In India, the e-invoicing system has been live since 2020. Taxpayers in the scope of e-invoicing mandate must issue their invoices relating to B2B and B2G transactions through the e-invoicing system, which is a form of continuous transaction controls (CTC).
However, B2C invoices are not issued through the CTC system, which means that B2C invoices don’t pass through the Invoice Registry Portal’s (IRP) clearance. The Indian authorities have announced their goal to include B2C invoices in the scope of the CTC system although there is no timeline provided for that plan.
Meanwhile, there is a separate QR code requirement for B2C invoices. We explain why and when a QR code is required and how taxpayers can generate it:
The QR code requirement for B2C invoices aims to promote digital payments. In that respect, it differs from the QR code for B2B and B2G invoices which include the IRP’s signature. The latter serves as proof of clearance that B2B and B2G invoices must go through. Additionally, the QR code for B2C invoices must be self-generated, whereas the IRP generates the QR code content for B2B and B2G invoices (if the supplier is in the scope of e-invoicing).
The QR code requirement doesn’t apply to all suppliers. As per the CBIC notification, F. No. CBEC-20/16/38/2020-GST, suppliers with annual revenue of 500 Cr. Rupees or more (from 2017-2018) must comply with the QR code requirement when issuing invoices to their end customers (B2C).
The QR code must be dynamic. Unlike static QR codes, the system will update the content of the dynamic QR code if the payment is received. Content-wise, businesses must include the following information:
After printing the QR code on the invoice, customers must be able to scan it to make payments. If the supply is made through an e-commerce platform, suppliers must give cross-references of the payment received in respect of the said supply on the invoice. Then the invoice would be deemed to have complied with the requirements of the Dynamic QR Code.
The Indian authorities are making significant progress with their efforts to digitize paper processes in the country by introducing a CTC invoicing system and encouraging digital payments. In line with their ambitions, we expect further digitization developments in the near future.
Need to ensure compliance with the latest e-invoicing requirements in India? Get in touch with Sovos’ tax experts.
An increasing insurance premium tax (IPT) trend is using transactional level information in various returns and reports. Preparation and education are key to ensuring details are being captured on an ongoing basis rather than at the last moment. Furthermore, in some cases where legacy systems are being utilised and don’t have the capability to capture all required fields, a software update may be required. All relevant parties in the data supply chain should educate themselves on the importance of collecting the details to avoid the often painstaking and time-consuming exercise of going back to the policyholder to collect the required information.
Many businesses initiated this trend because of the changes to the Consorcio de Compensación de Seguros (CCS) reporting system in 2019. However, this is not always the case as some countries have had transactional submission in place for some time. Two such examples would be Cyprus and Malta. For the former, Policy Number, Class of Business, Inception/Expiry Date, Premium and Tax Amount are required per policy. The same fields are required for the latter bar Inception/Expiry Dates. We rarely experience any difficulties for insurers collecting this information, as these are common fields often being collected at the source.
Whilst this may surprise some, Italy is another country where transactional level information is required to be recorded. The main difference here is that these details aren’t required for ongoing tax submissions but rather in the form of IPT books which must be regularly maintained and contain the transactional information for the preceding ten years. You can find more about the required details here.
The IPT books are mandatory for successful prepayment transfer following a Part VII portfolio transfer, general prepayment reclaims and historicals. Transactional details are also required for the Claims Report and Contract & Premium Report.
The changes in CCS submission brought the trend of transactional submission to the forefront of insurers’ thinking. A mandatory field for successful submission is the postcode, which many insurers weren’t capturing at the time. To help insurers with this change, there was a six-month transitional period where insurers could submit policies without the postcode. However, this field then became mandatory and the requirement was that the preceding six months of reports would need updating.
The introduction of the Greek Annual Report in 2019 brought another layer of complexity for insurers. The main issue was the requirement for the VAT/tax registration number to be populated. Where it was impossible to collect, insurers sometimes opted to submit incomplete reports. To date, we haven’t experienced pushback from the tax authority for omitting this detail, but we cannot guarantee this will continue to be the case.
The most recent change has been to Portuguese Stamp Duty submissions. This change brought elements of the Greek Annual Report and the CCS changes together, in the sense that the geographical area required population (Azores, Madeira, Mainland) and the tax ID of the policyholder were required. Unlike in Greece, there was no option of submitting incomplete reports; if all necessary details were not populated, the insurer couldn’t pay the tax.
The above list is by no means exhaustive but gives a good idea of the exponential complexity facing insurers for ongoing compliance. Simply put, the insurer must have agile systems to deal with any potential changes. 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’re on the right compliance path.
Need help ensuring your IPT compliance? Get in touch with Sovos’ team of experts to discover the benefits of a managed service provider.
As previously predicted by Sovos, the threshold for implementing mandatory e-invoicing has been lowered by the Indian authorities. According to the Central Board of Indirect Taxes and Customs Notification No. 17/2022 – Central Tax, from 1 October 2022 compliance with the e-invoicing rules will be mandatory for taxpayers with an annual threshold of 10 Cr. rupees (approximately 1.270.000 USD) or more.
The Indian e-invoicing system falls under the category of continuous transaction controls (CTCs) under the Goods and Services Tax (GST) framework. The legal validity of the invoice is conditional based on the Invoice Registration Portal (IRP) digitally signing the invoice and providing an Invoice Registration Number (IRN). If the IRN is not included in an invoice, the invoice will not be legally valid.
The scope covers both domestic and cross-border transactions. The IRP clearance process is mandatory for B2B, B2G and export transactions. So, taxpayers in scope must issue their invoices (as well as other documents that need an IRN) according to the new system for all B2B, B2G or export transactions.
Taxpayers in scope of e-invoicing must generate e-waybills through the e-invoicing system. It is not possible to voluntarily adhere to the e-invoicing system. This means that taxpayers not satisfying the threshold limit cannot adopt CTC invoicing.
Before the initial introduction, the e-invoicing plan was announced by the Indian authorities as early as 2018. Afterwards, the evolvement of the plan has been as follows:
1 January 2020: Voluntary period of e-invoicing for businesses with a turnover of Rs.500 Crore or more
1 February 2020: Voluntary period of e-invoicing for businesses with a turnover of Rs.100 Crore or more
1 October 2020: Beginning of the mandatory e-invoicing period for businesses with a turnover of Rs.500 Crore or more (six months later than previously intended). For the first 30 days, there was a grace period during which invoices could be reported after they had been issued.
1 January 2021: Beginning of the mandatory e-invoicing period for businesses with a turnover of Rs.100 Crore or more.
1 April 2021: Threshold for mandatory e-invoicing lowered to taxpayers with turnover between Rs. 100 Crore to Rs. 50 Crore.
1 April 2022: Threshold lowered from Rs. 50 Crore to Rs. 20 Crore. Taxpayers above Rs. 20 Crore must implement e-invoicing.
1 October 2022: Threshold will be lowered from Rs. 20 Crore to Rs. 10 Crore. Taxpayers above Rs. 10 Crore must implement e-invoicing.
Some changes concerning the e-invoicing workflow are expected. Currently, there is a single platform (IRP) for the clearance process but multiple IRPs will be introduced soon. The Indian Authorities have already approved new IRPs, demonstrating that the authorities wish to have an interoperable e-invoicing market and are moving ahead with their plans to realise their goals.
Additionally, B2C invoices are not currently covered by the IRP clearance, yet the authorities have announced their intention to include those in scope of their CTC system.
India is a challenging jurisdiction for many taxpayers; businesses must have smart digitization and maintenance strategies to stay compliant. The benefits of digitization can be realised through a global strategy that businesses might put in place.
Since 1 January 2019 foreign electronic service providers must issue electronic invoices, a type of e-invoice, for sales of electronic services to individual buyers in Taiwan. Alongside this, Taiwan’s local tax authorities have been introducing incentives for domestic taxpayers to implement e-invoicing despite not being a mandatory requirement.
Before diving into the details of the e-invoicing system in Taiwan, we’ll discuss the Government Uniform Invoice (GUI), which the e-invoicing system is based on Government Uniform Invoices.
The government uniform invoice is a standard VAT invoice governed and pre-numbered by the tax authorities in Taiwan. All business entities must issue GUIs for all sales of goods and services subject to VAT, except for any legal exemptions.
Taxpayers can issue GUIs once following business registration approval by the local competent tax authority in Taiwan. Taxpayers can issue different types of GUIs including paper-based GUIs and Electronic Government Uniform Invoices (eGUIs) as well.
eGUIs are a type of GUI issued, transmitted, or obtained via the internet or other electronic means.
Issuing an eGUI is mandatory for foreign electronic service providers who sell electronic services to individuals in Taiwan as of 1 January 2019. However, issuing eGUIs for B2B, B2C and B2G transactions is optional for the broader economy, including domestic taxpayers in Taiwan.
Business entities in Taiwan must use a sequential track number called the electronic invoice track number (eGUI number for short) in their electronic invoices. Business entities must apply to the local tax authority to have eGUI numbers assigned.
The e-invoice issuance process requires the use of these eGUI numbers and must comply with MIG 3.2.1 based on an XML format provided by the tax authority.
Following the issuance of an electronic uniform invoice, businesses have 48 hours to upload the invoice information to the tax authority platform for B2C transactions and seven days for B2B transactions This model is known as continuous transaction controls (CTCs), whereby the tax authorities receive transactional information from taxpayers in real time or near-real time.
Business entities can appoint a certified e-invoicing service provider, also known as value-added centers, to issue and transmit uniform invoices electronically.
Taiwanese authorities have encouraged electronic invoicing for many years. As a result, more and more businesses have started issuing eGUIs.
The requirement to issue e-invoices for foreign electronic service providers has played an important role in the widespread adoption of e-invoicing throughout the country. While it’s clear Taiwan has come a long way in terms of the digitalization of e-invoicing processes, paper-based invoices can still be issued according to Taiwanese regulations.
We’ll monitor developments in the future to see whether the mandatory implementation of e-invoicing will be extended to the broader economy in Taiwan.
Need to issue GUIs electronically in Taiwan? To comply with tax authority requirements in Taiwan and around the world, contact us now.
A parafiscal tax is a levy on a service or a product which a government charges for a specific purpose. It can be used to financially benefit a particular sector (public and private).
Unlike the drastic changes in Stamp Duty reporting within the Portuguese region, the parafiscal taxes have remained consistent and unchanged for many years. Sovos helps customers report the central parafiscal taxes within the region:
The reporting of these taxes is varied and comprehensive which can become confusing for businesses unfamiliar with the requirements. The parafiscal charges, more notably INEM and ANPC, are reported on a monthly declaration structure, whilst PR and FGA are reported on a quarterly structure, and ASF is reported on a half-yearly basis.
The ANPC and INEM are reported quarterly, and premiums concerning the Azores, Continent (mainland Portugal), and Madeira must be split. This should be identified by the insurer and declared to the corresponding tax authorities.
The tax ANPC (also known as the National Authority for Civil Protection Contribution) can be applied in classes 3 – 13 and is commonly applied at 13% of the fire risk premium. However, this rate is not consistent for all classes of business and can fluctuate accordingly.
Moreover, the tax INEM (also known as the National Institute of Medical Emergency Contribution) can be applied to classes 1, 2, 3, 10 and 18 and at 2.5% of the taxable premium. The rate of 2.5% is consistent between all classes of business and reported on the compliant tax point with Portugal, which is the cash received date (much like ANPC, FGA, PR and ASF). Finally, an annual report for INEM needs to be reported directly to the tax authorities, confirming the total liabilities due throughout the fiscal year.
The reporting of FGA and PR is completed quarterly and submitted on two separate returns. The tax PR is reported at 0.21% of the premium (relating to motor insurance) for classes of business 1, 3 and 10; whilst an FGA rate of 2.5% of the premium (relating to Compulsory Third Party Liability) is only applicable to class 10.
The ASF tax is applied at a tax rate of 0.242% of the taxable premium and is calculated on all classes of business. The rate of 0.242% is confirmed annually by ministerial order within Portugal. So, the tax authority can effectively change the rate annually. It’s also important to mention that a separate rate of 0.048% applies to life insurance and is included within this return.
Need to ensure your business is fully compliant with the ever-changing IPT requirements in Portugal? Get in touch with Sovos’ tax experts.
On 22 July, the EU Commission opened four new infringement proceedings against the United Kingdom for allegedly breaching the 2021 Northern Ireland Protocol on conditions related to customs requirements, excise tax and VAT. The EU has brought seven proceedings against the UK over the Protocol since 2021.
Following the UK’s departure from the EU in 2020, the parties agreed that customs checkpoints on the land border between Northern Ireland and the Republic of Ireland could lead to political instability. The Protocol was an attempt to avoid border posts between the two countries.
Instead, the Protocol ensures customs checks are done in Northern Irish ports before goods are released into the Republic of Ireland. This process effectively created a customs border on the Irish Sea. In addition, the Protocol allows Northern Ireland to follow EU rules on product standards and VAT rules related to goods.
The Protocol has been controversial in the UK, as it creates special rules for Northern Ireland that don’t apply in England, Scotland or Wales. Members of the UK’s governing Conservative Party – including Liz Truss, a frontrunner to replace Boris Johnson as UK Prime Minister – have recently introduced a Northern Ireland Protocol Bill that would allow the UK to amend the terms of the Protocol.
Among other things, the draft legislation seeks to remove dispute settlement from the jurisdiction of the Court of Justice of the European Union, authorises “green [fast track] channels” for goods staying within the UK, and allows for UK-wide policies on VAT. Proponents of the bill claim it is necessary to protect the “essential interest” of peace in Northern Ireland.
However, European Union Representatives have condemned this draft legislation as a potential violation of international law. In its most recent infringement proceedings, the EU alleges that the UK has not substantively implemented parts of the Protocol at all.
In particular, the EU claims that:
The last point is particularly interesting for VAT purposes, as the IOSS scheme is a signature piece of the EU’s “VAT in the Digital Age” initiative.
At the time of writing the Northern Ireland Protocol Bill has not yet been adopted by the UK Parliament. It awaits review in the House of Lords. The UK and the EU have stated that further negotiations over the Protocol would be the preferred option. The parties, however, remain far apart on the details.
The EU has set out two months for the UK to respond to the infringement action. Failing any new agreements, the action could lead to possible fines and/or trading sanctions between the parties. Taxpayers conducting cross-border trade between the UK and EU should ensure they stay on top of future developments.
Need more information on IOSS and how it could impact your business’s compliance? Get in touch with our team.
Your guide to making VAT compliance simple
There are many elements to understanding European VAT compliance; our tax experts continually review regulations, compliance rules and tax authority updates to understand VAT requirements across Europe and beyond. This e-book is the result of their research and is ready for you to download. It’s ideal for anyone involved in VAT compliance who is keen to learn more.
Navigating cross-border and understanding European VAT compliance can be complicated. With requirements varying from country to country it’s important to be prepared for any upcoming changes to ensure continued compliance. The digitization of VAT continues, and our guide will help you understand and be ready for changes.
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The guide provides information on understanding European VAT compliance including some of the biggest trends in VAT. We also look at some of the more complex VAT requirements including Intrastat, supply chain management, the EU e-commerce VAT package and VAT for events – all in one easy to understand e-book:
VAT compliance means ensuring that VAT is applied and submitted in the correct format and by the relevant deadline to the relevant tax authority.
Each Member State has its own VAT invoicing and reporting requirements. VAT requirements continue to change so it’s important to be aware of upcoming regulations and prepare in advance to remain compliant with the latest requirements.
To obtain a VAT number a company must register for VAT in the EU. Registering for VAT in the EU remains a complicated task, with each Member State having bespoke processes and procedures to obtain a VAT number. VAT reporting includes many elements, from registration to fiscal representation and filing returns. This guide explains the VAT reporting process, as well as upcoming changes that organisations should be aware of to remain VAT compliant.
End-to-end, technology-enabled VAT Managed Services ease your compliance workload and mitigate risk wherever you operate today while ensuring you’re ready to handle the VAT requirements in the markets you intend to dominate tomorrow.
Ease your VAT compliance workload and mitigate risk wherever you trade with Sovos’ complete end-to-end offering, enabled by our comprehensive software, helping you stay up to date and reducing the burden on your team.
Data is one of the most valuable assets of companies and individuals. Data gathered, cleaned and analysed well enables businesses to realise their utmost capabilities. With the digitization trend, error-prone paper forms, ledgers and books are replaced by electronic versions. This development gave companies more control over their data and liquidated data for further analysis.
This is also true for governments. Since tax income is one of the most significant revenue sources for countries and transactional data is the basis of tax income calculation, transactional data analytics is also essential for governments.
Receiving data in electronic form enables tax authorities to estimate their tax income and income sources better and eventually collect taxes more efficiently. This process has led many global tax authorities to require taxpayers to transmit relevant tax data electronically. Furthermore, the reliability of real-time data has shown to be so appealing that taxpayers are required to transmit data in real-time to the tax authority in many countries.
The real-time or near-real-time tax-relevant data transmission requirement is a new trend often referred to as Continuous Transaction Controls (CTC). CTCs require each transaction to be transmitted to the tax authorities to enable immediate and continuous control. CTCs are becoming more and more common around the world. The initial purpose of the CTCs when it was first launched in Latin America, the origination point, was to reduce the VAT gap. By looking at countries which have adopted CTCs, it’s fair to say that CTCs have already achieved this goal. However, tax authorities subsequently noticed that the benefits of CTCs are not limited to closing the VAT gap.
The vast amount of data collected through CTCs presents immense opportunities for tax authorities. Tax authorities can achieve unprecedented levels of business transaction transparency. Tax authorities T can calculate taxpayers’ compliance risk, and can plan audits based on these risk calculations. Furthermore, data can be used to drive fiscal and economic policy and shared with other government bodies. For instance, during an economic crisis, it’s possible to determine the business sectors most affected through the sales data reported by taxpayers. Those effected can be granted support (through tax exemptions, reduced rates etc.). The OECD Forum on Tax Administration’s chart compares different tax jurisdictions’ data management and analytics abilities and can be used to understand different countries’ data analytics technology.
Granular data collection and transparency of source data create challenges for businesses as there is little room for mistakes, shortcuts or later error correction. Businesses will need to ensure much more granular tax determination decision-making earlier in their processes and their trading partners’ processes.
Furthermore, ensuring compliance where CTCs are implemented can be challenging, especially for international companies, who have historically viewed taxes as something to be addressed by local accountants. Viewing tax as primarily a local concern by adopting local solutions that combine business and compliance functionality for each jurisdiction will be difficult to reconcile with a business’ broader digital and finance transformation and alignment, which is often global.
To step up their game, businesses should focus on data gathering and having a central data repository to have the “big picture” rather than acquiring local solutions to “save the day”. Real-time data transmission also requires clean data to maintain. The global digital transformation strategy must be in place to meet these requirements as well as a scalable technology to manage future tax demands.
Starting with the introduction of a multiple tax rate system in 2019, Japan is in the middle of a multi-year process of upgrading its consumption tax system. Through this significant change, the Japanese government seeks to solve a tax leakage problem that has existed for years.
The recent series of tax reforms in Japan started with the introduction of its multiple tax rate system on 1 October 2019. Following this, changes in the country’s indirect tax, the Japanese Consumption Tax (JCT), started to take place. To counter systemic problems caused by the current ledger system structure, anew system – the Qualified Invoice System –will be introduced from 1 October 2023. The key difference from the current system is that a Qualified Invoice must include a breakdown of applicable tax rates for that given transaction.
Not long after these changes were announced, a new organisation, the E-Invoice Promotion Association (EIPA), was established in July 2020. It aims to promote digitization of overall commercial transactions. Leveraging the opportunity presented by the new Qualified Invoice System, the EIPA began to work on developing a standard specification for electronic invoices.
Since January 2021, the EIPA – with support from the Japanese government – has been working with the OpenPEPPOL team to develop a Japanese specification that meets the country’s regulatory framework and business demands. In September 2021, Japan acquired PEPPOL Authority status and aims to allow businesses to issue and receive electronic invoices through PEPPOL in the Autumn of 2022.
Introduced in January 1989, it’s the indirect tax charged on the consumption of goods and services in Japan. There are national and regional levies, and a reduced rate of Consumption Tax in Japan.
Japan’s Consumption Tax is the equivalent of VAT which is charged across the European Union.
Consumption Tax in Japan is levied when a business transfers goods, provides services or imports goods into Japan.
A refund of Consumption Tax in Japan isn’t possible for businesses without taxable sales in the country.
As Japan implements its Consumption Tax System updates, requirements for Japanese taxpayers will change. Need help ensuring your business stays compliant with all future Japanese Consumption Tax system updates?
Our experts continually monitor, interpret and codify regulatory changes from around the world into our software, reducing the compliance burden on your tax and IT teams.
1 July begins the second half of 2022, and in line with that milestone, changes have started to be implemented in the CTC sphere. In this blog, we highlight vital developments that have taken place in and outside Europe that may influence the continuous transaction controls (CTC) landscape globally.
The Philippines has officially implemented its mandatory continuous transaction controls (CTC system, which consists of the near-real-time transmission of electronically issued invoices and receipts. On 1 July 2022, the Philippines tax authority launched the Electronic Receipt, Invoice and Sales Reporting System (EIS) pilot program.
This initiative was first introduced in 2018 by the Tax Reform for Acceleration and Inclusion Act, known as TRAIN law. 100 selected pilot taxpayers are now obliged to issue and transmit e-invoices/receipts to the Bureau of Internal Revenue (BIR) through the EIS platform. (Philippines Advances Towards Mandatory CTC Reporting | Sovos)
Romania has been taking steps toward implementing its continuous transaction controls (CTC system since 2021. As of 1 July 2022, Romanian taxpayers are required to use the CTC e-invoicing system e-Factura for the supply of high-fiscal risk products in B2B transactions and all B2G transactions. Suppliers must transmit structured invoices issued in XML format to the E-Factura system. Subsequently, the seal will be applied by the Ministry of Finance as proof of clearance. Such invoice will be legally valid under the Romanian regulation. (Romania: Questions Remain as Deadline Looms | Sovos)
Alongside the 1 July 2022 go live for the CTC e-invoicing mandate, the e-transport system has been introduced to monitor high-fiscal-risk goods transported domestically. Taxpayers must issue an e-transport document before certain goods are transported. Moreover, taxpayers must send files to the tax authorities in XML format. Based on Act No. 106 issued by the Romanian government on 30 June 2022 and the change of Articles 13 and 14 of GEO, the fines for non-compliance with the e-transport requirements will not be effective until 1 October 2022. Also, starting from 1 July 2022, SAFT began to apply to large taxpayers as the penalty grace period has ended.
On the list of countries expanding their e-invoicing requirements is also Vietnam, where the issuance of e-invoices became mandatory for all taxable persons operating in Vietnam as of 1 July 2022. Previously, the expected deadline was 1 November 2020, but the tax authority extended it due to the difficulties encountered by local companies to implement on time a compliant e-invoice solution.
Moreover, enterprises, economic organisations, other organisations, business households and individuals must register with the local tax administration to use e-invoices according to the rules established in Decree 123. (Vietnam: E-invoicing Roll-Out in July 2022 | Sovos).
Mandatory B2G invoicing has been postponed for small, medium, and microenterprises with the enactment of Law Decree 42-A/2022. The initial date was 1 July 2022. Now, the B2G e-invoicing is going to be mandatory from 1 January 2023. The reason for this change is that, after extending the deadline for acceptance of electronic invoices in PDF until 31 December 2022, the Portuguese government considered it important to also extend the deadline for receiving and processing B2G electronic invoices for micro, small and medium-sized companies until 31 December 2022 (Portugal: Mandatory B2G invoicing for SME’s postponed again | Sovos)
In Turkey, the tax authority expanded the scope of taxpayers required to use e-fatura, e-arsiv and e-waybill applications. This expansion was done by either adding new sector-based mandates or decreasing the annual revenue threshold. The new requirements became applicable recently, and the taxpayers in the scope of the changes started using e-documents as of 1 July 2022. (Turkey Expands Scope of E-Documents (sovos.com)
In South Korea, e-invoicing has been mandatory for all corporate businesses since 2011. An issued e-tax invoice must be transmitted to the National Tax Service (NTS) within one day of the invoice being issued. The current change concerns the threshold limit for individual businesses, which from 1 July 2022 has been lowered to KRW 200,000,000.
Italy has also entered another phase of implementing its CTC requirements. Starting with cross-border invoices, the Esterometro (the report of cross-border invoices) has been replaced with the transmission of cross-border invoice data to the SDI in a FatturaPA format from 1 July 2022. Additionally, the recently published Decree n.73 established a threshold for the cross-border invoice reporting mandate. Taxpayers are only required to report transactions that exceed the amount of EUR 5,000 for every single operation. This applies, more specifically, to purchases of goods and services not territorially relevant for VAT purposes in Italy, under Articles 7 to 7-octies of Presidential Decree 633/1972.
Moreover, e-invoicing through the SDI became mandatory from 1 July 2022 for taxpayers applying the flat-rate VAT regime (regime forfettario), as well as amateur sports associations and third sector entities with revenue up to EUR 65,000. Lastly, e-invoicing became mandatory between Italy and San Marino from 1 July 2022. The system for e-invoice exchange between Italy and SM will leverage the SDI as the access point for Italian taxpayers and a new, comparable hub for companies in San Marino.
Many countries around the world are either introducing or expanding their existing CTC Regimes with the active changes taking place globally. Sovos continues to monitor which countries are next on the list to build its local CTC regimes and comply with the international standards.
With coverage across more than 60 countries, contact us to discuss your VAT e-invoicing requirements.
The Philippines continuous transaction controls (CTC) Electronic Invoicing/Receipting System (EIS) has been officially kicked off for the 100 large taxpayers selected by the government to inaugurate the mandate. Although taxpayers were still struggling to meet the new e-invoicing system’s technical requirements just before the go-live date, the Philippines upheld its planned deadline and went live with this pilot on 1 July 2022.
The Philippines roll-out has once again highlighted the challenges of complying with new mandates and shown that readiness is vital.
Together with one of the six initial pilot companies, which started testing early this year, Sovos has developed the first software solution to obtain approval by the EIS to operate e-invoice transmission through the government’s transmission platform. Sovos’ solution is up and running in the Philippines.
One day before the EIS go-live, the Philippines tax authority, BIR (Bureau of Internal Revenue), published Revenue Regulations n. 6-2022, 8-2022, and 9-2022, containing the new system’s policies and guidelines and documenting the rules and procedures adopted by the EIS.
While the regulations do not represent news for pilot taxpayers who have successfully implemented their CTC e-invoice reporting systems, the same might not be accurate for those preparing to comply with the new mandate. The legislation officially establishes the country’s e-invoice/receipt issuance and reporting initiative, first introduced in 2018 by the Tax Reform for Acceleration and Inclusion Act (TRAIN), and documents relevant information.
As of 1 July 2022, 100 selected pilot taxpayers have been obliged to issue and transmit e-invoices and e-receipts through the EIS. The BIR is planning a phased roll-out for other taxpayers within the scope of the mandate, starting in 2023, but no official calendar has been announced yet.
Taxpayers covered by the mandate are:
The mandate requires electronic issuance of invoices (B2B), receipts (B2C), debit and credit notes and transmission through the EIS platform in near real-time, that is, in up to three (3) calendar days counted from issuance date. Documents must be transmitted using the JSON (JavaScript Object Notation) file format.
Issuance and transmission can be done through the EIS taxpayer portal or using API (Application Programming Interface), in which taxpayers must develop a Sales Data Transmission System and secure certification before operating through the EIS. This entails the application for the EIS Certification and a Permit to Transmit (PTT) by submitting documentation with detailed information about the taxpayer’s system.
Although the regulations state that the submission of printed invoices and receipts is no longer required for taxpayers operating under the EIS, archiving requirements have not been modified. This means that during the 10-year archiving period, taxpayers must retain hard copies of transmitted documents for the first five (5) years, after which exclusive electronic storage is allowed for the remaining time.
Additionally, the legislation states that only the invoices successfully transmitted through the EIS will be accepted for VAT deduction purposes.
Many of the 100 pilot taxpayers struggled to comply with the country’s deadline. For this reason, the EIS has allowed alternations to the deadline for certain taxpayers, provided they submit a Sworn Statement detailing the reasons why they are not able to meet the requirement on time and a schedule with the date they intend to comply by, which are subject to the EIS’ approval.
Regarding non-compliance, the regulations state that the tax authority shall impose a penalty for delayed or non-transmission of e-invoices/receipts to the EIS and that unreported sales will be subject to further investigation.
After the pilot program kick-off and legally establishing the CTC framework, the government plans to gradually roll out the mandate to all taxpayers included in the scope in 2023. However, taxpayers who are not in the mandatory scope of the EIS may already opt to enrol in the system and be ready to comply beforehand.
Sovos was the first software provider to become certified, in conjunction with one of the pilot taxpayers, to transmit through the EIS, and is ready to comply with the Philippines CTC e-invoice reporting. Our powerful software combined with our extensive knowledge of the Philippines tax landscape helps companies solve tax for good.
Need to ensure compliance with the latest e-invoicing requirements in the Philippines? Speak with a member of Sovos’ team of tax experts
Update: 20 May 2024 by Edit Buliczka
In May 2023, the Hungarian government extended the extra profit tax on insurance premium amounts (EPTIPT) for another year.
It updated the regulations again in January 2024, adding the fourth amendment to the two-and-a-half-year history of this tax (this tax was supposed to be repealed from 2025). This time, the final settlement and prepayment declaration and payment rules were modified.
According to the new rules, both the final settlement and prepayment must be paid in two installments. The same exact amount should be settled four times over the year – as follows:
Both the final settlement and the prepayment installments should be equally split between these deadlines.
If an insurance company needs to correct the declared premium amount for 2023, for example, in August 2024, it must submit four corrective tax returns in a row:
If such an error is discovered after 15 November 2024, the number of corrective returns will rise to five. Taxpayers would also need to submit the corrective 2024 EPTIPT second installment prepayment return.
Do these changes add administrative burden to your organisation? Speak to Sovos about how we can help.
Update: 26 January 2023 by Edit Buliczka
The Hungarian Tax Office (HUTA) released the 2023 insurance premium tax (IPT) return template last month.
According to the government decree of 465/2017, return templates must be made available at least 30 days before the due date. The first IPT return of the year is due by 20 February 2023, pertaining to the monthly IPT liabilities for January 2023.
The new IPT return template replicates the template from 2022, though the code, rates and scales for 2023 extra profit tax (EPTIPT) are different.
Coding of the tax returns in Hungary are usually formatted so that the first two digits indicate the tax year – in this case, 23 for 2023 – and the remaining digits, which are typically numbers, specify the type of tax. IPT and EPTIPT fall under the same tax code of 20. Therefore, the IPT/EPTIPT return code for 2023 is 2320.
Based on advice obtained from HUTA, it was confirmed to Sovos that the return template will not refer to the declared EPTIPT prepayment. Instead, the difference between the final EPTIPT liability and the declared EPTIPT prepayment will be recorded as an additional debt or overpayment on the HUTA tax account. As a result, insurers must manually calculate the payable EPTIPT and make their payments accordingly.
Download our free IPT compliance eBook for additional information or read our guide to Insurance Premium Tax.
Update: 30 December 2022 by Edit Buliczka
It’s been less than a month since the Hungarian Tax Office (HUTA) published instructions for insurance premium tax (IPT) for 2023 and the rules have already been amended.
The amendment is in line with the recently issued government decree (No. 582/2022) published on 24 December 2022. This alters the tax rates for 2023.
The update affects the final scale (premium collected in 2023 exceeding 36 billion Hungarian Forints) in relation to non-life and life insurance premiums.
The rates for premium amounts collected from non-life policies climbed from 7% to 12%. Rates for premium amounts collected from life policies grew from 3% to 5%.
Need more information about Hungary’s Extra Profit Tax? Speak with our Insurance Premium Tax experts.
Update: 15 December 2022 by Edit Buliczka
On 29 November 2022 the Hungarian Tax Office (HUTA) published instructions for the insurance premium tax (IPT) rules applicable for 2023 liabilities. This guidance includes the rules for extra profit tax and extra profit tax prepayment payable for 2023.
The information provided for 2022, including the section about the overpayment of the extra profit tax prepayment, is essentially repeated in this guidance. It states that reclaims are possible for any overpaid prepayment. The question is how? Even if the HUTA hasn’t released the referenced 2320 declaration form yet, if the 2320-04 additional profit tax settlement page of the return doesn’t change, the oddity we highlighted in our earlier update on 14 November 2022 still exists. The anomaly is: Is the entire declared extra profit tax payable again? Can we deduct the prepayment that was previously made? If yes, how?
Another notable piece of information in the new guidance is the date of the extra profit declaration for 2023. It states that the due date is 30 January 2024. This date is 31 January 2024 according to the government decree.
We are hoping these anomalies will be cleared before the extra profit tax for 2022 is due, that is by 31 January 2023. We are going to update this blog once new information is available.
Read our IPT compliance guide for further information.
Update: 15 November 2022 by Edit Buliczka
On 2 November 2022 the Hungarian Tax Office (HUTA) published the declaration form for settling the insurance premium extra profit tax or supplemental insurance premium tax (EPTIPT) prepayment and the extra profit tax.
In this update we will be discussing anomalies around the declaration form’s publish date, its content, and its guidance.
1. In its guidance issued to Sovos, HUTA confirmed that if an insurance company with Hungarian tax registration terminates its taxable activity in Hungary, deregistering between July 2022 and the issuance of the declaration form, the company is liable to declare its extra profit tax liabilities at the date of the deregistration. HUTA adds that since the Decree determined a final settlement deadline of 30 November for extra profit tax prepayment and 31 January 2023 for extra profit tax, the deregistering insurer can and should fulfil its obligation before these final deadlines. The compliant approach for the date of deregistration in Hungary is 15 days following the termination of the activity.
Anomaly: How it is possible to settle extra profit tax liabilities and submit a declaration (online submission is compulsory in Hungary), for example on 15 September, if the declaration form has not been published by that date?
2. According to a government decree (No. 465/2017 on the detailed rules of tax administration) the declaration forms should be published at least 30 days before the tax due dates unless there were adjustments in the regulation during this period.
Anomaly: Although both 31 October and 1 November were public holidays in Hungary in 2022, the phrase “at least” suggests the form was published before the public holidays, leaving more than 30 days for taxpayers to prepare rather than less.
1. Separate sheets were created in the declaration form for ‘normal’ or monthly insurance premium tax (IPT), the insurance premium extra profit tax prepayment and the insurance premium extra profit tax. The sheet for the settlement of extra profit tax does not include a line to deduct the amount of the prepayment.
In the guidance issued by HUTA to Sovos, it states that as the monthly insurance premium tax, the extra profit tax prepayment and the extra profit tax have the same tax code (No. 200), all payments can be automatically offset against each other.
Anomalies:
2. Based on the guidance and as per the declaration form, corrective/substitute return should be submitted in relation to ‘normal’ IPT, extra profit tax prepayment and extra profit tax if the amount of these liabilities appears to be incorrect following the submission of the return.
Anomalies
The above anomalies are just examples around the extra profit tax prepayment and extra profit tax declaration. Sovos submitted queries to HUTA to clarify these anomalies. We predict some of these anomalies will be clarified soon with the issue of an adjusted declaration form and an amended guidance.
Still have questions about Hungary’s supplemental insurance premium tax? Get in touch with our Insurance Premium Tax experts.
Update: 11 July 2022 by Edit Buliczka
As of 1 July 2022, Hungary introduced an Extra Profit Tax scheme, which levies supplemental Insurance Premium Tax (IPT) on insurance premiums. The introduction of the Extra Profit Tax scheme is a temporary measure and aims to cover the increased governmental costs caused by the conflict in Ukraine. The Extra Profit Tax scheme is applicable not only for the insurance sector but also for other sectors, including airlines, medical, energy, telecommunications and banking.
The following blog gives an overview of this tax, highlighting some interesting features and anomalies around this tax.
On 4 June 2022, a Government Decree was published in the Hungarian Official Gazette, numbered 197/2022, with the title “About Extra Profit Taxes”. One may wonder why a government decree regulates a new tax method. To answer this question, we need to research and read the Hungarian Constitution and another law about special measurements in case of catastrophes. Adding two new sections to the mentioned law on 25 May 2022 made it possible for the government to introduce the Extra Profit Taxes in a government decree instead of adjusting the relevant laws. The Extra Profit Tax scheme includes the Supplemental IPT. Although the Government Decree refers to particular tax laws, such as the 102/2012 IPT Law, the Extra Profit Tax regulations are not and will not be built into these tax laws.
Hungary’s Supplemental Insurance Premium Tax is a temporary tax effective as of 1 July 2022 for 18 months and will end on 31 December 2023. This tax is due on non-life and life insurance policies written by both Freedom of Establishment and Freedom of Services insurers. A similar sliding scale system on the income collected is applicable for this new supplemental IPT as it is for the existing IPT. The scales for 2022 are as follows:
While for 2023, the scales are the following:
The rates vary depending on when the taxpayer collected the premium and the type of insurance policies. In 2022 the rates are higher for non-life and life insurance policies than in 2023, also noting that the life rates are half of those applied to non-life policies. For further details about the rates, please read our tax alert, Hungary: Supplemental IPT Introduced Due to Ukraine Conflict.
The declaration and the payment are due by 31 January 2023 and 31 January 2024, respectively. There is also a prepayment obligation for both years with due dates of 30 November 2022 and 31 May 2023. For further details about the prepayment, please also refer to the above mentioned tax alert.
The introduction of this tax is one of the features which is unique in taxation. In Hungary, in normal circumstances, taxes are introduced, or the existing taxes are modified via laws. Generally, tax laws should be published at least 30 days before they come into effect. In the case of the Extra Profit Tax scheme, the legislative body fulfilled none of the above.
Another interesting feature to mention is that although it is called supplemental insurance premium tax, it is also due on life insurance policies. In Hungary, there is no existing insurance premium tax on life policies as these policies are exempt.
No prepayment is due for the existing IPT, but prepayment is due to be paid for the supplemental IPT.
Supplemental IPT is a type of Extra Profit Tax, but it seems that there is no separate tax code given to it. The Supplemental IPT should be declared on the IPT declaration form and paid to the same Hungarian Tax Office account as the existing IPT.
The base period to calculate 2022 prepayment is one year, although Hungary’s supplemental insurance premium tax is due only for the second half of 2022. On the other hand, the prepayment for the whole 2023 year is equal to the amount of the half-yearly 2022 supplemental tax. As such, insurance companies will likely overpay the tax with the 2022 prepayment. This overpaid tax will then need to be reclaimed or can be offset against the existing IPT or used for the 2023 prepayment or 2023 supplemental IPT. Is it for purpose or just a mistake and it will be amended?
In the guidance issued by the Hungarian Tax Office on 1 July 2022 on supplemental insurance tax rules for 2022, the tax authority mentioned that taxpayers should declare the supplemental tax on the standard IPT tax declaration form, 2220. However, the tax authority did not update the form by 1 July 2022. As the due date of the prepayment and the supplemental tax differ from that of the existing IPT, there is still an open question of how the form will look to make the distinction between the existing IPT, the prepayment and the supplemental tax. Hopefully, a new return template will be published soon to answer these questions.
As explained above, there is still ambiguity and questions around this new tax. Sovos is dedicated to keeping our clients up to date and informing you as soon as the clarified information is available. Please contact our dedicated IPT compliance team if you have any questions.
Still have questions about Insurance Premium Tax? Download our IPT Guide, written by our team of IPT experts.
The EU and the UK use the Economic Operators Registration and Identification System (EORI) to identify traders.
Businesses and people wishing to trade in the EU and the UK must use the EORI number as an identification number in all customs procedures when exchanging information with customs administrations. The EU has one standard identification number across the EU, while the UK requires a separate GB EORI number for trade in the UK post-Brexit.
The purpose of having one standard ID in the EU is that it creates efficiency for both traders and the customs authorities. However, it’s vital to ensure all aspects of the system are considered.
The primary need for an EORI number is to be able to lodge a customs declaration for both imports and exports. Guidance is that a trader should obtain an EORI number in the first country of import or export. Carriers will also require an EORI number.
The EORI number exists in two parts:
The UK has also adopted this format, with both GB EORI numbers for trade into Great Britain (GB) and an XI EORI number for trade via the Northern Ireland protocol. The UK and EU have online databases where it is possible to check the status of an EORI number.
Since the UK left the EU, it is now required to have a separate GB EORI number to import and export from GB. This number will not be valid in the EU. However, should businesses be trading from Northern Ireland, then due to the Northern Ireland protocol, it is possible to apply for an XI EORI number to import into the EU.
Initially, after the introduction of the XI prefix, there were several reported issues. They included tax authorities being unable to recognise XI EORI numbers or link them to existing EU VAT numbers. Often it is the case that businesses have found it simpler to cancel an XI EORI number and apply for an EU EORI number in a Member State, particularly if that Member State is the main point of entry for imports into the EU.
Some of the most common issues we see at Sovos include:
Sovos provides an EORI registration service for traders who must apply for an EORI number. We can also link any existing EU VAT numbers to the EORI to ensure that customs declarations can be logged correctly, ensuring a smooth process and avoiding delays. You can find more information about EU VAT and the EU VAT e-commerce package here.
Contact us if you need help with VAT compliance.
The complexities of Spain’s insurance premium tax regulations can be daunting for anyone responsible for IPT reporting and compliance for this country.
Apart from the different tax authorities involved with Spanish IPT reporting and various submission processes, there are also many different declarations that tax compliance teams must be aware of.
Here we’ll look at some of the more challenging aspects of IPT reporting.
Although the Spanish tax authorities receive declarations monthly for insurance premium tax they also require an annual declaration. The annual declaration form is referred to as a Modelo 480. This form contains a monthly summary of information by class of business and a section to provide exempt premiums. Modelo 480 is also due to the four tax authorities for the Basque region provinces, which are different formats but contain the same information. The deadline remains in January alongside the December declarations.
Most of the insurance classes include a charge for the Fund for Winding up of Insurers (or the Modelo 50) even if the policy is exempt from IPT. The Modelo 480 acts as another form of review by the Spanish authorities to ensure they receive the correct amount of tax. They can cross reference the premium amount declared for the Fund for Winding up of Insurers against the premium reported on Modelo 480.
Another of the more notorious annual reports is the Fire Brigade Charge. The Fire Brigade Charge report can take around four years to complete one tax period. With prepayments and adjustments, incorrect submissions can take equally as long to fix. Reports require careful attention to detail as taxpayers cannot make corrections after submission.
Historically, an insurer could apply either a 2.5% for a multi-risk policy or a 5% rate for pure fire and be confident that the total requested by the tax authority would be around that number. More recently, this is no longer the case with the change in economic climates and more instances where the claims are higher.
The process begins with a report concerning Property and Fire policies written in the previous year. At the beginning of the following year, the taxpayer makes a prepayment based on that report. The year after, the taxpayer submits a report with the actual premiums written during the previous year. Finally, in the fourth year, the difference between the prepayment and actual premiums written is confirmed and adjusted should there be any discrepancies. Simply put, the 2022 Fire Brigade tax period will be closed in 2026!
Another of the more complicated annual reports was the Modelo 0-6, which became obsolete with the introduction of the new reporting system. This report focused on the Extraordinary Risk taxes due on Property Damage, Fire, Business Interruption and Accident. The new system allows real-time information to be accessed should a claim against a policy be made.
Still have questions about IPT in Spain? Get in touch with Sovos’ team of IPT experts or watch our webinar on The Complexity of Insurance Premium Tax in Spain.
On 1 January every year, taxpayers operating in Peru must assess their monthly income over a certain period determined by law to verify if they fall under the obligation to keep electronic ledgers. Taxpayers above the established threshold or who wish to voluntarily keep their ledgers electronically may do so by using the Electronic Ledgers Program (Programa de Libros Electrónicos – PLE), which covers all electronic books, or through the System of Electronic Ledgers (Sistema de Libros Electrónicos Portal – SLE), exclusively for the records of sales and purchases.
Earlier this year, however, the Peruvian tax authority (SUNAT) approved a new system specifically for the records of sales and purchases, the Integrated System of Electronic Records (Sistema Integrado de Registros Electrónicos – SIRE). Through the new Resolution 40-2022/SUNAT, the Electronic Record of Purchases (Registro de Compras Electrónico – RCE) was introduced, a module similar to the Electronic Record of Sales and Earnings (Registro de Ventas e Ingresos Eletrónicos – RVIE) created in 2021 and already in use by taxpayers.
The two modules, RVIE and RCE, compose the SIRE. This new system will be rolled out gradually, starting in October 2022, obliging taxpayers to migrate from the PLE and SLE to generate their records of sales and purchases exclusively through SIRE while maintaining the PLE for other ledgers.
The primary purpose of the SIRE is to simplify the generation of records of sales and purchases for taxpayers. Through the SIRE, a proposal for the RVIE and the RCE is automatically generated. It is available from the 2nd calendar day of every month. The taxpayer may accept, modify or replace it with the information they wish to present to SUNAT. If there are no transactions during the monthly period, the taxpayer must still submit a blank file to SUNAT.
Under the current systems (PLE and SLE), SUNAT doesn’t generate a proposal; the taxpayer enters all sales and purchases information and generates the records. With the SIRE, however, SUNAT uses information from its Electronic Invoice System (Sistema de Emisión Eletrónica – SEE) to create a proposal of the RVIE and RCE, which the taxpayer submits in each declaration period. The record is updated daily with the information received on the previous day.
The RCE has certain peculiarities compared with the RVIE, already in use. The RCE requires the generation of two separate files, the records of domestic and cross-border purchases. Even if no cross-border transactions are carried out, a blank RCE must still be submitted to SUNAT. Additionally, taxpayers may exclude specific purchase invoices and include them in the RCE at any time for 12 months from the invoice issuance date.
After the taxpayer’s revision, the RVIE and RCE are filed in conjunction, and a receipt status message (Constancia de Recepcion), containing relevant information, is delivered to the taxpayer’s electronic mailbox.
The SIRE can be accessed through the SUNAT portal, using the SIRE application installed on the taxpayer’s computer or through SUNAT’s API web service.
Once taxpayers become obliged to the exclusive maintenance of sales and purchase records through the SIRE, they must discontinue keeping such records in the PLE, SLE or paper ledgers. However, because the SIRE covers the RVIE and RCE exclusively, taxpayers will still need to maintain the PLE, which contains all other ledgers.
This means taxpayers must be aware of the distinct set of rules applied to the PLE and the SIRE. An example is that the SIRE allows modification of an already “closed” record from a previous period without waiting until the next period, as with the PLE and SLE. In the SIRE, adjustments can be made at any time using the different annexes provided by SUNAT, with no limitations on the year the record was generated.
Another significant change is that taxpayers will no longer have to store, file and preserve electronic records since SUNAT will do this for them.
Implementation of the SIRE will happen gradually, according to the following schedule:
Taxpayers may also start using the SIRE voluntarily if they are obliged to keep the Records of Sales and Purchases and are enrolled in the SUNAT operations portal (clave SOL), according to the following calendar:
Resolution 40-2022/SUNAT becomes effective on 1 October 2022. However, because most companies in Peru are already obliged to keep Records of Sales and Purchases, the largest groups of taxpayers must be ready to comply with the new mandate starting 1 January 2023.
Speak to our team if you have any questions about the latest tax requirements in Peru. Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.
According to European Customs Law, non-EU established businesses must appoint a representative for customs purposes when importing goods into the EU. In particular, the Union Customs Code establishes that non-EU resident businesses must appoint an indirect representative.
At the end of the Brexit transitionary period, many UK businesses suddenly needed to appoint an indirect representative to clear goods into the EU. In this article, we will look in further detail at this requirement’s challenges.
Indirect representation implies that agents are jointly and severally liable for any customs debt (import or export duties), which is why it’s harder for businesses to find freight companies and customs brokers willing to act on their behalf than for direct representation imports.
The conditions to be an indirect representative are that the customs agent must have a registered office or permanent establishment in the EU. An agent would require a Power of Attorney that enables them to act for the company. The main characteristic of indirect representation is that the agent will act in their own name but on behalf of the company that appointed them, essentially transferring the rights and obligations of customs procedures to the representative.
On the other hand, agents act in the name and on behalf of the company in direct representation.
In addition to the customs implications, agents acting as the importer of record or declarant may also be considered liable for complying with regulatory requirements. For example, any error in the declarations (ex. Article 77 paragraph 3 Union Customs Code (UCC), if the agent was aware of incorrect information or if they “should have known better”).
The European Court of Justice recently expressed its opinion on this matter with the ruling on the case C-714/20, UI Srl. This ruling determined that the indirect representative is jointly and severally liable from a customs law perspective, but not for VAT (contrary to a previous interpretation of Article 77 (3) UCC). The court specified that it’s up to the Member States to expressly determine if other persons, such as indirect representatives, may be considered jointly and severally liable for VAT of their importer clients. However, according to the principle of legal certainty, this should be clearly expressed in the local legislation before courts can enforce said responsibility.
For these options, each alternative solution will have economic and administrative implications to be considered. It is recommended that businesses carefully review their overall strategy before deciding what can be adjusted to comply with customs formalities.
Contact Sovos’ team of VAT experts for help with meeting VAT compliance obligations.
Romania has been taking steps toward introducing a continuous transaction controls (CTC) mandate since 2021. Although the Romanian tax authority only established the legal framework for implementing the e-invoicing system less than a year ago, it is set to go live soon. At the same time, the e-transport system, introduced even later, will also be rolled-out. Both systems will become mandatory as of 1 July; however, there are still open questions that taxpayers hope will be addressed by the Romanian authorities. By international comparison, taxpayers in Romania have a relatively short time window to comply with the new obligations.
For more information see this overview about e-invoicing in Romania.
Suppliers of high-fiscal risk goods are obliged to use the RO E-Factura system as of 1 July 2022. Suppliers must transmit structured invoices issued in XML format to the system. The Ministry of Finance will apply its electronic seal as proof of clearance. This XML with the Ministry of Finance’s seal is considered the legal invoice according to Romanian regulation.
Romania requested a derogation from EU VAT Directive 2006/112/EC to introduce mandatory e-invoicing. ANAF (The National Agency for Fiscal Administration) is authorised with Law no. 139 to issue an order in 30 days following the expected derogation decision from the EU VAT Directive to establish the scope and the timeline of the B2B e-invoicing mandate according to Law No. 139. However, the Romanian authorities are silent on whether the 1 July mandate to use the e-Factura system for high fiscal risk B2B supplies also requires a derogation decision from EU VAT Directive.
Regarding the technical documentation, ANAF recently published the OAUTH (Open Authorization) 2.0 procedure within SPV (Virtual Private Space), allowing taxpayers to produce an authentication token and pass it to third-party applications, which will enable third-party applications to authenticate towards the SPV. However, even if the complications with the authentication process seem resolved after the recent documentation, the May date of these documents’ publication raised questions on whether the Romanian authorities gave reasonable time to businesses to comply by 1 July.
The RO E-transport system is another Romanian digitalization project. It requires taxpayers to use an IT system and issue an e-transport document before transporting of certain goods begins. Just like e-invoicing, taxpayers are required to issue an XML file and send it to the tax authority through SPV.
The requirement to issue e-transport documents concerns categories of high fiscal risk products; as mentioned above, this also comes into force on 1 July 2022. While the mandatory go-live date for the e-transport system is imminent, the legislative process has not been completed by ANAF yet. In addition, the technical documentation, including the APIs, schema, and validation rules, was completed only two weeks ago.
The emergency ordinances that introduced the obligation of e-invoicing and e-transport system for high fiscal risk products as of 1 July have not yet been approved by law.
However, as both systems are currently due to become mandatory on 1 July 2022, businesses have been preparing to comply with the requirements while trying to deal with many uncertainties.
We’ll see in the coming days how Romanian authorities will manage the implementation of both systems, either by keeping the 1 July deadline or by postponing the mandates until further clarification and guidance on open questions are provided.
Need to ensure compliance with the latest regulations in Romania? Get in touch with our tax experts. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.
Following other Eastern European countries such as Poland and Romania, Serbia is on its way to implementing the mandatory e-invoicing system for the B2B (business to business) and B2G (business to government) sectors.
The Law on Electronic Invoicing that came into force in May 2021, introduces the clearance e-invoicing system and presents the centralised continuous transaction controls (CTCs) platform called SEF (Sistem E‑Faktura) for sending, receiving, capturing, processing and storing structured electronic invoices. Additionally, there is a system to help taxpayers with the processing and storage of invoices called the Sistem za Upravljanje Fakturama (SUF).
The new legislation aims to replace paper invoices with electronic invoices and outlines the requirements for the issuance of e-invoices in B2B and B2G transactions.
Under the new e-invoicing framework, e-invoices must be sent and received in accordance with Serbian e‑invoicing standards (custom application of the standard EN 16931-1). All e‑invoices must be submitted via a centralised platform to the recipient who must accept or reject the invoice.
Currently in scope are resident taxpayers in the private and public sector and non-resident businesses with a local fiscal representative in Serbia.
May 2021: Law on Electronic Invoicing entered into force
1 May 2022: All suppliers in the public sector must send invoices electronically and the Serbian government must be able to receive and store them. (G2G/B2G)
1 July 2022: Serbian public entities are obliged to send e‑invoices to companies, who must be able to receive and process them. (G2B)
1 January 2023: E‑invoicing will be extended to the entire B2B sector. (B2B)
Need help to ensure your business stays compliant with the emerging mandatory e‑invoicing for all taxpayers in Serbia?
Our experts continually monitor, interpret and codify legal changes into our software, reducing the compliance burden on your tax and IT teams.
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