Back in 2019, Portugal passed a mini e-invoicing reform consolidating the country’s framework around SAF-T reporting and certified billing software.
Since then, a lot has happened: non-resident companies were brought into the scope of e-invoicing requirements, deadlines were postponed due to Covid, and new regulations have been published.
Sovos provides a complete VAT, SAF-T and B2G compliance solution for Portugal helping customers meet the demands of the digital transformation of tax and public procurement through a single provider. Sovos uniquely combines local expertise with a seamless, global customer experience.
The Zakat, Tax and Customs Authority (ZATCA) announced the finalised rules for the Saudi Arabia e-invoicing system earlier this year, announcing plans for two main phases for the new e-invoicing system.
The first phase of the Saudi Arabia e-invoicing system is set to go live from 4 December 2021.
With the mandate just around the corner, we’ve highlighted the latest news on a reform that is still evolving.
The latest documentation communicated on the requirements was the Detailed Guidelines, published in August 2021. The Detailed Guidelines provided clarity on the following topics:
The first phase requirements are not as complex as the second phase requirements that will be enforced from 1 January 2023.
The ZATCA has been successful in providing taxpayers with the necessary information. The go live date is set to go ahead as planned and a delay is not currently expected.
Find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.
On 1 July 2021 the EU E-Commerce VAT Package was introduced. The package replaced existing distance-selling rules and extended the Mini One Stop Shop (MOSS) into a wider-ranging One Stop Shop (OSS).
The implementation of the EU E-Commerce VAT Package was designed to simplify the VAT reporting requirements for sellers and improve the tax take for Member States.
Two months in: we take a look at how it’s going.
There were unfortunately some initial delays and teething problems when the EU E-Commerce VAT Package was introduced, which is to be expected with the adoption of such a significant new system, but as with any new scheme these can be resolved over time.
Some examples include:
There are also issues associated with the import of the goods.
Some Member States disallow the import of certain categories of goods due to local restrictions e.g. foodstuffs, plants etc.
It’s sometimes unclear if freight forwarders have used IOSS or not and this could lead to repeated errors of underpayment or overpayment of VAT.
Some non-EU vendors are trying to avoid an IOSS registration by stating that the customer is the importer of record. Such practice happened before the introduction of IOSS but not always at the same level as it is now – and was not always spotted or queried.
However, since the introduction of the IOSS, some tax authorities, including Germany, are questioning such an approach on the grounds that the carrier who imports the goods is acting for the non-EU vendor and is not known by the buyer.
This means import VAT is due by the vendor who must then also charge German VAT. For cases that have already occurred there may be an issue with recovery of the import VAT, as the evidence required to support the deduction will have been issued in the wrong name (consumer).
It’s still early days for the EU VAT E-Commerce Package and initial teething problems are to be expected. One thing is certain, navigating these new VAT schemes is complex. Sovos is here to help and we’ll keep you updated on the latest regulatory changes.
Join our latest webinar on September 22, 2021 to learn how you can use the Import One-Stop Shop (IOSS) to simplify your EU VAT compliance and unlock the full potential of the EU e-commerce market.
Still have questions about OSS and IOSS? Download our e-book to understand the implications of the 2021 EU e-commerce VAT package and ensure your business is ready by 1 July 2021 for the significant changes ahead
Simplify EU VAT with IOSS – Unlock the EU E-Commerce Market
Time: 3:00pm BST / 10:00 EDT
Date: September 22, 2021
Join our latest webinar to learn how you can use the Import One-Stop Shop (IOSS) to simplify your EU VAT compliance and unlock the full potential of the EU e-commerce market.
Since July 2021, the low value consignment relief on small packages has been removed. From the same date, businesses selling imported goods valued at less than EUR 150 can now use IOSS to collect, declare and pay VAT to the local tax authorities in one single VAT return. IOSS simplifies your EU VAT compliance – making it essential to grow sales in the EU, avoid fines and penalties, and provide an excellent customer service.
Join Consulting Services Director Alex Smith and Senior Consultant Russell Hughes in this webinar to learn:
We will host a short Q&A session at the end of this webinar.
Need more information? Sovos’ VAT managed service provides a full IOSS service for your business. In addition to proving an intermediary service, we handle the IOSS registration and monthly filling. Click here to find out more.
In Insurance Premium Tax (IPT) compliance, the Aviation Hull and Aviation Liability policy is defined under Annex 1, Classes of Non-Life Insurance, as described in DIRECTIVE 138/2009/EC (SOLVENCY II DIRECTIVE).
But there are variations and identifying which class the policy is covering can be a challenge.
This article will cover what insurers need to know about Aviation Hull and Aviation Liability policy and what IPT rate to apply.
Aviation can fall under Class 5, Class 11 or General Liability.
There are five different variations of an Aviation policy, either taken out individually or in combination. Although the descriptions vary, the most referred to are:
Class 5 Aviation policies are focused on the hull and physical aspect of the aircraft, whereas Class 11 Aviation Liability mainly covers the public and passengers or damage to property owned by third parties.
Defining between Aviation Liability Class 5 and 11 can be a headache. As aviation policies can include a combination of liabilities, it can be difficult to know the correct classification to apply.
Some tax authorities have recognised this and applied similar rates for both, but there are exceptions.
For example, in Hungary Class 5 is considered CASCO , which stands for Casualty and Collision (automobile insurance). So, it has a higher IPT rate of 15% whereas IPT for Class 11 on Aviation Liability is 10%.
There are also parafiscal taxes to consider. These mainly come into effect when the policy includes a fire element. But as always there are exceptions – in Greece both classes are exempt from IPT, but TEAEAPAE (or Pension Fund) can be due on Class 5 Aviation when cover includes the maintenance of the aircraft.
Once the correct class of insurance has been applied to the policy, an additional reference to an AVN clause is made.
AVN clauses are additional to the main risk and more specific than some of the other coverages, which are also included in aviation contracts. There are over 214 AVN clauses and most fall under Class 13 General Liability.
The last piece of the puzzle is how to report a policy document that could have up to three different classes.
The territory could have apportionment rules, meaning an insurer could benefit from some of those exemptions. Some insurers choose to take the prudent approach and apply the highest rate from the three classes to avoid noncompliance or penalties.
For most insurers, classification of an aviation policy is only the beginning of the journey. There are other considerations such as location of risk rules outside of Europe, which can mean double taxation, or exemptions depending on the use of the aircraft.
To ease the burden on compliance, many insurers work with a managed service provider with IPT expertise.
Get in touch with Sovos about the benefits a managed service provider can offer.
Back in 2019, Portugal passed a mini e-invoicing reform consolidating the country’s framework around SAF-T reporting and certified billing software.
Since then, a lot has happened: non-resident companies were brought into the scope of e-invoicing requirements, deadlines have been postponed due to Covid, and new regulations were published. This blog summarises the latest and upcoming changes.
Introduced in 2019, the de facto implementation of the QR code requirement was delayed, and is now expected to be fully implemented by taxpayers in January 2022. A QR code should be included in all invoices. Technical specifications about the content and placement of the code in the invoice are available on the tax authority’s website.
The ATCUD is a unique ID number to be included in invoices and is part of the content of the QR code. The ATCUD is a number with the following format ‘ATCUD:Validation Code-Sequential number’.
To obtain the first part of the ATCUD – the so-called ‘validation code’ -, taxpayers must communicate the document series to the tax authority along with information such as type of document, first document number of the series, etc.
In return, the tax authority will deliver a validation code. The validation code will be valid for the whole document series for at least a fiscal year. The second part of the ATCUD – the ‘sequential number’ – is a sequential number within the document series.
This month, the Portuguese tax authority published technical specifications for obtaining the validation code, creating a new web service. To access this web service, a specific certificate obtained from the tax authority is required and can be assigned to taxpayers or software service providers.
In addition, the tax authority has created a standard list of document classes and types, enabling the communication of document types in a structured format.
An ATCUD will be required in all invoices from January 2022. To be ready for the deadline, taxpayers must get the series’ validation codes during the last half of 2021 to apply in invoices issued in the beginning of 2022.
In April this year, Portugal clarified that non-resident companies with a Portuguese VAT registration should comply with domestic VAT rules. This includes the use of certified billing software for invoice creation, among others. These companies must also ensure integrity and authenticity of e-invoices. In Portugal, integrity and authenticity of invoices are presumed with the use of a qualified electronic signature or seal, or use of EDI with contracted security measures.
Consequently, since 1 July 2021, non-established but VAT registered companies must adopt certified billing software to comply with the Portuguese law as required by Law-Decree 28/2019, Decision 404/2020-XXII, and Circular 30234/2021.
The Portuguese e-invoicing mandate for business-to-government transactions includes a format requirement attached to specific transmission methods. In other words, invoices to the public administration must be issued electronically in the CIUS-PT format and transmitted through one of the web services made available by the public administration.
Initially, a phased roll-out started in January 2021, obliging large companies to issue e-invoices to public buyers. In July, the subjective scope was enlarged to include small and medium-sized businesses. The last step is to include microenterprises by January 2022.
Due to the Covid pandemic, Portugal established a grace period that has been renewed several times, whereby PDF invoices would be accepted by the public administration. Currently, the grace period runs until 31 December 2021, meaning that, in practice, all suppliers of the public administration, regardless of their size, should comply with the e-invoicing rules in public procurement by 1 January 2022.
Need to ensure compliance with the latest e-invoicing regulations? Get in touch with our tax experts at Sovos.
In our last look at Romania SAF-T, we detailed the technical specifications released from Romania’s tax authority. Since then, additional guidance has been released including an official name for the SAF-T submission: D406.
To alleviate taxpayer concerns due to the complexity of the report and difficulties with extraction, the tax authorities are introducing a voluntary testing period which is due to begin in the coming weeks. During this period, taxpayers may submit what is known as D406T which will contain test data that the authorities will not use in the future for audit purposes.
The Romanian SAF-T, D406, is based on the OECD schema version 2.0 which contains five sections:
The submission deadlines are as follows:
Taxpayers must submit sections of D406 monthly or quarterly, following the applicable tax period for VAT return submission.
For the first report, tax authorities have announced a grace period for the first three months of submission. This is from the date when the deposit obligation becomes effective for that taxpayer, where non-filing or incorrect filing will not result in penalization if correct submissions are submitted once the grace period ends.
The D406 must be submitted electronically in PDF format, with an XML attachment and electronic signature. The size of the two files must not exceed 500 MB. If the file is larger than the maximum limit, the portal will not accept it and the file must be divided into segments according to details set out in the Romanian guidance.
The tax authorities have indicated that, should a taxpayer find errors in the original submission, a corrective statement may be submitted to rectify these errors. The taxpayer should submit a second full corrected file to replace the original file that contains errors. If a taxpayer submits a second D406 for the same period, it is automatically considered a corrective statement.
Need to ensure compliance with the latest Romania SAF-T requirements? Speak to our team. Follow us on LinkedIn and Twitter to keep up-to-date with the latest regulatory news and updates or see this overview on VAT Compliance in Romania.
Welcome to our Q&A two-part blog series on the French e-invoicing and e-reporting mandate, which comes into effect 2023-2025. That sounds far away but businesses must start preparing now if they are to comply.
The Sovos compliance team has returned to answer some of your most pressing questions asked during our webinar.
We have outlined the new mandate, e-invoicing specifically, and questions around this topic in our first blog post.
This blog will look at the other side of the mandate – e-reporting obligations. These will apply to B2C and cross-border B2B transactions in France, which must be periodically reported.
First let’s look at common questions around payments e-reporting.
What are the invoice and payment statuses to be reported?
Here is a slide from our webinar showing invoice statuses, whether these are mandatory, recommended, or free, origins, action to take if rejected, status data, and when it needs to be reported:
Who is responsible for payment e-reporting? The buyer, the seller, or both?
It was initially rumoured to be both on the buyer and the seller side, but the latest information from DGFIP clearly states that it will be the responsibility of the seller to report the invoice status, and, if applicable, its payment status.
Some further clarification is needed though since the seller is dependent on the buyer’s response on some status (e.g. ‘invoice rejected’).
Your e-invoicing and e-reporting project cannot be done in isolation. This is a significant project with many dependencies that involve external third parties.
There will be one or, in most likelihood, several third parties in the middle of the transaction chain. This will include Chorus Pro, chosen by the French government as the official and obligatory platform for businesses to issue e-invoices to public administrations.
This section covers common questions on partner platform certification requirements.
Is there a list of official validated partner platforms?
The 13 July 2021 DGFIP workshop dedicated to this matter highlighted that there would be a registration process for third-party platforms, as well as taxpayers who would want to run their own platform.
The registration process will consist of two phases:
Phase 1. A prior selection by the tax authorities based on the general profile of the candidate (e.g. are they up to date in their own tax payment duties?) and the services they propose;
Phase 2. Within 12 months after registration, an independent audit would have to performed that demonstrates that the platform meets the DGFIP requirements, such as:
<liPerforming the control and mapping activities (extraction of invoicing data for both e-invoicing and e-reporting, certain invoice validation checks – mandatory fields, check sums, Customer ID verification – mapping to and from a minimum set of mandatory formats, compliance with GDPR, etc)
A few other key points to note are:
What is the current expectation on when exact required fields with be supplied by the government (invoice specs with all required fields and values)?
Excel files are available as a draft document at a very detailed level which Sovos can provide on request. The final specs should be known by the end of September 2021.
Still have questions about e-reporting? Access our webinar on-demand for more information and advice on how to comply.
A tax authority audit can come in various forms, whether it be directly to the insurer itself or indirectly through a policyholder or broker.
It can be targeted, for example, where an insurer has been specifically identified to be investigated due to a discrepancy on a tax return, or it can be indiscriminate in its nature as part of a wider exercise being carried out by an authority.
Whatever form the audit takes, the key to responding is in the preparation beforehand.
First and foremost, insurers should ensure they are retaining copies of evidence that can be used to justify the tax amounts declared and settled. This may include the insurance contracts themselves, the invoices issued to policyholders and a record of their data that comprises the declarations that have been made.
It’s worth noting that in Italy there is a formal requirement to maintain IPT books which detail each of the premiums received during each annual period. Although this is not necessarily a specific requirement in other countries, applying this approach to all premiums received will put an insurer in a strong position if an audit is carried out.
Further documentation demonstrating compliance is also useful. If external advice has been sought, e.g., to determine the appropriate class of business for a policy and the consequent tax application, then retaining a record of this advice is advised in case this is required later.
There may be cases where a tax authority’s advice has specifically been sought and such correspondence will inevitably hold considerable weight if tax treatment is queried during a subsequent audit. Documentation of any processes in place to ensure compliance is also valuable.
As statutory limitation periods vary across jurisdictions, evidence should be kept as long as is practicable (subject to relevant data protection laws where applicable) so that it can be produced if an audit takes place.
In the digital age, this practice should hopefully not seem overly burdensome. It’s worth referring to the penalty regimes in place in some countries to put the potential repercussions of an unsatisfactory audit into context.
The UK is an example of where a behaviour-based approach to determining penalties is used, with the highest level of penalties reserved for cases of deliberate and concealed undeclared tax where the authority itself has prompted the declaration.
Lower penalties (or indeed no penalties at all) will be levied where reasonable care is taken, and reasonable care will be far more likely to be considered to have been taken where records are kept in the ways described.
Audits can happen at any time so it’s important insurers have taken the necessary steps to ensure information and data to demonstrate compliance is available to the tax authority when requested.
Ensuring the accurate and timely submission of tax returns is likely to reduce the possibility of a targeted audit. The IPT managed services team at Sovos has a huge amount of experience with tax filings in the UK and across Europe and has assisted many insurers with unexpected audits.
Get in touch with Sovos today about the benefits a managed service provider can offer to ease the burden of IPT compliance.
Insurance Premium Tax in Germany is complex. From IPT rates to law changes, this quick guide will help you navigate the challenges of IPT in Germany. For an overview about IPT in general, read our Insurance Premium Tax guide.
Last update: 24.01.2023
Based on IPT declarations made for the year 2022:
Below €1,000.00 – annually
Between €1,000.00 and €6,000.00 – quarterly
Above €6,000.00 – monthly
Based on FBC declarations made for the year 2022:
Below €400 – annually
Between €400 and €2,400.00 – Quarterly
Above €2,400.00 – monthly
Last update: 07.12.2022
Different IPT rates are applicable in Germany, depending on the type of insured risk provided to the policyholder. Sovos’ IPT Managed Services ensures your company complies with the latest Insurance Premium Tax requirements in Germany.
Yes. Life and sickness policies are exempt from German IPT.
German IPT is a charge to the policyholder in addition to the premium. The taxable premium is the total amount paid by the policyholder to obtain the cover. The Insurance Tax Act specifically includes charges and other ancillary costs within the scope of the definition.
The main challenges in Germany regarding IPT relate to two areas:
Insurance Tax Act reforms in Germany, effective from 10 December 2020, have continued to cause some uncertainty in the insurance market.
The main area of concern relates to the location of risk for Insurance Premium Tax (IPT) purposes. The reform can impact a policy taken out with either an EEA or non-EEA insurer where the policyholder is established in Germany, i.e., a German enterprise, permanent establishment, or corresponding institution, or an individual habitually resident in Germany, where the policy covers non-EEA risks.
These changes affect all classes of business and are irrespective of the physical location of any insured risk.
If a policy for the German policyholder includes non-EEA countries, then German IPT is due on the premium allocated to Germany and to premiums allocated to non-EEA countries. This could be in addition to any applicable premium taxes due in non-EEA countries.
Therefore, double taxation is a possibility. However, if the policy includes other EEA countries, then German IPT cannot be charged on premiums allocated in these EEA countries.
If a policy for the German policyholder includes both other EEA and non-EEA countries, then German IPT is due on the premium allocated to Germany and to 100% of the premiums allocated to all the other countries. This could be in addition to any applicable premium taxes due in all these countries. Therefore, again, double taxation is a possibility.
The law reforms did not specifically clarify at the time what a ‘permanent establishment’ or ‘corresponding institution’ was that would bring a non-EEA risk within the scope of German IPT. The primary concern related to global policies such as liability and miscellaneous financial loss risks that are not considered ‘special risks’ (i.e., don’t relate to fixed property, vehicles and travel). These types of global programmes for German policyholders, in particular financial institutions, are common in the insurance market.
Guidance from the Federal Ministry of Finance (BMF) published confirmed that a non-EEA branch of a German policyholder would be deemed to constitute a permanent establishment. But it was silent on whether the same applied to a non-EEA subsidiary. Also included in this guidance were several scenarios to aid insurers and brokers with taxing policies correctly, but unfortunately there wasn’t one for this subsidiary scenario.
The BMF issued a new version of their general leaflet on insurance tax and fire protection tax for EU/EEA insurers. This included a flowchart showing the changes in taxability of policies as a result of IPT law reforms, but the non-EEA subsidiary question was not specifically answered here.
The German Insurance Association (GDV) issued a Frequently Asked Questions (FAQs) document to help insurers understand the reforms in several areas, including answering some questions around the treatment of non-EEA subsidiaries.
Whilst the answers appeared to provide hope that these subsidiaries did not constitute a permanent establishment, there was a caveat at the beginning of the FAQs document. It said it was non-binding, and that every insurer could interpret and apply the statutory provisions (and the associated BMF letter from 4 March 2021) at their discretion.
This meant if insurers decided not to tax non-EEA subsidiaries based solely on this guidance, they could be subject to tax assessments later, where German IPT has not been charged.
The BMF subsequently resolved this matter. They published a further decree confirming that for policies taken out by a German policyholder with an EEA insurer not relating to ‘special risks’, any premium apportioned to a non-EEA subsidiary is not subject to German IPT. This is because the Fiscal Code of Germany does not consider a subsidiary to be within their definition of a permanent establishment for tax purposes.
Need to ensure compliance with the latest IPT regulations? A managed service provider can help. Get in touch with our tax experts today.
In our recent webinar, Sovos covered the new French e-invoicing and e-reporting mandate, and what this means for businesses and their tax obligations.
We are witnessing a global move towards Continuous Transaction Controls (CTCs), where tax authorities are demanding transactional data in real-time or near real-time, affecting e-invoicing and e-reporting obligations.
As such, from 2023, France will implement a mandatory B2B e-invoicing clearance and e-reporting obligation in an effort to increase tax efficiency, cut costs, and fight fraud.
The pace towards this mandate has been accelerating lately with the adoption of the Finance law for 2021, followed by a number of workshops organised by the Ministry of Finance — namely the Direction Générale des Finances Publiques (DGFIP).
In the first of two blogs on the mandate, we answer some of your most pressing questions asked during our webinar.
In part one, we focus on setting the scene in terms of scope, and cover questions around e-invoicing specifically, invoicing file formats, processes and controls, and archiving.
The second blog covers questions around e-reporting obligations.
In this section, we answer questions on the scope of the regulation, such as which companies must comply with the mandate and how.
Are non-resident companies (foreign companies with only a French VAT-registration) obliged to fulfil this new regulation? Are foreign legal entities with a French VAT number in scope?
The Budget Laws for 2020 and 2021 introduced the CTC scheme from a legal perspective. Both include “persons subject to VAT” in the scope.
VAT registration is a strong indication that a company is subject to VAT, but classification as a VAT “taxable person” also depends on other factors.
Therefore, it is not as simple as just looking at whether a company has a local VAT registration, to decide whether it is subject to VAT and therefore targeted by the mentioned budget laws.
However, the scope cannot be unilaterally decided by France as the French CTC scheme is dependent on a derogation from the EU Council.
As a comparison, Italy initially included all taxable persons in the scope of its e-invoicing clearance mandate, including those with a mere VAT registration but no establishment. But in this case, the EU Council limited the scope (of its derogation) to persons established in Italy.
From an e-invoicing perspective, we can therefore expect that France will need to follow the Italian path (due to its reliance on a derogation from the EU Council), limiting the scope to established persons.
DGFIP has however suggested that companies that are non-established but VAT registered will be in scope of the reporting obligation.
Is import of goods in the scope of e-reporting? What about import of services?
Only imports (supplies from outside of the EU) of services are in the scope of the current proposal.
In this section, we discuss permitted e-invoice formats.
The fact that the new regime creates a specific process for domestic B2B e-invoicing does not change the need for businesses to demonstrate the integrity and authenticity of each invoice.
This can be done through one of the 3 legal methods defined by the existing regulations:
To ensure there’s no impact of the reform on integrity and authenticity demonstration methods, one can still apply any of them.
However, with the new regime, e-invoicing data sent to the DGFIP does need to be in a structured format.
Will digital signatures be required?
Digital signatures are not strictly required today and will not be strictly required in the new scheme. Integrity and authenticity will still need to be ensured though, irrespective of invoice format, as is the case today.
The options remain the same; use of digital signatures, use of EDI with security measures, or the BCAT option whereby the audit trail should prove the transaction and its authenticity and integrity.
Are PDF and XML invoice file formats still possible to receive from 2023-2025?
The legal invoice format can be anything, as long as the supplier and buyer agree on it and the integrity and authenticity are guaranteed. Also, a human readable version (normally a PDF) is required upon audit as part of the general EU requirements.
What e-invoicing formats are permitted?
This is not fully defined yet, but DGFIP has indicated the following syntax, based on the EN16931 standard:
Those formats would apply to:
In this section, we answer questions around the processes for sending and receiving e-invoices, what information they need to include, and the Chorus Pro platform.
Will the e-invoice need to be sent real-time?
Yes, it can be considered a “real-time clearance system”. As part of the e-invoicing obligation, the reporting of mandatory data to the tax authorities and the issuance of the original invoice to the buyer by the supplier’s partner platform should happen right after receiving the invoicing data from the supplier.
If the invoice doesn’t have all the mandatory information like the SIRET number of a customer, will the Chorus Pro platform clear it?
Will Chorus Pro also be validating the VAT rates used?
No, or at least not on the fly when submitting the invoicing data to Chorus Pro. Our understanding is that those verifications will be done by the tax authorities after the fact, using data analytics / AI algorithms.
Are there common data, connection and bridges with the current SAF-T?
The French version of SAF-T (FEC) must still be available on demand from the tax authorities.
In this section, we answer questions around compliant archiving of e-invoices.
Does the Chorus Pro/Tax Authority portal provide a compliant electronic archive for AP/AR invoices in France?
Yes. However, in our experience, even though a tax authority’s archiving solution would be available for taxable persons, few larger companies choose to solely rely on it for evidence purposes and instead continue to use their compliant internal or third-party archiving solutions.
This decision is ultimately based on the fact that the tax authority’s archiving solution poses a conflict of interest: it is maintained by the tax authority, which, from a legal perspective, is not an independent party but rather the counterparty in a fiscal claim.
In fact, from discussions with many experts and customers over that past year, we see that the market request for third-party archiving services is even stronger after the introduction of clearance, especially as customers see a need to store not only the invoice but also response messages from the CTC portal to further maintain evidence of compliance.
Still have questions about the e-invoicing mandate? Access our webinar on-demand for more information and advice on how to comply.
In the “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalization of the Economy” issued on 1 July 2021, members of the G20 Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) have agreed upon a framework to move forward with a global tax reform deal.
This will address the tax challenges of an increasingly digital worldwide economy. As of 9 July 2021, 132 of the 139 OECD/G20 member jurisdictions have agreed to the Inclusive Framework on BEPS.
Pillar 1
Pillar 1 gives a new taxing right, Amount A, to market countries to ensure companies pay tax on a portion of residual profits earned from activities in those jurisdictions, regardless of physical presence. Pillar 1 will apply to multinational enterprises (“MNEs”) with global turnover above 20 billion euros and profitability above 10%.
There will be a new nexus rule permitting allocation of Amount A to a market jurisdiction when the in-scope multinational enterprise derives at least 1 million euros in revenue from that jurisdiction. For jurisdictions with a GDP less than 40 billion euros, the nexus will instead be set at 250,000 euros.
The “special purpose nexus rule” determines if a jurisdiction qualifies for the Amount A allocation. Furthermore, countries have agreed on an allocation of 20-30% of in-scope MNE residual profits to market jurisdictions, with nexus using a revenue-based allocation key.
Revenue will be sourced to the end market jurisdictions where goods or services are consumed, with detailed source rules still to come.
More details on segmentation are still in the works, as is the final design of a marketing and distribution profits safe harbour that will cap the residual profits allowed to the market jurisdiction through Amount A.
Lastly, countries have agreed to streamline and simplify Amount B with a particular focus on the needs of low-capacity countries. The finalised details are expected to be completed by the end of 2022.
Pillar 2
Pillar 2 consists of Global anti-Base Erosion (“GloBE”) Rules that will ensure MNEs that meet the 750 million euros threshold pay a minimum tax rate of at least 15%. The GloBE Rules consist of an Income Inclusion Rule and an Undertaxed Payment Rule, the latter of which still needs to be finalised.
Pillar 2 also includes a Subject to tax rule, which is a treaty-based rule, allowing source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum rate. The rate will range from 7.5 to 9 percent.
There is currently a commitment to continue discussion, in order to finalise the design elements of the plan within the agreed framework by October 2021. Inclusive Framework members will agree and release an implementation plan.
The current timeline is that the multilateral instrument through which Amount A is implemented will be developed and opened for signature in 2022, with Amount A coming into effect in 2021. Similarly, Pillar Two should be brought into law in 2022, to be effective in 2023.
Although the key components of the Two-Pillar Solution have been agreed upon, a detailed implementation plan that includes resolving remaining issues is still to come.
As many countries could be implementing these changes in the near future, it is important for businesses active in the digital economy to carefully track and understand the developments surrounding the OECD/G20 Base Erosion and Profit Shifting Project.
Need to ensure compliance with the latest e-document regulations? Get in touch with our tax experts.
For anyone relatively new or unfamiliar with insurance premium tax (IPT), an understanding of each of the core components is key to ensuring compliance. They also sit in a logical sequence of five distinct areas.
1.Location of risk rules
This essentially is having a clear understanding of where the risk lies to determine in which jurisdiction the premium taxes should be declared. The rules can be complex and vary across different territories but having a clear process will help.
You’ll need to determine:
Next, check which rules apply. The EU’s four rules determine the correct jurisdiction depending on the nature of the risk:
Download our recent location of risk rules webinar to learn about the rules in more detail.
2.Class of business
A class of business is basically the category the risk falls under. Within the EU there are 18 classes of non-life business, ranging from accident and motor to miscellaneous financial loss and general liability.
The EU provides brief descriptions of each of these classes as well as some specific examples. The information is used by local tax authorities as guidance when implementing their own tax legislation.
Local rules vary so it’s important to understand your insurance policies to ensure the correct and relevant class of business is applied. Some policies may include more than one class of business which will affect the proportions of the premium that relate to each business class.
Our blog, Three Key Steps to Apply IPT on New Lines of Business is a useful resource.
3.Calculating taxes
Having determined the location of risk and the correct class of business the next step is to determine the taxes that apply and need settling.
Tax rates across the EU are fragmented and there are even more variations when you look at the varying tax rates within a jurisdiction. For example, in Spain you have an IPT rate applied at 6% yet you might also have some extraordinary risks surcharges calculated at 0.0003%.
Also consider who must carry the cost of these taxes. Is it the insured or the insurer? In most cases it’s the insurer’s responsibility, however it can fall to the policyholder.
Key to being able to determine which taxes and what rate to apply is having access to reliable software.
Register for our upcoming ‘Back to basics’ webinar, to learn more about how to calculate taxes.
4.Declaration and payment
Here again the rules vary country by country around the frequency for declaring and settling liabilities. They can be monthly, quarterly, bi-annually and annually. Failure to declare within the deadline will result in penalties and/or interest so knowing the deadlines for each return and when payment must be made are crucial.
Some tax authorities have strict rules and are quick to enforce them. Others are more lenient dealing with penalties on a case by case basis, and some (such as the UK) take a behaviour led approach where full disclosure and cooperation could lead to a far reduced penalty.
5.Additional reporting – will IPT follow where VAT leads?
Tax authorities across the world are taking a more granular approach to tax reporting to prevent fraud and reduce the tax gap. With VAT mandates in place across Latin America and more recently spreading into Europe and Asia, the VAT gap is reducing. So as governments transition to digital tax compliance wanting more data and faster, you can expect IPT will in time follow. The Spanish authorities, for example, have already started on this journey with the introduction last year of new digital reporting requirements for Extraordinary Risk Surcharges.
To stay ahead of the curve, the more prepared you are today the easier it will be to face the challenges that lie ahead as the pace of change in digitising tax compliance increases.
Keep up to date with ever changing rules by subscribing to our blogs and following us on LinkedIn and Twitter. We also host regular webinars with our in-house specialists who are on hand to help.
Intrastat is a reporting regime relating to the intra-community trade of goods within the EU.
Under Regulation (EC) No. 638/2004, VAT taxpayers who are making intra-community sales and purchases of goods are required to complete Intrastat declarations when the reporting threshold is breached.
Intrastat declarations must be completed in both the country of dispatch (by the seller) and the country of arrival (by the purchaser). The format and data elements of Intrastat declarations vary from country to country, though some data elements are required in all Member States. Reporting thresholds also vary by Member State.
In an effort to improve data collection and ease the administrative burden on businesses an ‘Intrastat Modernisation’ project was launched in 2017. As a result of this project Regulation (EU) 2019/2152 (the Regulation on European business statistics) was adopted.
The practical effects of these changes are two-fold:
Currently Member States are required to collect the following information as part of Intrastat:
To ease compliance burdens on small businesses, EU Member States are allowed to set thresholds, under which businesses are relieved of their obligations to complete Intrastat. Thresholds are set annually by Member States, and threshold amounts for arrivals and dispatches are set separately.
Under the current regulations, Member States cannot set thresholds at a level that results in less than 97% of dispatches from the Member State being reported and cannot set thresholds at a level that results in less than 93% of intra-community arrivals to the Member State being reported.
Under current regulations Member States are allowed to let certain small businesses report simplified information, so long as the value of trade subject to simplified reporting does not exceed 6% of total trade.
Under the upcoming new regulation, Member States need only ensure that 95% of dispatches are reported and the exchange of data on intra-community arrivals between Member States is optional.
Need to ensure compliance with the latest Intrastat requirements? Get in touch with our tax experts.
Keeping up to date with the latest rates, rules, and regulation of Insurance Premium Tax (IPT) is a challenge for insurers. Not to mention this is especially complex for insurers writing across multiple territories.
Written by Sovos’ team of regulatory specialists, IPT Compliance – A Guide for Insurers provides everything you need to know about the IPT regulatory landscape.
A mix of deep dive country-by-country information in addition to guidance on IPT and the digital tax landscape, this guide is for any insurer wanting to know more about IPT compliance.
Despite its focus on Europe, our guide also explores other jurisdictions in Asia, Australia, North and South America. This guide is your trusted source of information wherever in the world you write business.
The IPT Compliance Guide for Insurers includes:
The digital future of IPT
The tax landscape is changing. Governments across the globe are looking to technology that helps to fill tax revenue gaps and also speed up tax collection. As a result, tax authorities are increasing their focus on the insurance industry. They are ensuring IPT and parafiscal taxes are collected correctly, accurately, and on time.
In light of the rise of digital tax regimes and granular reporting, IPT compliance should be a priority for insurers. Incorrect filing or reporting can lead to costly penalties and reputational damage otherwise.
Our IPT Compliance Guide for Insurers e-book provides guidance on the many elements of IPT compliance. This includes tax point, tax rates, currency, filing, submission and the importance of accurate data.
Owing to the recent changes in IPT across Europe, including Spain’s complex and detailed reporting requirements and Portugal’s Stamp Duty reporting, this guide will help you navigate the ever-changing IPT landscape.
The IPT Compliance Guide for Insurers takes an in-depth look into some of the more complex and unique IPT jurisdictions across Europe. This includes Italy, Slovakia, Portugal, France, Germany, Spain, Finland, Denmark, and the UK.
Europe is the third largest insurance captive domicile in the world. Around 15% of companies are established within the continent. This e-book also contains relevant IPT rules, applicable charges, and guidance for captives.
Progress has been made in the roll-out of the Polish CTC (continuous transaction control) system, Krajowy System of e-Faktur. Earlier this year, the Ministry of Finance published a draft act, which is still awaiting adoption by parliament to become law. Draft e-invoice specifications have been released and there has been a public consultation on the CTC system.
In June, the Ministry of Finance announced it had reviewed all comments submitted by the public and Polish ministers on the CTC system and decided to take the following actions:
In the announcement, the Minister outlined the benefits of adopting the CTC system for taxpayers. These include: quicker VAT refunds; security of the stored invoice in the tax authority’s database until the end of the mandatory storage period; certainty about the invoice delivery to the recipient through the CTC platform and therefore quicker invoice payments; automation of the invoice processing and exchange due to the adoption of a standardized e-invoice format.
In addition, as a result of the new e-invoicing rules upcoming changes in the SLIM VAT 2 package will trigger further relief measures, e.g. around the handling of duplicates and corrective invoices.
The Polish authorities are making good progress in the implementation of the Krajowy System e-Faktur. It is positive to see that the public consultation has proven useful in defining next steps and the authorities’ intent for transparency and timely documentation will hopefully continue throughout the entire CTC roll-out.
To find out more about what we believe the future holds, download Trends: Towards Continuous Transaction Controls.
For more information see this overview about e-invoicing in Poland, Poland SAF-T or VAT Compliance in Poland.
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, ensuring you stay compliant.
We spoke to Wendy Gilby, technical product manager at Sovos, to find out more about her role developing Sovos’ Insurance Premium Tax (IPT) software to help customers meet the demands of a constantly changing regulatory environment.
Prior to joining Sovos I worked at an investment bank in London, working my way up from trainee programmer to programmer, analyst, business analyst, systems analyst, project manager, global production support manager and eventually vice president.
Due to personal circumstances, I started working part time and was even briefly a rowing coach before heading back to university to complete a Computing and IT degree.
I was looking for another role in IT and originally worked for FiscalReps (now part of Sovos) on a short-term contract in 2016 or 2017. This is the product that we now know as Sovos IPT which needed testing to ensure it was fit for purpose.
After completing the project, I came back on a six month contract, which became a full-time permanent position and I’m still here today!
My role is to work out how to implement any modifications to the Sovos IPT system. We agree with the wider Sovos IPT team what new functionality or changes they want and work closely with the development team to convert the ideas into the solutions that our customers use.
I’ve recently been looking at the Sovos VAT solution to try and see the synergies between VAT and IPT in terms of user set up, user roles, uploading data, and initial validation on the files that we get from clients to improve the overall user experience for our IPT solutions.
We’re always trying to make the whole process of filing taxes more efficient, and a lot smoother for customers, whichever country they file their taxes in.
We’ve spent a lot of time refining the IPT Portal to make the process of filing and reporting IPT easier but also more compliant. We’re trying to eliminate as many of the manual steps involved in filing taxes as possible to reduce errors.
Sovos is a blend of technology and human expertise so we work closely with the compliance team who ensure reporting is accurate and compliant across all the tax authorities our customers file IPT in.
Our aim is to automate and integrate as much of the filing process as possible from data submission to receiving funds and submitting to the tax authorities to ensure we don’t miss any tax return dates and avoid late fees.
This probably ties into the work we’re doing on the IPT Portal. We’re trying to make everything more transparent so customers can see everything in one place including the status of their tax returns.
We’ve also introduced APIs as well, so customers can send us a file straight from their system, it’s a lot less hassle for them. We’re always focused on making it easier for customers to send us their data and providing as many options as possible to do this.
I think the biggest impact has been the IPT Portal. When I started, much of the reporting processes were still paper based which meant a lot of sifting through paper tax return documents for the compliance team ahead of filing.
So having the IPT portal with all the documents that used to be printed out in one place, where clients can view everything online, has been the biggest change and one that our customers and our compliance team value, especially over the past year when companies have had to adapt to working remotely and not having as easy access to resources in the office.
I think it’s the move towards a more connected reporting processes, joining all these disparate elements of tax returns to make the IPT reporting and filing process even easier and far less error-prone. As certain elements still require some manual input there’s still opportunities for mistakes so eliminating this concern altogether and making it a simple process from initial upload to submission to the tax authorities is really exciting.
Automated returns are becoming more prevalent and we’re in the process of working on these for Germany, France and Hungary so when I say future it’s actually already happening which is very exciting.
Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.
Moving goods from one place to another is a quintessential part of business. Manufacturers, wholesalers, transporters, retailers and consumers all need to carefully orchestrate the shipping and handling of raw materials, parts, equipment, finished goods and other products to keep business flowing. This supply chain harmony is what makes production and trade possible in society.
In Canada, the United States and most European countries, tax administrations don’t intervene much in these trade processes. Until recently, the same could be said about most countries of Latin America. But, with the rise and expansion of electronic invoicing mandates in the region, this is rapidly changing.
Most governments with mature e-invoicing mandates are now recognizing that these mechanisms and government platforms can be used as vehicles to understand where, what, how and when goods are being moved. The traditional electronic invoice, is no longer enough – and tax authorities are requiring businesses to report goods movements in real-time.
The implications are serious too. Goods moved on public roads without those documents are very likely to be seized by the authorities, and the owners and transporters will be subject to fines and other sanctions.
The country with the most sophisticated system in place is arguably Brazil. The MDF-e (or Manifesto Eletrônico de Documentos Fiscais) is a mandatory document required by the tax administration in order to audit the movement of goods in Brazil.
This purely digital document combines the information of an electronic invoice (NF-e) and the electronic documents that hauling companies issue to their clients (CT-e). This system became mandatory in 2014 and has since been expanded and modernized with a vast grid of electronic sensors and transponders placed in the public highways of Brazil, intended to ensure that every truck moving goods already has the corresponding MDF-e, NF-e and CT-e. In most cases, the authorities don’t need to stop the trucks to verify the existence of the document.
Mexico recently issued a new resolution requiring taxpayers delivering goods, or simply redistributing them, to have the corresponding authorization from the tax administration (SAT). Products delivered by road, rail, air or waterways need to have what is known as the CFDI with the Supplement of Carta Porte.
CFDI is the acronym for an electronic invoice in Mexico. That supplement of Carta Porte is a new attachment to the electronic invoice of transfer (Traslado) issued by the owners delivering products or to the CFDI of Income (Ingresos) issued by the hauling companies. Carta Porte will provide all the details about the goods being transported, the truck or other means being used, the time of delivery, route, destination, purchaser, transporter and other information. This new mandate will become effective on 30 September 2021. As is in Brazil, noncompliance with this mandate will result in hefty penalties.
Chile also has a mandate requiring the delivery of goods to be pre-authorized by the tax administration. These tax authorized documents are locally known as Guias de Despacho (or dispatch guides) and since January 2020 they can only be issued in an electronic format.
There are some exceptions where the dispatch guide can be issued temporarily on a paper format by certain taxpayers. Also, in cases of contingency, taxpayers may be authorized to issue paper versions of the guide; however, that will not exempt the issuer of regularizing the process once the contingency is complete.
The content of the dispatch guide will vary depending on who issues it and the purpose of the delivery (sales, consignment, returns, exports, internal transfers etc.) but in general, delivery of goods in Chile without the authorized dispatch guide will be subject to penalties from the tax administration (SII).
Argentina has a federal level VAT and a provincial level gross revenue tax. To control tax evasion, both levels of governments exercise certain levels of control in the process of dispatching goods within their jurisdictions.
The tax authority’s system for controlling the flow of goods in public ways is not as encompassing as in Brazil, Chile and Mexico, but it is getting closer. Only the provinces of Buenos Aires, Santa Fe and Mendoza, plus the City of Buenos Aires, require authorization from the fiscal authority to move goods that originated in, or are destined to, their jurisdictions. For that, they require the COT (or Transport Operations Code) where all the data related to the products, means of transport and other information is included once the authorization is provided. The provinces of Salta, Rio Negro and Entre Rios are working on similar regulations.
At federal level, the AFIP (Federal tax administration) only requires pre-authorization for the delivery of certain products such as meat and cereals. But at this level too, the regulatory environment is changing.
The AFIP, along with the Ministry of Agriculture and the Ministry of Transportation have issued a joint resolution 5017/2021 that mandates the use of a digital bill of lading (Carta Porte Electronica) whenever there is a transfer of agricultural products on public roads in Argentina. This change will become effective on 1 November 2021. In 2022, this federal requirement may expand to other products.
The requirement of authorization for moving goods in LatAm is not limited to the largest economies of the region. Smaller countries with electronic invoicing systems have expanded, or are in the process of expanding their mandates to require taxpayers to inform the tax authority, before goods are moved as result of a sale or any other internal distribution.
For instance, Peru requires the Guias de Remision from taxpayers before they start the delivery of their products. This electronic document should be informed to and authorized by the tax administration (SUNAT) using the digital format established for that purpose and will include all the information about the product delivered, issuer, recipient, means of transport, dates and more.
Uruguay has the ‘e-Remitos’ which is an electronic document authorized by the tax administration (DGI). It is required for any physical movement of goods in Uruguay. As in other countries, this document will provide all the information about the goods being transported, the means used, the issuer, the recipient and additional data. It is electronically delivered and authorized by the tax administration using the XML schemas established for that purpose.
Lastly, in Ecuador the tax administration (SRI) requires the ‘Guias de Remision’ (Delivery Guide) for any goods to be transported legally inside the country. As the infrastructure to support the electronic invoice is not fully developed in Ecuador, in some cases the tax administration allows the taxpayer to comply with this part of the mandate by having the electronic invoice issued by the retailer delivering the goods to his clients. Even though Colombia and Costa Rica do not require a separate electronic document to authorize the transport of goods, it is expected that in the future, this requirement will come into effect, mirroring what has happened in many other countries of the region.
The common element of all these mandates in Latin America, is that all of them are closely knitted to the electronic invoicing system imposed in each country. They are basically seen as another module of the electronic invoice system where information regarding goods being transported by public roads, waterways, by rail or air should be submitted to the tax administration, via the XML schemas established for that purpose.
Tax administrations in the region are actively enhancing their systems to ensure that movements of goods are properly controlled in real time. In some cases, tax administrations have provided online solutions aimed at taxpayers with small numbers of deliveries. But for all other taxpayers, a self-deployed solution is required.
Enforcement of the mandate is made not only by the tax administration, but also by the police and the public roads authorities, both of which routinely seize goods for non- compliance. Since these mandates have proven to be successful to control tax avoidance and smuggling, it’s safe to say that the Remitos, Dispatch Guides, Carta Porte or COTs are here to stay for good and taxpayers doing business in Latin America have no option but to comply with this new regulatory requirement.
To find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.