver the goods to the EU customer the goods must pass through an EU customs border. And here is the first point for supply chain management.

The customer’s starting point is likely to be that they will want the supplier to import the goods and a salesperson, eager to please their customer, is likely to agree. Is this a problem for the supplier? OH YES!

Customs considerations

A salesperson returns triumphant with an order with Incoterms of DDP (Deliver Duty Paid) – but is this a cause for celebration?

Deliver Duty Paid means that the supplier must deliver the goods to the territory of the customer from which, for VAT purposes, a local sale will be made. This will require the UK supplier to import the goods into the EU and this creates the first issue.

Under the Union Customs Code (UCC) the person presenting the goods to the customs authority (the declarant) must be established within the EU. An EU established business importing goods can be both the importer and the declarant. A business established outside the EU can be the importer but not the declarant. In this case the non-EU importer must appoint an EU established business to act as its “indirect customs agent”. This agent is jointly and severally liable for the import duties that are due and there are not too many businesses which provide such a service because of the risk. So the seller could find itself unable to satisfy a contractual obligation because it cannot find someone to act as its indirect customs agent in time to make the required delivery – or at all.

Understanding local VAT issues

If a supplier successfully manages to overcome this hurdle then there is the issue of dealing with local VAT on the sale – must the supplier register for VAT and apply it to the sales invoice – or does the reverse charge apply? And will the customer pay the non-refundable duty costs incurred by the supplier at the border?

The takeaway here is that a contract concluded under DDP terms may be much easier for the sales team to achieve but it can create serious issues down the line. UK suppliers should seek to agree any Incoterm other than DDP wherever possible.

EU warehouse facilities

To reduce the possibility of delays some UK suppliers have set up warehouse facilities within the EU from which deliveries can be made. One issue which can affect both VAT and direct taxes is whether the warehouse creates a permanent or fixed establishment. For the purposes of this article we assume no – although creating a permanent establishment could avoid the need to appoint an indirect customs agent.

How to deal with import VAT

Once the UK supplier has successfully brought the goods into an EU warehouse it will make deliveries to customers. One big consideration here is how the import VAT is dealt with. Several Member States offer the possibility to postpone import VAT to the VAT return via a reverse charge. In such circumstances import VAT deduction is guaranteed so long as the formalities are followed and the business is able to fully recover VAT. Where goods are imported into a Member State where import VAT must be first paid and then deducted consideration as to how this will happen is important. Where there is a VAT registration in place, the VAT can normally be recovered via the VAT return. However, where the Member State of import has a reverse charge mechanism for domestic sales, a non-EU supplier will need to make 13^th Directive claims to recover import VAT. One Member State where this will arise is Spain which has reciprocity rules in place so not all businesses are able to make 13^th Directive claims.

Therefore if a supplier is considering utilizing an EU warehouse or making sales on a DDP basis, they should first map out all of the likely flows and then determine the VAT treatment to understand if any negative VAT issues will arise. The planning opportunities and potential pitfalls that arise from such a warehouse will be considered in a later article.

IPT in Ireland reflects the dynamic shifts in the global tax landscape. With an increasing number of tax jurisdictions adopting electronic filings, Ireland has joined this progressive movement. The Irish tax authority has announced changes to how Stamp Duty, Life Levy, Government Levy and the Compensation Fund are declared and paid from the Quarter 1 2022 submission period (i.e. 25 April 2022).

What is changing for Ireland’s Insurance Premium Tax (IPT) requirements?

From Q1 2022, businesses will be required to file all returns via the Irish online portal and pay taxes due via direct debit.

The Irish Revenue issued notification of the filing requirement changes in December 2021. The Irish Revenue has an online service with a digital pay and file facility for Stamp Duty on insurance levies which will be available via Revenue Online Services (ROS).

What happens next?

Registered insurers will have an individual ROS account. By the end of February 2022, insurers will be issued new ID numbers (TRN numbers), and the 4-digit file reference number will be discontinued. Insurers will need a TRN number to register for a ROS account to file declarations online via ROS. Payments made online are required to be via direct debit instruction.

Although many authorities still rely on paper returns, online filing and payment systems are becoming more common place. In Europe alone, Spain, Finland, Portugal, Hungary, Italy and the UK are just a few who have adopted digital tax approaches.

More tax authorities are now adapting to online submissions to fill the gap for further transparency and accuracy in collecting taxes, causing increased challenges for insurers when ensuring premium tax compliance.

This change in Ireland is just another example in the list of tax authorities requesting additional information on a more frequent basis to increase efficiency, minimise tax gaps and boost revenue. We don’t see this trend disappearing and recommend that insurers stay abreast of the latest regulations to be prepared for more countries who will undoubtedly follow this approach. Insurers need to be aware of compliance responsibilities by keeping pace with this heightened degree of complexity, scrutiny and change. This will result in system and process changes and any digitisation will inevitably impact IT systems and budgets.

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

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

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

What Is Business E-invoicing Right (BER)?

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

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

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

Further measures to support e-invoicing adoption

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

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

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

On 24 February 2022, the Indian Central Board of Indirect Taxes and Customs (CBIC) issued a notification (Notification No. 01/2022 – Central Tax) that lowered the threshold for mandatory e-invoicing.

In India, e-invoicing is mandatory for taxpayers when exceeding a specific threshold (businesses operating in certain sectors are exempted). The current threshold for mandatory e-invoicing is 50 Cr. Rupees (approximately 6.6 million USD). From 1 April 2022, taxpayers with an annual threshold of 20 Cr. Rupees (approximately 2.65 million USD) or above must comply with the e-invoicing rules.

Evolution of e-invoicing in India

E-invoicing has been mandatory in India since October 2020. The IRP must approve and validate e-invoices before being sent to the buyer. Therefore, the Indian e-invoicing system is categorised as a clearance e-invoicing system, a type of continuous transaction controls (CTC).

From the beginning, the Indian tax authority clearly expressed their intention to gradually expand the scope of e-invoicing. In line with its message, the threshold limit has been lowered twice; in January 2021 (from 500 CR. To 100 Cr.) and April 2021 (from 100 CR. To 50 Cr.). Once again, the threshold limit is reduced to require more taxpayers to transmit their transactional data to the tax authority’s platform.

One important thing to be noted in this context is that voluntary adoption of e-invoicing is still not possible. Taxpayers cannot opt in to use the e-invoicing system and transmit their invoices to the IRP voluntarily. Given the recent developments, this might change in the future.

E-invoicing and E-waybill relationship

Suppliers in the mandatory scope of e-invoicing must generate e-waybills relating to B2B, B2G and export transactions through the e-invoicing platform because their access to the e-waybill platform is blocked for generating e-waybills relating to these transactions. E-waybills relating to transactions outside of the scope of e-invoicing can still be generated through the e-waybill platform.

Therefore, it would be advisable for taxpayers who are getting ready to implement e-invoicing to consider this aspect.

Spain Establishes Billing Software Requirements

The long-awaited Royal Decree, establishing invoicing and billing software requirements to secure Spanish antifraud regulations, has been officially published by the Spanish Ministry of Finance.

The taxpayers and SIF developers, defined further below in this article, must be aware of several new official deadlines set forth by the Spanish tax authority in the Royal Decree:

Therefore, companies that fall within scope must ensure their computer systems are adapted to this regulation as of 1 July 2025.

Understanding Spain’s Verifactu system

The Spanish government is pursuing various routes for digitizing tax controls, including introducing software requirements on the billing system.

In February 2022, Spain published a Draft Royal Decree establishing invoicing and billing software requirements to secure Spanish antifraud regulations.

The Draft Decree ensures billing software meet the legal requirements of integrity, conservation, accessibility, legibility, traceability and inalterability of billing records. It sets standards for systems known as SIF (Sistemas Informaticos de Facturación).

To comply with SIF standards, taxpayers may use a Verifactu system – a verifiable invoice issuance system which is further detailed later in this article.

Since publishing the Draft Decree and concluding its public consultation, the Spanish tax authority has released draft technical specifications for the Verifactu system and a list of modifications to be introduced to the Draft Decree. One is the estimated date of entry into force of the billing software requirements.

What is a Verifactu billing system?

Among the many SIF requirements established in the Draft Decree is the capability to generate a billing record in XML format for each sale of goods or provision of services. This needs to be sent to the tax authority simultaneously or immediately before the issuance of the invoice.

The Draft Decree establishes two alternative systems taxpayers can adopt to comply with the technical standards of the SIF: the ordinary SIF and the Verifactu system.

A Verifactu system is a verifiable invoice issuance system, and its adoption is voluntary under the Draft Decree. Taxpayers who use computer billing systems to comply with invoicing obligations may choose to continuously send all the billing records generated by their systems to the tax authority.

A Verifactu billing system complies with all the technical obligations imposed by the Draft Decree., Taxpayers use the system to effectively send all billing records electronically in a continuous, automatic, consecutive, instantaneous, and reliable manner.

Benefits of the Verifactu billing system

A taxpayer opts for a “verifiable invoice issuance system” by systematically initiating the transmission of billing records to the tax authority. If the systems are Verifactu, invoices must include a phrase stating so.

There are several benefits for taxpayers who decide to opt for a Verifactu system:

Current deadlines

Taxpayers and SIF developers must be aware of several deadlines set forth by the Spanish tax authority. These are still part of the draft development of the SIF and official deadlines are outstanding:

What’s next?

Although still in draft form, it’s expected there will be official publication of the Draft Royal Decree – along with a Ministerial Order detailing the technical and functional specifications of the billing systems. Official publication of the Verifactu technical specifications is to come.

The Draft Decree explicitly states that its implementation is compatible with an electronic invoicing mandate which is also underway in Spain. Therefore, taxpayers must ready themselves to comply.

For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.

The Spanish Ministry of Finance has published a draft resolution that will – once adopted – establish the requirements for software and systems that support the billing processes of businesses and professionals. This law will have a significant impact on the current invoice issuance processes. It will require implementing new invoice content requirements, including a QR code, and the generation of billing records by January 2024.

The regulation is also intended to adapt the Spanish business sector, especially SMEs, micro-enterprises, and the self-employed, to the demands of digitization. For this, it is considered necessary to standardise and modernise the computer programs that support the accounting, billing, and management of businesses and entrepreneurs.

Scope of the regulation

The regulation establishes the requirements that any system must meet to guarantee the integrity, conservation, accessibility, legibility, traceability and inalterability of the billing records without interpolations, omissions or alterations.

Companies that do not fall within the above categories do not need to comply, but those who do must ensure their computer systems are adapted to this regulation as of 1 January 2024.

New invoice content requirements: ID and QR codes

Invoices generated by the computer systems or electronic systems and programs that support the billing processes of businesses and professionals must include an alphanumeric identification code and a QR code, generated per the technical and functional specifications established by the Ministry of Finance.

Billing system requirements

The computer systems that support billing processes must have the capability to:

To achieve these ends, all computer systems must certify that they ensure the commitment to comply with all the requirements established in this regulation through a “responsible statement”. The Ministry of Finance will establish the minimum content of this statement later in a new resolution.

Billing record content and its optional transmission

The billing records must comply with several content requirements laid down by the regulation.

The taxpayers using computer systems to comply with their invoicing obligations may voluntarily send all its billing records generated by the computer systems to the AEAT automatically by electronic means. The response of a formal acceptance message from the AEAT will automatically mean that these records have been incorporated into the taxpayer’s sales and income ledgers.

Tax administration audits

The AEAT may appear in person where the computer system is located or used and may require full and immediate access to the data record, obtaining, where appropriate, the username, password and any other security key that is necessary for full access.

The AEAT may request a copy of the billing records, which companies may provide in electronic format through physical support or by electronic means.

Application to the B2B e-invoicing mandate

The regulation doesn’t include any specific rule for the B2B e-invoice mandate draft decree currently being discussed in Congress and waiting for approval. However, if the mandate is approved, all the B2B e-invoices issued under this draft decree will have to comply with all the new rules established in this regulation.

Next steps

While this new regulation does not seem to take Spain further down the continuous transaction control (CTC) route, the proposal has clear similarities with Portugal’s invoice requirements.

The draft resolution establishing these is currently open for public consultation until 11 March 2022. Once this resolution is approved, the Ministry of Finance will publish the technical and functional specifications needed to comply with the new requirements and the structure, content, detail, format, design and characteristics of the information that companies must include in the billing records.

The Ministry of Finance will also publish the specifications of the signature policy and the requirements that the fingerprint or ‘hash’ must meet. Once these details are published, it will be clearer whether Spain is going down the Portuguese route or carving out its own path.

Ebook

Compliance Mandates Around the World Have Elevated the Importance of Tax

Sorting out indirect tax issues was not traditionally at the top of any IT organisation’s to-do list. Today that’s changed and new VAT compliance mandates being introduced at an increasing rate around the world have elevated its status.

It’s more important than ever that IT decision makers and in-house tax and finance professionals engage and have meaningful, strategic discussions about how – and also why – to accelerate their digital transformation. This will enable them to not only respond but also to prepare for invasive new tax mandates.

Each time a product or service is sold in a new country or under the watchful eye of evolving national tax regimes, enterprises must respond. They must ensure their VAT recognition and reporting processes are aligned to new and evolving mandates for continuous controls on e-invoicing and other critical sales and purchase processes and documents.

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A cascade of tax compliance mandates

Multinational companies continue to leverage new technologies to optimise borderless supply chains. The spectacular growth of e-commerce and a new generation of technologies is opening global markets for even the smallest of micro-enterprises.

Global businesses and supply chains increasingly intersect new national mandates. Many of these mandates impose sophisticated real-time controls on business transactions and make compliance more complex than it’s ever been before. And the cost of non-compliance can be high.

Non-compliance can affect an organisation in many ways – financial, operational, employee productivity, customer experience, legal, and even brand perception.

IT, tax and finance teams need to communicate and collaborate effectively to fully understand their compliance obligations in each of the markets where they operate. If they can’t companies will likely find their digital transformations inhibited by disparate local point solutions that can be so entrenched, they can become impossible to replace.

With better collaboration between functions and alignment on tax, your entire organisation can achieve real operational efficiencies.

Download our e-book and read about

The opportunities that exist when tax and IT work together
How joined up thinking can reduce risk and uncover opportunities
A shared vision and modern tax solution
How better conversations drive a better compliance process

As tax compliances becomes increasingly interconnected with core business processes, organisations must make all aspects of tax reporting central to, and integrated with, core business activities.

A modern tax compliance solution must be engineered from the ground up to handle modern regulatory mandates. This especially applies to global manufacturers and retailers that do business in numerous countries around the world and must comply with mandates established by hundreds of tax authorities.

Preparing for France’s E-invoicing and E-reporting Mandate

France is now moving towards continuous transaction controls (CTCs), introducing mandatory e-invoicing coupled with e-reporting.

The trend towards CTCs is global, and France is one of many countries to join this journey. As with previous CTC reforms in other countries, fiscal and economic gains are expected for both the government and businesses, such as:

Fighting fraud and bridging the VAT gap (€10 – 15 billion per year in France)
Reducing invoice processing costs for companies
Monitoring the economic activity in the country
Increase efficiency
Automating part of the VAT reporting process

Along with this, France is implementing an e-invoicing and e-reporting mandate. This is alongside the B2G e-invoicing obligation that is already mandatory.

The new French framework foresees a public platform as the recipient of data from e-invoices and e-reports. On top of this, a central directory will keep track of the invoice lifecycle, including payment status.

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Rollout dates

From September 2026, France will implement mandatory e-invoicing via a central platform and connected service providers as well as a complementary e-reporting obligation.

With these comprehensive requirements, alongside the B2G e-invoicing obligation that is already mandatory, the government aims to increase efficiency, cut costs, and fight fraud.

This extended timeline is welcomed by many companies, providing more time to better understand and prepare for the far-reaching consequences of this reform for their business processes, IT systems and tax compliance strategy.

However, businesses should start preparing now. Here are the key dates:

From 1 September 2026
All companies headquartered or with established operations in France will have to accept e-invoices through the CTC system from their suppliers.

Issuing e-invoices according to the CTC regime will become mandatory for the largest enterprises (some 300 entities) and will apply also to a further 8,000 mid-sized companies – “Entreprises de taille intermédiaire”

The e-invoicing mandate does not apply to B2C and cross-border invoices though there is an obligation to report those transactions.

From 1 September 2027
All remaining medium and small companies will be in scope of the mandate.

How can businesses prepare for the mandate?

The mandate presents challenges for businesses. There is a lot to consider, and most businesses current IT and manual processes aren’t equipped to handle this change.

The French e-invoicing mandate is still evolving and there are many elements remaining before the scheme is introduced.

In this e-book, we will cover in depth how business can achieve compliance:

An overview of the French mandate
The latest update to the timeline
Partner Dematerialization Platform (PDP) registration requirements
What’s on the horizon for the French Mandate
Challenges for your organisation – what buyers and suppliers need to consider to prepare their business processes
How Sovos can help businesses prepare for France’s e-invoicing mandate

Many businesses will need help to achieve compliance with the new mandate.

Sovos has unmatched experience with continuous transaction controls and e-invoicing mandates all over the world. Our scalable global platform has evolved to encompass new mandates, handling the needs of today, and the future.

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Annual reporting requirements vary from country to country, making it complex for cross-border insurers to collect the data required to ensure compliance.

Italy has many unique reporting standards and is known for its bureaucracy across the international business community. Italy’s annual reporting is different due to the level of detail required. The additional reporting in Italy requires an in-depth list of policies and details including inception and expiry dates, cash received dates, policyholders’ names, addresses, fiscal codes and premium values. This makes the annual reporting a significant undertaking. Refer to this blog about IPT in Italy for an overview.

Contracts and Premiums Report – due by 16 March each year in respect of previous calendar year

The Italian legislation and regulations require insurance companies writing business in Italy to submit annual reports with the purpose of collecting information that facilitates the tax authorities’ control of activities on taxpayers.

These reports should list all the insurance contracts in place in the relevant year with a policyholder (individual or entity) subject to Italian taxes. Policies covering Liability, Assistance and any risks written as ancillary to an underlying Liability or Assistance policy don’t need to be included in the report.

If there were no contracts in place in the previous calendar year, there is no requirement to submit a Nil report.

Claims Report – due by 30 April each year in respect of previous calendar year

Claim payments made during the previous year in favour of beneficiaries (individuals or entities) who possess an Italian fiscal code must be reported to the Italian tax authorities by the end of April.

If there are no claims to be reported for the previous year, Nil reports are not required.

Motor Report – part to the annual IPT report due by 31 May each year in respect of previous calendar year

As an integral part of the annual Insurance Premium Tax (IPT) return due by the end of May, insurance companies writing compulsory motor third-party liability must report the amount of IPT paid in the previous year to each of the Italian provinces. Details required include province policy number, fiscal code, vehicle plate number, premium, IPT rate and IPT.

Why planning ahead of the reporting season is vital

The additional reporting in Italy requires that certain elements are present before submission. To submit the Contracts and Premiums report an insurance company needs:

Many insurance companies work with third parties, and the policy information they collate might not always include all required details. Incomplete and incorrect data prevent the successful submission of the annual reports and can lead to costly fines and reputational damage.

Navigating annual reporting alongside regular monthly and quarterly reporting can feel overwhelming. The more that can be prepared in advance, the smoother the reporting process. Understanding Italy’s specific annual reporting requirements will ensure insurers remain compliant and avoid any unnecessary delays or corrections.

In 2020, the European Commission (EC) adopted a four-year plan to develop a fairer and simpler taxation framework. The Action Plan aspires to tighten up the tax system, ensure that digital platforms are made to follow transparency rules and utilise data better, reducing tax fraud and evasion.

In 2021, the Commission implemented e-commerce changes – another step in the modernisation process. Beginning in July of 2021, the Mini One Stop Shop (MOSS) system was expanded to the One Stop Shop (OSS) and Import One Stop Shop (IOSS).

The implementation of OSS expanded the use of the union and non-union schemes. This allows European and non-European business-to-consumer sellers of digital services and goods to simplify their reporting practices. Meanwhile, IOSS allows businesses to register and import goods into the EU with a value not exceeding €150.

In 2022, there are plans to release legislation under the “VAT in the digital age” Action Plan. Much like its predecessors in 2020 and 2021, the core purpose of this plan is to tackle the issue of fraud and improve the way businesses engage with the VAT system. The Commission has announced three points it seeks to address in its legislation:

Specifically, one point of interest is the single EU VAT registration point, which aims to facilitate compliance among Member States. With this, the European Commission is requesting feedback on how businesses think the I/OSS implementation has gone and on other potential legislative options for the future, including:

The European Commission began a period of public consultation on 21 January regarding adapting VAT rules in a digital economic landscape. They are seeking feedback on how the EC should adapt VAT tax processes and how they can incorporate technology to solve principal issues in tax, such as fraud and the complexity of its systems. The Commission is accepting feedback in this public consultation period until 15 April 2022 – submissions can be made here.

Sovos will continue to monitor the development of this legislation throughout the year as more information about its structure and impact is released, as these changes are sure to be impactful upon the European VAT landscape.

RO e-Transport system

Which transportations are in scope?

What happens next?

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Digital Reporting Requirements

The route to harmonisation

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A phased approach

The journey continues towards a B2B e-invoicing mandate

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Changes to the EU VAT tax policy

EU VAT tax policy challenges

Moving towards simpler VAT reporting

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Publication of regulation on the use of KSeF

New information and documentation published by the Polish tax authority

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The adoption of Pre-Filled VAT Returns so far

Pre-Filled VAT Returns – New Developments in 2022

Pre-filled VAT returns across Europe

The future of pre-filled VAT returns

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Greek annual IPT report

Easing the pain of IPT reporting in Greece

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Importing goods into the EU

Customs considerations

Understanding local VAT issues

EU warehouse facilities

How to deal with import VAT

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What is changing for Ireland’s Insurance Premium Tax (IPT) requirements?

What happens next?

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What Is Business E-invoicing Right (BER)?

Further measures to support e-invoicing adoption

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Evolution of e-invoicing in India

E-invoicing and E-waybill relationship

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Spain Establishes Billing Software Requirements

Understanding Spain’s Verifactu system

What is a Verifactu billing system?

Benefits of the Verifactu billing system

Current deadlines

What’s next?

Scope of the regulation

New invoice content requirements: ID and QR codes

Billing system requirements

Billing record content and its optional transmission

Tax administration audits

Application to the B2B e-invoicing mandate

Next steps

Take Action

Compliance Mandates Around the World Have Elevated the Importance of Tax

Get the e-book

A cascade of tax compliance mandates

Preparing for France’s E-invoicing and E-reporting Mandate

France is now moving towards continuous transaction controls (CTCs), introducing mandatory e-invoicing coupled with e-reporting.

Get the e-book

Rollout dates

How can businesses prepare for the mandate?

Contracts and Premiums Report – due by 16 March each year in respect of previous calendar year

Claims Report – due by 30 April each year in respect of previous calendar year

Motor Report – part to the annual IPT report due by 31 May each year in respect of previous calendar year

Why planning ahead of the reporting season is vital

Take Action

Take Action