There have been improvements in recent years to VAT revenue collection in the Philippines, but there are a considerable number of exemptions from the country’s standard 12% VAT rate.
In addition to periodic VAT filing obligations, the Philippines has launched a Continuous Transaction Controls (CTC) e-reporting pilot program to improve VAT collection. It is also expected to roll out a phased expansion of this VAT control reform to the rest of the economy soon.
This page is your ideal overview for VAT compliance in the Philippines.
| Periodic VAT return | Monthly: 20th day of the month following the end of the tax period Quarterly: 25th day following the close of each taxable quarter |
| VAT rates | 12% 0% and Exempt |
In the Philippines, VAT filings are due monthly or quarterly.
When filing monthly, submissions must be made no later than the 20th day following the end of the taxable month. When filing quarterly, submissions must be made no later than the 25th day following the end of the taxable quarter, aligned with the taxpayer’s income tax quarter.
There are several qualifying factors for taxpayers who must register for VAT in the Philippines. These conditions include:
If you fail to meet your tax obligations in the Philippines, you may be fined 1,000 PHP per instance of failure. However, this can be avoided if the failure is proven to have been caused by reasonable cause and not by neglect.
Taxpayers cannot be charged more than 25,000 PHP in tax-related fines in a year. However, additional penalties, such as surcharges and interest, may also apply depending on the nature of the non-compliance.
Meeting tax obligations in the Philippines may seem complicated, but it doesn’t have to be. Choose Sovos as your compliance partner to save time and gain peace of mind that your requirements are being met.
Sovos combines solutions with regulatory expertise, serving as an extension of your team to make sure you are compliant – not just now, but in the future too. Get in touch today to get started.
Yes, the Philippines levies Valued Added Tax on goods and services. The standard tax rate is 12%.
Valued Added Taxis calculated on the gross selling price of goods or gross receipts from the sale of services.
Tourists or non-resident passport holders can apply to reclaim VAT in the Philippines on goods bought from an accredited store, if goods are taken out of the country within 60 days of purchase, and goods purchased worth at least 3,000 PHP.
The European Commission’s “VAT in the Digital Age” initiative reflects on how tax authorities can use technology to fight tax fraud and, at the same time, modernise processes to the benefit of businesses.
A public consultation was launched earlier this year, in which the Commission welcomes feedback on policy options for VAT rules and processes in a digitized economic EU. In an earlier blog post, Sovos explored the aspects of a single EU VAT registration. It’s one of the main initiatives proposed by the Commission to adapt the EU VAT framework to the digital age. Another critical issue is VAT reporting obligations and e-invoicing, discussed in this blog.
The Commission sees a need for modernising VAT reporting obligations and is considering the possibility of further extending e-invoicing. The term Digital Reporting Requirements was introduced by the Commission for any obligation to report transactional data other than the obligation to submit a VAT return, i.e. reporting transaction by transaction. This means that Digital Reporting Requirements include various types of transactional reporting requirements (e.g. VAT listing, Standard Audit File/SAF-T, real-time reporting) and mandatory e-invoicing requirements.
These measures have been implemented in various fashions in different EU Member States over the past couple of years resulting in diverse rules and requirements for VAT reporting and e-invoicing across the EU. The current Commission initiative is an opportunity for the EU to obtain harmonisation in this area. Its public consultation is asking for input as to which road to take.
The public consultation contains several policy options to consider. One would be to leave things as they currently stand with no harmonisation and the continued need for Member States to request a derogation if they wanted to introduce mandatory e-invoicing. At the other end of the scale, a further option would be to introduce full harmonisation of transactional reporting for VAT for both intra-EU and all domestic transactions.
And sitting between these extremes, are several other routes. Instead of making a harmonised solution mandatory such a solution could be simply recommended and voluntary, coupled with the removal of the need to request a derogation ahead of introducing B2B e-invoicing mandates. Another way is to have taxpayers keep all transactional data and make it available on request by the authorities. And one final option could be to adopt partial harmonisation where the VAT reporting for all intra-EU supplies is aligned and mandatory but where domestically it remains optional.
While these policy options formally remain open to public consultation until 5 May here, they must now be viewed in the light of the European Parliament resolution of 10 March 2022 with recommendations to the Commission on fair and simple taxation supporting the recovery strategy.
In its resolution, the European Parliament calls upon the Commission to take actions regarding e-invoicing and reporting, to reduce the tax gap and compliance costs. Among the measures recommended are to set up a harmonised common standard for e-invoicing across the EU without delay and establish the role of e-invoicing in real-time reporting. Furthermore, the European Parliament proposes that the Commission explore the possibility of a gradual introduction of obligatory e-invoicing by 2023, where state-operated or certified systems should administrate the invoice issuance. In both cases focus should be on a significant reduction of costs of compliance, especially for SMEs.
It remains to be seen how the Commission will manage to align the European Parliament’s recommendations with their policy options and Member States where in several cases solutions have already been implemented.
Need more information? Sovos’ VAT Managed Services can help ease your business’s VAT compliance burden. Contact our team to learn more.
In November 2021, a Draft Royal Decree was published by the Chancery of the Prime Minister of Belgium, aiming to expand the scope of the existing e-invoicing mandate for certain business to government (B2G) transactions by implementing mandatory e-invoicing for all transactions with public administrations in Belgium. This obligation was already in place for suppliers of the centralised public entities of certain regions (Brussels, Flanders, Wallonia). However, going forward, it will include all public entities in all Belgian regions.
More specifically, the roll-out for mandatory issuance of e-invoices by the suppliers of public institutions in Belgium will be carried out in the following phased approach:
As a result of the transposition of the Directive 2014/55/EU, all Belgian government bodies are already obliged to be able to receive and process e-invoices within public procurement. This new national legislation expands the Directive’s scope and mandates the issuance of e-invoices by all suppliers to the federal government.
These B2G developments are not the end of the story. They are just the beginning. The Belgian Minister of Finance, Vincent Van Peteghem, announced in October 2021 that the government intends to extend the existing B2G e-invoicing obligation to also cover B2B transactions. Nevertheless, official sources have not yet communicated formal information specifying details of the mandate and its following implementation. Rumour has it that a legislative proposal for the B2B e-invoicing mandate was going to be published during 2022 with the implementation process happening in 2023.
However, considering the European Parliament Resolution last week which strongly favours harmonised and mandatory e-invoicing in the EU, Belgium will likely hold its horses at least until the Commission produces a proposal for how to manage e-invoicing and reporting in the Union.
Need to ensure compliance with the latest Belgian e-invoicing requirements? Speak to our team. Follow us on LinkedIn and Twitter to keep up to date with the latest regulatory news and updates.
On 10 March, the European Parliament (EP) adopted a Resolution to the Commission’s Action Plan on fair and simple taxation supporting the recovery strategy, which set forth 25 initiatives predominantly related to European Union Value Added Tax (EU VAT). The document includes several general considerations and recommendations to the Commission for the VAT Directive revision proposal (“VAT in the Digital Age”) for 2022.
The EP’s resolution addressed the significant challenges in the European Union (EU) VAT tax policy and placed particular attention on the simplification, modernisation and harmonisation of such rules by uniform adoption of technology tools across all Member States, including digital and e-invoicing requirements and mandates.
The updated resolution highlights a concern around the lack of sufficient support from the Council regarding the definitive VAT regime, that is, the shift from origin to destination principle, still due for implementation. In such a system, VAT will be levied at the place of destination, leaving behind the complex transitional VAT system rules.
Concerns were also raised on the complexity of the multiple tax regulations across the EU and the constraints this entails, particularly for small and medium enterprise (SME) compliance and for those vulnerable to fraud. Added to these factors are the high costs borne by businesses to conform to the multitude of legislative requirements in the different jurisdictions. The Parliament makes an urgent call for a consistent move towards a more straightforward and modern VAT system.
More specifically, the EP described the Commission’s efforts to harmonise procedural rules across the EU and encourage closer cooperation efforts among tax authorities and businesses through the EU Cooperative compliance program as of “highest importance”.
The objective of various points was to use technology as an effective means for simple and modern tax compliance. Digitization of VAT was utterly welcomed as a means for modern and simplified VAT compliance, where real-time or near real-time reporting and e-invoicing is to be utilised by Member States in a uniform and harmonised manner across EU all jurisdictions.
On the same front, recommendations were for one-time collection of data by the tax authority aligned with utmost protection and respect regarding data security legislation, and the use of artificial intelligence (AI) and various software to ensure maximum effectiveness of data usage and security. Adopting digitization requirements will enhance security, prevent and combat fraud and increase administrative cooperation among Member States.
The resolution also targeted the new Union business and taxation agenda, supporting the design of a new and single Union corporate tax rulebook, which should reflect the OECD Pillar 1 (reallocation of taxing rights) and Pillar 2 (minimum tax on corporate profit) negotiations.
These recommendations are to be followed by the European Commission’s submission of one or more legislative proposals by 2022/2023.
Sovos can help. Get in touch about the benefits a managed service provider can offer to ease your VAT compliance burden.
Poland has been moving towards introducing the CTC framework and the system, the Krajowy System e-Faktur (KSeF), since early 2021. As of 1 January 2022, the platform has been available for taxpayers who opt to issue structured invoices through KSeF and to benefit from the introduced incentives.
As the taxpayers have been using KSeF for a while, let’s take a closer look at what has been happening and will happen in the future regarding Poland’s CTC reform.
Initially presented as a draft act by the Ministry of Finance in November 2021, the regulation on the use of KSEF was finally adopted and published in the Official Gazette on 30 December 2021 after several reiterations.
The regulation covers mainly the categories of authorisations, methods of authentication, and information required to access the structured invoices.
According to the regulation, taxpayers using KSEF are required to authenticate using one of the following methods: Qualified Electronic Signature, Qualified Electronic Seal, Trusted Signature, or Token.
A trusted signature confirms the identity assigned to a specific Polish Identification (PESEL) number. The token method can be used to grant authorisations in the KSeF once the taxpayer has been authenticated.
The Polish tax authority has published new information on its website about KSeF features including FAQs and further documentation.
The FAQs include information regarding the scope and operational side of the system, whereas the sample XML files and the information brochure shed light on the logical structure of e-invoices and mapping requirements.
Although the tax authority continues to make every effort to clarify the many aspects of the new CTC system in Poland, we still have a long way to go regarding the full implementation of KSeF.
For instance, during the public consultation of the draft act the Ministry of Finance stated taxpayers would be able to download structured invoices via API in XML or PDF format. As of today, there is no technical information available regarding the PDF generation within the system using the API. The tax authority has published the technical documentation related to the outbound process but there is still no documentation available on the inbound side.
More importantly, a decision authorising Poland to introduce special measures derogating from Articles of the EU VAT Directive is yet to be obtained from the EU Council for roll-out of the e-invoicing mandate for all B2B transactions. The current Polish VAT Act requires the buyer’s acceptance to receive structured invoices. As the Polish authorities aim to make the KSeF mandatory in 2023 an amendment of this provision is expected once the special measures have been authorized by the EU Council.
Need to ensure compliance with the latest CTC requirements in Poland? Get in touch with our tax experts.
For more information see this overview about e-invoicing in Poland, Poland SAF-T or VAT Compliance in Poland.
China’s VAT digitization journey began nearly two decades ago with the rollout of a tax regime called the Golden Tax System. This created a national taxation platform for reporting and invoicing, as well as legislation regulating the use and legal effect of e-signatures.
With the increase of mobile payment adoption, the push towards customer-facing e-invoicing grows. The Chinese government has taken initiatives to further reform reporting and invoicing with a proposed nationwide e-invoicing service platform to provide an e-invoice issuance service to all taxpayers free of charge.
E-invoicing has been gradually introduced in China, starting with the B2C segment – in some cases by mandating large amounts of taxpayers in the public service sector to issue VAT e-invoices to their customers.
Whilst e-invoicing is not mandatory, it has been widely accepted in B2C instances for several years. It is mandatory in certain core service-based industries, including telecommunications and public transportation. Invoices are issued via the national system, and the hardware and software are certified by the state authority.
A pilot program was launched in September 2020, which enables specific taxpayers operating within China to voluntarily issue VAT special e-invoices. Special invoices are used to claim input VAT and are generally used in B2B transactions.
Electronic invoices take different forms in China. The document is automatically sent to the State Taxation Administration in XML format, and it is returned to the invoice issuer in either PDF or OFD format.
All e-invoices must include a QR code and an electronic signature, buyer and seller information, an invoice number and issuance date, details for the goods or services provided and financial information (unit price, tax rate & amount, etc).
Yes, China began its pilot program for electronic invoicing in September 2020 – specifically for B2B transactions in Ningbo, Shijiazhuang and Hangzhou.
Electronic invoicing is not currently mandatory in China, though it is widely accepted by organisations nationwide.
China’s electronic invoicing dictates that these documents must be securely archived for 30 years from their issuance.
Learn more about China’s journey to adopting electronic invoicing with the key dates below.
Unlike many other country initiatives that we have seen in the e-invoicing space recently, Australia does not seem to have any immediate plans to introduce continuous transaction controls (CTC) or government-portal involvement in their B2B invoicing.
Judging from the recent public consultation, current efforts are focused on ways to accelerate business adoption of electronic invoicing. This consultation builds on the government’s previous outreach undertaken in November 2020 on “Options for the mandatory adoption of e-invoicing by businesses”, which led to a serious government effort to enhance the value of e-invoicing for businesses and increase business awareness and adoption.
In addition to a decision to make it mandatory for all commonwealth government agencies to receive PEPPOL e-invoices from 1 July 2022, the Australian government seeks to also boost e-invoicing in the B2B space, but without the traditional mandate for businesses to invoice electronically. Instead, the proposal is to implement the Business e-Invoicing Right (BER).
Under the government’s proposal, businesses would have the right to request that their trading parties send an e-invoice over the PEPPOL network instead of paper invoices.
To make and receive these requests, businesses need to set up their systems to receive PEPPOL e-invoices. Once a business has this capability, it would be able to exercise its ‘right’ and request other companies to send them PEPPOL e-invoices.
According to the current proposal, BER would be delivered in three phases, with the first phase to include large businesses, and the later stages to include small and medium-sized businesses. The possible rollout of BER would be as follows:
The objective of the Australian BER initiative to boost the adoption of B2B e-invoicing is complemented by a proposal for several other initiatives supporting businesses in this direction. One measure would be the enabling of PEPPOL-compatible EDI networks. As EDI networks represent a barrier to broader adoption of PEPPOL e-invoicing, particularly for small businesses that interact with large businesses that use multiple EDI systems, the proposal to enable PEPPOL-compatible EDI networks could ultimately reduce costs for businesses currently interacting with multiple EDI networks. Furthermore, the government is contemplating expanding e-invoicing into Procure-to-Pay. Businesses may realise more value from adopting e-invoicing if the focus grows to embrace an efficient and standardised P2P process that includes e-invoicing.
Finally, integrating e-invoicing with payments is another proposed means to boost e-invoicing. This would allow businesses to efficiently receive invoices from suppliers directly into their accounting software and then pay those invoices through their payment systems.
How efficient the proposed measures will be in accelerating adoption of e-invoicing, and whether the Australian government will feel it was the right decision not to introduce a proper e-invoicing mandate, as is becoming more and more common globally, remains to be seen.
Need help staying up to date with the latest VAT and compliance updates in Australia that may impact your business? Get in touch with Sovos’ team of experts today.
On 24 February 2022, the Indian Central Board of Indirect Taxes and Customs (CBIC) issued a notification (Notification No. 01/2022 – Central Tax) that lowered the threshold for mandatory e-invoicing.
In India, e-invoicing is mandatory for taxpayers when exceeding a specific threshold (businesses operating in certain sectors are exempted). The current threshold for mandatory e-invoicing is 50 Cr. Rupees (approximately 6.6 million USD). From 1 April 2022, taxpayers with an annual threshold of 20 Cr. Rupees (approximately 2.65 million USD) or above must comply with the e-invoicing rules.
E-invoicing has been mandatory in India since October 2020. The IRP must approve and validate e-invoices before being sent to the buyer. Therefore, the Indian e-invoicing system is categorised as a clearance e-invoicing system, a type of continuous transaction controls (CTC).
From the beginning, the Indian tax authority clearly expressed their intention to gradually expand the scope of e-invoicing. In line with its message, the threshold limit has been lowered twice; in January 2021 (from 500 CR. To 100 Cr.) and April 2021 (from 100 CR. To 50 Cr.). Once again, the threshold limit is reduced to require more taxpayers to transmit their transactional data to the tax authority’s platform.
One important thing to be noted in this context is that voluntary adoption of e-invoicing is still not possible. Taxpayers cannot opt in to use the e-invoicing system and transmit their invoices to the IRP voluntarily. Given the recent developments, this might change in the future.
Suppliers in the mandatory scope of e-invoicing must generate e-waybills relating to B2B, B2G and export transactions through the e-invoicing platform because their access to the e-waybill platform is blocked for generating e-waybills relating to these transactions. E-waybills relating to transactions outside of the scope of e-invoicing can still be generated through the e-waybill platform.
Therefore, it would be advisable for taxpayers who are getting ready to implement e-invoicing to consider this aspect.
Get in touch with our team of tax experts to learn how Sovos’ tax compliance software can help meet your e-invoicing requirements in India.
Update: 7 December 2023 by Carolina Silva
The long-awaited Royal Decree, establishing invoicing and billing software requirements to secure Spanish antifraud regulations, has been officially published by the Spanish Ministry of Finance.
The taxpayers and SIF developers, defined further below in this article, must be aware of several new official deadlines set forth by the Spanish tax authority in the Royal Decree:
Therefore, companies that fall within scope must ensure their computer systems are adapted to this regulation as of 1 July 2025.
Looking for more information on tax compliance in Spain? This page can help.
Update: 10 February 2023 by Carolina Silva
The Spanish government is pursuing various routes for digitizing tax controls, including introducing software requirements on the billing system.
In February 2022, Spain published a Draft Royal Decree establishing invoicing and billing software requirements to secure Spanish antifraud regulations.
The Draft Decree ensures billing software meet the legal requirements of integrity, conservation, accessibility, legibility, traceability and inalterability of billing records. It sets standards for systems known as SIF (Sistemas Informaticos de Facturación).
To comply with SIF standards, taxpayers may use a Verifactu system – a verifiable invoice issuance system which is further detailed later in this article.
Since publishing the Draft Decree and concluding its public consultation, the Spanish tax authority has released draft technical specifications for the Verifactu system and a list of modifications to be introduced to the Draft Decree. One is the estimated date of entry into force of the billing software requirements.
Among the many SIF requirements established in the Draft Decree is the capability to generate a billing record in XML format for each sale of goods or provision of services. This needs to be sent to the tax authority simultaneously or immediately before the issuance of the invoice.
The Draft Decree establishes two alternative systems taxpayers can adopt to comply with the technical standards of the SIF: the ordinary SIF and the Verifactu system.
A Verifactu system is a verifiable invoice issuance system, and its adoption is voluntary under the Draft Decree. Taxpayers who use computer billing systems to comply with invoicing obligations may choose to continuously send all the billing records generated by their systems to the tax authority.
A Verifactu billing system complies with all the technical obligations imposed by the Draft Decree., Taxpayers use the system to effectively send all billing records electronically in a continuous, automatic, consecutive, instantaneous, and reliable manner.
A taxpayer opts for a “verifiable invoice issuance system” by systematically initiating the transmission of billing records to the tax authority. If the systems are Verifactu, invoices must include a phrase stating so.
There are several benefits for taxpayers who decide to opt for a Verifactu system:
Taxpayers and SIF developers must be aware of several deadlines set forth by the Spanish tax authority. These are still part of the draft development of the SIF and official deadlines are outstanding:
Although still in draft form, it’s expected there will be official publication of the Draft Royal Decree – along with a Ministerial Order detailing the technical and functional specifications of the billing systems. Official publication of the Verifactu technical specifications is to come.
The Draft Decree explicitly states that its implementation is compatible with an electronic invoicing mandate which is also underway in Spain. Therefore, taxpayers must ready themselves to comply.
For further information on the incoming changes to tax in Spain, speak with a member of our expert team.
For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
Update: 24 February 2022 by Victor Duarte
The Spanish Ministry of Finance has published a draft resolution that will – once adopted – establish the requirements for software and systems that support the billing processes of businesses and professionals. This law will have a significant impact on the current invoice issuance processes. It will require implementing new invoice content requirements, including a QR code, and the generation of billing records by January 2024.
The regulation is also intended to adapt the Spanish business sector, especially SMEs, micro-enterprises, and the self-employed, to the demands of digitization. For this, it is considered necessary to standardise and modernise the computer programs that support the accounting, billing, and management of businesses and entrepreneurs.
The regulation establishes the requirements that any system must meet to guarantee the integrity, conservation, accessibility, legibility, traceability and inalterability of the billing records without interpolations, omissions or alterations.
The new rules established in the regulation will apply to:
Companies that do not fall within the above categories do not need to comply, but those who do must ensure their computer systems are adapted to this regulation as of 1 January 2024.
Invoices generated by the computer systems or electronic systems and programs that support the billing processes of businesses and professionals must include an alphanumeric identification code and a QR code, generated per the technical and functional specifications established by the Ministry of Finance.
The computer systems that support billing processes must have the capability to:
To achieve these ends, all computer systems must certify that they ensure the commitment to comply with all the requirements established in this regulation through a “responsible statement”. The Ministry of Finance will establish the minimum content of this statement later in a new resolution.
The billing records must comply with several content requirements laid down by the regulation.
The taxpayers using computer systems to comply with their invoicing obligations may voluntarily send all its billing records generated by the computer systems to the AEAT automatically by electronic means. The response of a formal acceptance message from the AEAT will automatically mean that these records have been incorporated into the taxpayer’s sales and income ledgers.
The AEAT may appear in person where the computer system is located or used and may require full and immediate access to the data record, obtaining, where appropriate, the username, password and any other security key that is necessary for full access.
The AEAT may request a copy of the billing records, which companies may provide in electronic format through physical support or by electronic means.
The regulation doesn’t include any specific rule for the B2B e-invoice mandate draft decree currently being discussed in Congress and waiting for approval. However, if the mandate is approved, all the B2B e-invoices issued under this draft decree will have to comply with all the new rules established in this regulation.
While this new regulation does not seem to take Spain further down the continuous transaction control (CTC) route, the proposal has clear similarities with Portugal’s invoice requirements.
The draft resolution establishing these is currently open for public consultation until 11 March 2022. Once this resolution is approved, the Ministry of Finance will publish the technical and functional specifications needed to comply with the new requirements and the structure, content, detail, format, design and characteristics of the information that companies must include in the billing records.
The Ministry of Finance will also publish the specifications of the signature policy and the requirements that the fingerprint or ‘hash’ must meet. Once these details are published, it will be clearer whether Spain is going down the Portuguese route or carving out its own path.
Need help staying up to date with the latest VAT and compliance updates in Spain that may impact your business? Get in touch with Sovos’ team of experts today.
The trend towards CTCs is global, and France is one of many countries to join this journey. As with previous CTC reforms in other countries, fiscal and economic gains are expected for both the government and businesses, such as:
Along with this, France is implementing an e-invoicing and e-reporting mandate. This is alongside the B2G e-invoicing obligation that is already mandatory.
The new French framework foresees a public platform as the recipient of data from e-invoices and e-reports. On top of this, a central directory will keep track of the invoice lifecycle, including payment status.
From September 2026, France will implement mandatory e-invoicing via a central platform and connected service providers as well as a complementary e-reporting obligation.
With these comprehensive requirements, alongside the B2G e-invoicing obligation that is already mandatory, the government aims to increase efficiency, cut costs, and fight fraud.
This extended timeline is welcomed by many companies, providing more time to better understand and prepare for the far-reaching consequences of this reform for their business processes, IT systems and tax compliance strategy.
However, businesses should start preparing now. Here are the key dates:
From 1 September 2026
All companies headquartered or with established operations in France will have to accept e-invoices through the CTC system from their suppliers.
Issuing e-invoices according to the CTC regime will become mandatory for the largest enterprises (some 300 entities) and will apply also to a further 8,000 mid-sized companies – “Entreprises de taille intermédiaire”
The e-invoicing mandate does not apply to B2C and cross-border invoices though there is an obligation to report those transactions.
From 1 September 2027
All remaining medium and small companies will be in scope of the mandate.
The mandate presents challenges for businesses. There is a lot to consider, and most businesses current IT and manual processes aren’t equipped to handle this change.
The French e-invoicing mandate is still evolving and there are many elements remaining before the scheme is introduced.
In this e-book, we will cover in depth how business can achieve compliance:
Many businesses will need help to achieve compliance with the new mandate.
Sovos has unmatched experience with continuous transaction controls and e-invoicing mandates all over the world. Our scalable global platform has evolved to encompass new mandates, handling the needs of today, and the future.
South Korea has an up-and-running e-invoicing system that combines mandatory e-invoicing with a continuous transaction controls (CTC) reporting obligation. This mature and well-established system, launched over a decade ago, is seeing its first significant changes in years.
Presidential Decree No. 31445 (Decree) has recently amended certain provisions of the Enforcement Decree of the Value-Added Tax Act. Among other changes, the scope of e-invoicing has been expanded and a new timeline and threshold limits introduced. This means that more taxpayers in South Korea must comply with e-invoicing rules in accordance with the timelines.
In South Korea, e-invoicing has been mandatory for all corporate businesses since 2011. From 2012, individual businesses (entrepreneurs) have also been required to comply with e-invoicing obligations if they meet the threshold limits which have been updated a couple of times over the years. Currently, an individual business whose aggregate supply value (including transactions that are tax exempt) for the immediately preceding tax year is KRW 300,000,000 or more, is required to comply with the country’s e-invoicing rules.
After the recent amendments, the current threshold is now lowered to KRW 200,000,000 and the new threshold limit will be applicable from 1 July 2022. The tax authority has already communicated further adjustments, announcing that from 1 July 2023, the threshold will be reduced further to the limit of KRW 100,000,000. The Korean tax authority aims to enhance the transparency of tax sources by requiring more businesses to comply with the e-invoicing rules.
The expansion of the scope of e-invoicing obligations does not come as a surprise. Like in many other CTC jurisdictions, transactional data collected from a larger number of taxpayers provides greater insight to the tax authority about VAT, market trends and more.
Due to its success and maturity, e-invoicing in South Korea continues to inspire other countries in the Asia Pacific region. The Philippines tax authority is in the process of launching an e-invoicing pilot for the country’s 100 largest taxpayers from 1 July 2022. When designing their e-invoicing system, the Philippines tax authority had several meetings with its South Korean counterparts to benefit from Korean expertise and experience. Therefore, the Philippines is introducing a relatively similar CTC system to the Korean one.
Need to ensure compliance with the latest e-invoicing requirements in South Korea? Get in touch with our tax experts. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.
During the last decade, the Vietnamese government has been developing a feasible solution to reduce VAT fraud in the country by adopting an e-invoice requirement for companies carrying out economic activities in Vietnam. Finally, on 1 July 2022, a mandatory e-invoicing requirement is scheduled to enter into force nationwide.
Despite the postponement of the original starting date for the mandatory nationwide e-invoicing obligation, which was first intended to enter into force in July 2020, the Vietnamese government quickly established a new deadline.
Later that year, in October 2020, the new timeline was communicated through Decree 123, delaying the e-invoicing mandate until 1 July 2022. This new deadline is also in line with the implementation dates for the rules concerning the e-invoicing system envisaged in the Law on Tax Administration.
Vietnam’s General Taxation Department (GTD) announced its plan to work first with the local tax administrations of six provinces and cities: Ho Chi Minh City Hanoi, Binh Dinh, Quang Ninh, Hai Phong and Phu Tho to start implementing technical solutions for the new e-invoice requirements and the construction of an information technology system that allows the connection, data transmission, reception, and storage of data. According to the GTD’s action plan, by March 2022, these six cities and provinces should be ready for the e-invoice system’s activation.
The GTD announced that, from April 2022, the new e-invoicing system will continue to be deployed in the remaining provinces and cities.
Finally, under this local implementation plan, by July 2022, all cities and provinces in Vietnam must deploy the e-invoicing system based on the rules established in Decree 123 and the Circular that provides guidance and clarification to certain aspects of the new e-invoicing system.
Taxable persons operating in Vietnam will be required to issue e-invoices for their transactions from 1 July 2022 and must be ready to comply with the new legal framework. Enterprises, economic organisations, other organisations, business households and individuals must register with the local tax administration to start using e-invoices according to the rules established in the mentioned Decree 123.
Vietnam is finally moving forward to adopt mandatory e-invoicing. However, there is plenty of work related to the necessary technical documentation and local implementation of the new e-invoicing system. We will continue to monitor the latest developments to determine whether the GTD can meet all the requirements in time for the mandatory e-invoicing roll-out.
Need help staying up to date with the latest VAT and compliance updates that may impact your business? Get in touch with our team of experts today.
On 30 January 2022, the Zakat, Tax and Customs Authority (ZATCA) published an announcement on its official web page concerning penalties for violations of VAT rules, and it is currently only available in Arabic. As part of the announcement, the previous fines have been amended, ushering in a more cooperative and educational approach for penalizing taxpayers for their non-compliance with VAT rules than previously.
If ZATCA officials detect a violation during a field visit, the taxpayer will first be given a warning about the violation without any penalty. The ZATCA aims to raise awareness instead of penalizing taxpayers for their first violation. Taxpayers will be granted three months to comply and make necessary changes in their processes.
If non-compliance continues after the first inspection, the taxpayer will be fined 1.000 Riyals, roughly 267 USD. The penalty charge will gradually increase if the taxpayer fails to comply with the rules and doesn’t make necessary changes within three months after the notice.
The fine for each additional repetition time will be as follows: 5.000 Riyals for the third time, 10.000 Riyals for the fourth time and 40.000 Riyals for the fifth time. If the same violation is repeated 12 months after its discovery, it is considered a new violation, and the process will begin with a warning without a fine.
According to the announcement, the violations of e-invoicing rules will be penalized per the new procedure described above. The instances that require a notice/fine are slightly different than the initial violations described previously and highlighted as follows:
The ZATCA states that the new approach ensures proportionality between the violation and the penalty imposed on taxpayers while giving taxpayers a chance to comply within a specific time frame. Considering that the introduction of both VAT and mandatory e-invoicing is fairly recent in the country, there are certain aspects that are unclear for taxpayers. This approach will educate businesses and is expected to be welcomed by stakeholders.
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Towards the end of 2021, the tax authority in Turkey published a draft communique that expands the scope of e-documents in Turkey. After minor revisions, the draft communique was enacted and published in the Official Gazette on 22 January 2022.
Let’s take a closer look at the changes in the scope of Turkish e-documents.
Taxpayers meeting these thresholds and criteria must start using the e-fatura application from the start of the year’s seventh month following the relevant accounting period.
In terms of accommodation service providers, if they provide services as of the publication date of this communique, they must start using the e-fatura application from 1 July 2022.
For any business activities that start after the publication date of the communique e-fatura must be used from the beginning of the fourth month following the month in which their business activities began.
Taxpayers not in scope of e-arşiv invoices have been obliged to issue e-arşiv invoices if the total amount of the invoices to be issued exceeds TRY 30.000 including taxes (in terms of invoices issued to non-registered taxpayers, the total amount including taxes exceeds TRY 5.000) from 1 January 2020.
With the amended communique, the Turkish Revenue Administration (TRA) lowered the total amount of the invoice threshold to TRY 5.000, and thus more taxpayers will be required to use the e-arsiv application. The new e-arsiv invoice threshold applies from 1 March 2022.
Another change introduced by the communique was the expansion of the scope of e-delivery notes. The gross sales turnover threshold for mandatory e-delivery notes has been revised to TRY 10 million, effective from the 2021 accounting period. In addition, taxpayers who manufacture, import or export iron and steel (GTIP 72) and iron or steel goods (GTIP 73) are required to use the e-delivery note application. E-fatura application registration is not applicable to those taxpayers.
Get in touch with our team of tax experts to find out how Sovos’ tax compliance software can help meet your e-fatura and e-document requirements in Turkey.
The Tax Bureaus of Shanghai, Guangdong Province and Inner Mongolia Autonomous Region have all issued announcements stating they intend to carry out a new pilot program for selected taxpayers based in some areas of the provinces. The pilot program will involve adopting a new e-invoice type, known as a fully digitized e-invoice.
Many regions in China are currently part of a pilot program that enables newly registered taxpayers operating in China to voluntarily issue VAT special electronic invoices to claim input VAT, mostly for B2B purposes.
The new fully digitized e-invoice is a simplified and upgraded version of current electronic invoices in China. The issuance and characteristics of the fully digitized invoice are different from other e-invoices previously used in the country.
Relying on the national unified electronic invoice service platform, tax authorities will provide selected taxpayers for this pilot program with services such as issuance, delivery, and inspection of fully digitized e-invoices 24 hours a day. Taxpayers will be able to verify the information of all electronic invoices through the electronic invoice service platform or the national VAT invoice inspection platform.
This new pilot program has been effective in Shanghai, Guangzhou, Foshan, Guangdong-Macao Intensive Cooperation Zone, and Hohhot since 1 December 2021. Despite the lack of an official timeline for implementation, it’s expected that the scope of this pilot program will be extended in 2022 to cover new taxpayers and regions in China, paving the way for nationwide adoption of the fully digitized e-invoice.
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With the most significant VAT gap in the EU (34.9% in 2019), Romania has been moving towards introducing a continuous transaction control (CTC) regime to improve and strengthen VAT collection while combating tax evasion.
The main features of this new e-invoicing system, e-Factura, have been described in an earlier blog post. Today, we’ll take a closer look at the roll-out for B2B transactions and the definition of high-fiscal risk products, as well as the new e-transport system that was introduced through the Government Emergency Ordinance (GEO) no. 130/2021, published in the Official Gazette on 18 December.
For more information about e-invoicing in Romania in general refer to this overview or VAT Compliance in Romania.
According to GEO no. 120/2021 (the legislative act introducing the legal framework of e-Factura), the supplier and the recipient must both be registered with the e-Factura system. The recently published GEO no. 130/2021 establishes an exception for high fiscal risk products and ensures that taxpayers will use the e-Factura system regardless of whether the recipients are registered.
In line with the GEO no. 130/2021, the National Agency for Fiscal Administration has issued an order to clarify which products are considered high fiscal risk products.
The five product categories are as follows:
High fiscal risk products are defined based on the nature of the products, marketing method, traceability of potential tax evasion and degree of taxation in those sectors. Detailed explanations, as well as product codes, can be found in the Annex of GEO no. 130/2021.
The enforcement timeline of this requirement means that businesses that supply these types of products must be ready to comply with the new Romanian e-Factura system as follows:
Another reform that shows the intention of the Romanian authorities to combat tax fraud and evasion is the introduction of an e-transport system.
Taxpayers will be required to declare the movement of goods from one location to another in advance. Once declared, the system will issue a unique number written on the transport documents. Authorities will then verify the declaration on the transport routes.
Moreover, it is stated in the justification letter that the e-transport system will interconnect with the Ministry of Finance’s current systems, Romanian e-invoice, and traffic control, much like similar initiatives in other countries, such as India, Turkey and Brazil.
The introduction of the e-transport system is still pending as the Ministry of Finance has not yet issued the order regarding the application procedure of the system. According to GEO 130/2021, the Ministry of Finance had 30 days to do so after GEO 130/2021 was published in the Official Gazette. However, the deadline expired on the 17 January, and no announcement has been made yet. Therefore, the details of the system are still unknown.
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In a blog post earlier this year, we wrote about how several Eastern European countries have started implementing continuous transaction controls (CTC) to combat tax fraud and reduce the VAT gap. However, it’s been an eventful year with many new developments in the region, so let’s take a closer look at some of the changes on the horizon.
Latvia has recently revealed its new CTC regime plans. The Latvian government approved a report prepared by the Ministry of Finance to implement an electronic invoicing system in the country. The concept described in the report envisages the introduction of electronic invoicing as mandatory for B2B and B2G transactions from 2025 under the PEPPOL framework. The details about the system, including the legislation and technical documentation, are expected in due course.
Serbia is another country moving rapidly towards a CTC framework, and apparently, various stakeholders find this movement rather quick. The Ministry of Finance recently announced that upon the request for a transition period to adapt to the new system of e-invoices, they have decided to postpone the date for entry into force of CTC clearance for B2G transactions until the end of April 2022. It must be noted that there has been no delay concerning B2B transactions.
According to the revised calendar:
Slovenia is also looking to introduce CTCs. In June 2021, the Ministry of Finance submitted a draft law to the Slovenian parliament, aimed at introducing mandatory B2B e-invoicing in the country. According to the draft regulation, all business entities would be obliged to exchange e-invoices exclusively in their mutual transactions (B2B). In the case of B2C transactions, consumers could opt to receive their invoices in electronic or paper form. However, the Ministry of Finance withdrew the draft law due to disagreement with various stakeholders but intends to review it by simplifying the process and reducing the administrative burden on businesses.
Discussions around the introduction of CTCs in the country continue among various stakeholders, e.g., the local Chamber of Commerce. However, seeing as national elections are expected in Slovenia in April 2022, the CTC reform is not expected to gain much traction until summer 2022 at the earliest.
Earlier this year, we reported that the Slovakian Ministry of Finance had prepared draft legislation to introduce a CTC scheme. The aim was to lower Slovakia’s VAT gap to the EU average and obtain real-time information about underlying business transactions. Public consultation for the draft law was completed in March 2021. However, no roll-out timeline was published at the time.
Over the past months, the Slovakian government has launched the CTC system and published new documentation. The CTC system is called Electronic Invoice Information Systems (IS EFA, Informačný systém elektronickej fakturácie) and is a unified process of electronic circulation of invoices and sending structured data from invoices to the financial administration. The timeline for the gradual roll-out of entry into force looks as follows:
There have been serious developments regarding Poland’s CTC framework and system, the Krajowy System e-Faktur (KSeF). The CTC legislation was finally adopted and published in the Official Gazette on 18 November 2021. Starting from January 2022, KSeF goes live as a voluntary system, meaning there is no obligation to use this e-invoicing system in B2B transactions. It is expected that the system will be mandatory in 2023, but no date has been set yet for the mandate.
For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.
With the largest VAT gap in the EU (34.9% in 2019), Romania has also been moving towards introducing a CTC regime to streamline the collection of taxes to improve and strengthen VAT collection while combating tax evasion. In October 2021, Government Emergency Ordinance (GEO) no. 120/2021 introduced the legal framework for implementing e-Factura, regulating the structure of the Romanian e-invoice process and creating the framework for basic technical specifications of the CTC e-invoicing system. While the Romanian e-Factura went live as a voluntary system on 6 November 2021, no timeline has yet been published for a mandate. Suppliers in both B2B and B2G transactions may opt to use this new e-invoicing system and issue their e-invoices in the Romanian structured format through the new system.
For more information see this overview about e-invoicing in Romania or VAT Compliance in Romania.
Contact us or download VAT Trends: Toward Continuous Transaction Controls to keep up with the changing regulatory landscape.
Several EU Member States have been introducing continuous transaction controls (CTCs), aiming to close their VAT gaps, increase revenue and have more control over the data of their economy. However, the CTC regimes adopted by those countries are far from uniform. So far, Italy is the only country that obtained a derogation from the VAT Directive to introduce mandatory e-invoicing in domestic flows. Other countries, such as Hungary and Spain, instead adopted an e-reporting approach, which avoids the need for a derogation from the European Council as it does not mandate e-invoicing.
These national movements towards CTCs have not passed unnoticed by the European Commission which commissioned a study to assess the current CTC landscape and analyse different scenarios involving new technologies and digitization of business processes. This project is broadly called “VAT in the Digital Age”. It includes the analysis of CTC regimes, the VAT treatment of the platform economy, and the creation of a single EU identification number.
Although the final study is yet to be published, preliminary findings have been discussed in some forums. The study has found that CTCs exist in Europe, with southern and central-eastern Europe at the forefront of local implementations. That also means that the Member States have implemented local flavours of CTCs in a non-uniform and non-standardised way, often creating a burden to multinational companies and cross-border commerce.
One of the study’s goals is to assess the cost-benefit for tax authorities and businesses trading under CTC rules. The study investigates a few approaches, including real-time reporting, mandatory e-invoicing, and periodical reporting (including SAF-T schemes). It is expected that the research will consider EU-wide standards/platforms for CTC models and analyse the possibility of leaving things as they are (but removing the need for the Member States to ask for a derogation before the implementation of mandatory e-invoicing schemes).
The “VAT in the Digital Age” initiative is not the sole CTC project on the EU’s agenda. Italy has also asked the European Council to extend the country’s derogation for its e-invoicing mandate. The ongoing discussion, which includes Italian data estimating an increase in public revenue of more than EUR 2 billion might considerably influence the conclusions of the “VAT in the Digital Age” initiative.
After the study’s publication, the European Commission is expected to open a public consultation to debate the future of CTCs in Europe, a single EU VAT registration, perhaps expanding the One-Stop-Shop (OSS) scheme for transactions and subjects currently out of scope and the VAT treatment of the platform economy. The public consultation is expected to open before the end of this quarter.
Get in touch or download VAT Trends: Toward Continuous Transaction Controls for an essential guide VAT compliance.