Back in June this year, many heads were turned when the French Minister of Public Accounts and Action, Gérald Darmanin, went on record stating that the French Government has the intention of making e-invoicing mandatory also for B2B transactions. Now it seems that the Government – spearheaded on this topic by Minister Darmanin as well as by the Minister of Finance Bruno Le Maire – has moved from word to action. The French Finance Bill for 2020, formally presented after the meeting of the Council of Ministers on 27 September, codifies the plan to extend the B2G e-invoicing obligation in force today to cover also B2B e-invoices.
What’s new?
In just three short paragraphs, the draft finance law outlines the major principles for the budding reform. While much is left to be clarified by later decrees, art. 56 of the Finance Bill introduces the main rule that electronic form for invoices will be mandatory and that, as a result, paper invoices will no longer be permitted. It also introduces language that means that e-invoices most likely also will be cleared by the tax authority, or otherwise have the data transmitted to the tax authority to enable control of the VAT on the invoice. France will effectively, and not surprisingly, be joining the ranks of other countries such as Mexico, Turkey, Italy and Brazil, who have implemented measures to tackle its VAT gap through real-time VAT control mechanisms.
The timeline of the roll-out of the mandate will, just like the roll-out of the B2G mandate currently in force, be scheduled in stages; gradually becoming applicable for companies depending on the size of the business. The first stage of the mandate will begin on 1 January 2023, and according to the bill the entire economy should be up-and-running under the new e-invoicing system no later than 1 January 2025.
The Government also states that it, during the course of next year, will present a report to parliament, the Assemblée Nationale, presenting how the reform will be carried out as well as the underlying analysis of which method and what regulations constitute the most appropriate technical, legal and operational solution, particularly as regards the clearance/transmission of invoice data to the tax administration.
What’s next?
In addition to the analysis and drafting of both laws and reports that the Government announced, it’s also clear that one more critical element needs to be covered before the reform becomes a reality: Brussels.
Ever since Italy went down this same path and became the first EU country to introduce mandatory clearance B2B e-invoicing, many parallels have been drawn between the two countries. They share a similar situation in terms of VAT gap and IT infrastructures, which have made many experts (rightly) assume that France would follow down the path Italy set out. However, in order to lawfully do so, Italy had to seek and obtain permission from the EU Council to deviate from the provisions of the EU VAT Directive (2006/112/EC). The French Government has acknowledged that it will need to do the same.
Take Action
Want to learn more? For a continued and in-depth analysis of the French e-invoicing reform and its challenges, please join a webinar hosted by Christiaan van der Valk, e-invoicing expert and VP of Strategy at Sovos, on this topic on 3 October.
Inscrivez-vous ici si vous désirez rejoindre le webinaire de Christiaan van der Valk le 3 Octobre.
On 7 July, Greece began voting to elect a new government. The disposed governing left party has been dealt with a hefty blow having been in power since 2015. It was hoped they would introduce less severe politics which many claim they have not only failed to do but, in fact, they actually introduced stricter measures. As some expected, the opposition centre-right party won with an outright majority. With this result, Greece has once again voted for change with a manifesto to boost economic growth.
Impact on the proposed e-invoicing reform
We expect that the result of the recent elections may impact the agenda of the Independent Public Revenue Authority (IPRA) on how Greece will implement its envisaged e-invoicing reform.
The IPRA, which has authority over all tax matters in the country, is also the architect behind a recent proposal for a nationwide e-invoicing and reporting framework. Being an independent authority and not subject to any form of government oversight or control, the IPRA shouldn’t be affected by the outcome of the parliamentary elections; however, its policy might change depending on how strict the new government will be with tax controls and enforcement in its efforts to combat VAT fraud and close the country’s VAT gap.
Potential scenarios
Before making any predictions, it is worth noting that the IPRA first envisaged an e-invoicing mandate similar to what was rolled out in Italy during 2018-2019. However, just like Italy, Greece would in this situation need to seek and obtain EU approval ahead of such a reform. An Italy-like EU derogation would not only take time but may also be more difficult for Greece to obtain as it lacks the technical B2G e-invoicing infrastructure that Italy already had in place. It has instead moved ahead with another model based on e-reporting and bookkeeping within the tax administration’s online platform. Essentially, this model is a combination of supplier-driven reporting of basic invoice data combined with buyer-side requirements for validating the data with various accounting information. The process will also update the online ledgers held by the IPRA. This model stops short of real-time ‘clearance’ of electronic invoices, but the IPRA has stated that this Latin American style approach is ultimately their goal for the country.
IPRA has announced that the reporting and bookkeeping model will be implemented in January 2020 but as the country is facing political change in the coming months, this deadline appears unrealistic.
Although it is difficult to predict whether or not Greece will move ahead with the proposed e-reporting and bookkeeping framework, it is much less likely that the authorities will change the scope or specifics of the invoice data to be sent to the tax administration in the future reporting scheme. While implementation directions may change, the shift in focus from traditional compliance and audit to more continuous transaction controls in real or near-real time is significant. This trend is gaining momentum across Europe and is politically unstoppable as more and more governments take measures to combat fraud and make tax controls more effective.
Take Action
To find out more about what we believe the future holds, download Trends: e-invoicing compliance and follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and other updates.
As more and more countries across the world depend on VAT, GST or other indirect taxes as the single most significant source of public revenue, governments are increasingly asking themselves what technical means they can use to ensure that they maximise the collection of the taxes due under the new tax regimes. India is the most recent such example.
GST was introduced in India in July 2017, following many years of discussions and negotiations between different stakeholders in the country. The reform has entailed significant simplifications and streamlining of taxation in India. While the road to roll-out of the tax was bumpy, it was by international comparison very quick. Nearly two years down the road, the roll-out is widely viewed as a success, and it appears as if the government is ready to take the GST success story one step further by introducing real-time tax controls to the B2B e-invoicing process.
India on the road to real-time tax enforcement
Earlier this spring, the Indian GST Council announced the formation of a special committee with the purpose of investigating a potential Indian implementation of a mandatory B2B e-invoicing system: the “Committee of Officers on generation of electronic invoice through GST Portal” (CoO).
More specifically, the CoO has been tasked with analysing and comparing the South Korean clearance system to similar systems in Latin America in order to understand global best practices and also to assess to what extent the existing Indian state-controlled platform – the GST Network – can serve as the central hub in a clearance-style e-invoicing process.
In late May, the CoO formed two sub-committees to continue working on parallel tracks: one on legal and policy matters and the other on the development of technical requirements. During the past few weeks, work has progressed in these working groups as well as in public-private consultations.
The committee is getting close to concluding the initial deliberations, but its closing recommendations have not yet been published in a final report. As a result, no draft laws, draft invoice schemas or draft process frameworks have yet been made public; however, results are expected to be published this summer.
What would the system look like?
While it’s still too early to describe what the Indian e-invoicing system will look like with any real certainty, speculation has naturally already begun. The CoO was specifically asked to investigate how the current eWaybill system could be recycled into a mandatory e-invoicing system, and it is therefore very likely that the new framework will bear strong similarities to the eWaybill process.
Such similarities include the principle of real-time or near-real-time generation of invoice number ranges by a central platform, which must then be included on the invoice document in order for it to constitute a fiscally valid invoice. In other words, this type of system would not entail issuance of the invoice on a clearance portal, such as in Italy, but constitute a somewhat softer version of a clearance e-invoicing system.
What’s next?
E-invoicing has been a legal possibility and practical reality in India for a number of years now, and as a result many companies are up and running with PDF-based e-invoicing in the country. Given the size of the Indian economy and the role it plays in global manufacturing, any major e-invoicing reform will have significant impact, not just on local businesses but on international commerce as a whole.
On 21 June, the GST Council is set to discuss the general topic of tax controls and how to increase tax collection through modernised compliance requirements. It remains to be seen if the GST Council is ready to formally decide on the introduction of mandatory e-invoicing in the country, or if it is ready to publish a high-level framework for basic considerations such as scope, dates for entry force and high-level technical principles.
If not, there’s still no reason to worry that a decision will be delayed; if anything, it would be wise to expect the opposite: the government has repeatedly displayed the ability to get things done with remarkable speed. Strengthened as the prime minister is after the recent elections not even a month ago, there’s every reason to believe that this project won’t be an exception.
Take Action
Learn how Sovos helps companies handle e-invoicing and other mandates all over the world. To find out more about what we believe the future holds, download the Sovos eBook on trends: e-invoicing compliance.
Italy has been at the forefront of B2G e-invoicing in Europe ever since the central e-invoicing platform SDI (Sistema di Interscambio) was rolled out and made mandatory for all suppliers to the public sector in 2014.
While a number of its European neighbours are slowly catching up, Italy is continuing to improve the integration of new technologies with the public administration’s processes. Its latest move is to make e-orders mandatory in public procurement. By leveraging the successful use of the public administrations’ Purchase Orders Routing Node platform (Nodo di Smistamento degli Ordini, or NSO) in the Emilia-Romagna region, Italy is now extending the functionality throughout the country.
E-ordering for purchases beyond healthcare products
As of 1 October 2019, all purchase orders from the Italian National Health System (Servizio Sanitario Nazionale, or SSN) must be delivered to and received by suppliers through the NSO platform. The suppliers affected by the mandate will be required to receive e-orders from public entities; the public administration will not proceed with the liquidation and payment of invoices issued by non-compliant companies. It is noteworthy that the mandate covers all purchase orders made by entities associated with the SSN, including office supplies and electronics, and not just health-related products.
In addition to mandatory receipt of e-orders, suppliers will also be able to send messages to the public administration. In cases where suppliers and the public administration have previously agreed, the supplying company may send pre-filled e-orders to the public administration buyer, which will confirm or reject the proposed supply.
Foreign suppliers and the new e-ordering mandate
Moreover, foreign suppliers must also comply with this mandate. The NSO mandate will have some impact on e-invoicing for Italian public administrations seeing as certain e-order data must be included in the e-invoices that are transmitted through the SDI.
The NSO system is built upon the existing SDI infrastructure, and as a result, the communication with the NSO requires similar channel accreditation as the SDI. Suppliers and intermediaries already performing the transmission of messages through the SDI platform are required to comply with complementary accreditation requirements, which are yet to be published. Furthermore, the technical specifications show that PEPPOL intermediaries may interact with the NSO platform through an Access Point service accredited with the NSO.
The French Minister of Public Accounts and Action, which has authority over all tax matters, has taken advantage of the process that is required to transpose the EU E-Commerce Directive to launch a number of initiatives to curb VAT fraud, including a renewed attempt to create a system of mandatory e-invoicing.
Going from B2G to B2B
A program for the gradual implementation of electronic invoicing for business-to-government (public procurement) transactions is currently entering its final stages whereby even small companies will soon be required to send their invoices to public entities via the so-called Chorus platform.
Current President Macron had previously, as Finance Minister under his predecessor François Hollande, already proposed to introduce a similar obligation for B2B e-invoicing, but this proposal was rejected due to inconsistencies with the VAT Directive and a perceived increase in the administrative burden on companies.
However, times have changed and France – like other EU Member States – is seeing new opportunities to go down the B2B e-invoicing mandate path since Italy led the way on 1 January 2019. The Italian government obtained an EU derogation from certain provisions in the VAT Directive which allowed the country to go live with a countrywide e-invoicing mandate that is based on prior real-time controls by the tax administration. Such ‘clearance’ e-invoicing systems, which are generally inspired by the approach taken in the past 5-10 years by Latin American countries, have proven to be very effective tools in the fight against VAT fraud.
A first step to nationwide clearance e-invoicing?
While it’s still too early to talk about a concrete (or theoretical) French proposal for B2B e-invoicing, it is clear that the government means business. Minister Gérald Darmanin has stated that the government will begin a consultation process that involves the private sector to discuss how to best get small and medium sized companies up-and-running as smoothly as possible.
Take Action
To find out more about what we believe the future holds, download Trends: e-invoicing compliance and follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and other updates.
To help reduce delays in the payment of invoices, the French authorities by Ordinance No. 2019-359 of 24 April 2019 have clarified their invoicing rules to include two new mandatory content requirements. These are in addition to those already in place.
The two new requirements stipulated in the France invoice mandate are:
1) To provide the billing address of the buyer and the seller if it is different from their office / home address and
2) To include the purchase order number if it has been previously established by the customer.
The addition of this extra information on the invoice should help businesses which have their head office in one location and the invoicing department located in another. It should ensure that invoices are sent directly to the billing address and speed up the payment process by adding a purchase order number where this has previously been created.
In addition, the Ordinance has also considered it necessary and aligned commercial legislation and tax legislation to provide a single date of issue of the invoice to ensure legal certainty for both trading parties. According to the Ordinance, the date of issue of the invoice is set to be the day the products or services are delivered.
The cost of non-compliance
Failure to include this mandatory information on the invoice, incurs an administrative penalty of up to €75,000 for an individual and up to €375,000 for a business.
Take Action
To find out more about what we believe the future holds, download Trends: e-invoicing compliance and follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and other updates.
Beyond the implications outlined in our last blog, Decree-Law 28/2019 (the Decree-Law) impacts areas beyond invoicing, introducing modifications to both archiving and the reporting of tax data.
Mandatory electronic archiving
A novelty of the Decree-Law is the explicit introduction of an obligation to archive electronic invoices in electronic format which in turn further promotes the adoption of electronic formats. Portugal has chosen a closed system in which by law the invoice must remain in the same format in which it was issued. This means that even those companies who are not engaged in e-invoicing, but who receive an electronic invoice from a supplier, will have to acquire and maintain an electronic archive. The alternative would be to reject the invoice and request a printed version. For archiving, the law does not allow for the invoice format to change.
The law also establishes archiving requirements:
Archiving of e-invoices must enable the execution of controls that guarantee the reliability of the data;
Execution of controls to prevent the unlawful creation, alteration or removal of data;
Data recovery in case of incidents;
The ability to reproduce readable copies of the data.
It is mandatory for taxpayers to report to the tax authority the location of the electronic archive. All taxpayers must comply with the transition rules of the Decree-Law within 30 days from when it comes into force – i.e. by 17 March 2019.
SAF-T (PT) filing changes
As well as the e-archiving rules, changes have been introduced to the reporting of invoice data to the tax authority through SAF-T (PT) files by modifying provisions set in Decreto -Lei n.º 198/2012 regarding the time of filing the SAFT-T (PT) file. Until now, taxpayers could file the SAF-T file to fulfill reporting obligations until the 25th of the following month of issuing the invoice.
A reduced time to report comes into force according to the following schedule:
For 2019, the decree modifies the deadline to the 15th day of the following month of issuing the invoice;
From 2020, it is further reduced to the 10th day of the following month of issuing the invoice.
Taxpayers can still choose to report in real-time through webservice integration instead of uploading the SAF-T (PT) file. The Decree-Law enhanced this option as taxpayers who choose to report in this way are not obliged to print B2C issued invoices unless it is explicitly requested by the buyer and provided they comply with the requirement of inserting the unique invoice code to the invoice and use certified invoicing software.
Take Action
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On 15 February 2019, Portugal published Decree-Law 28/2019 regarding the processing, archiving and dematerialisation of invoices and other tax related documents including:
The mandatory use of certified invoicing software
General requirements for paper and electronic invoices
Dematerialisation of tax documentation
Archiving of tax documentation (including ledgers, etc)
Adjacent tax rules and obligations
The decree aims to consolidate rules and to promote the adoption of electronic means of dealing with tax documentation and archiving. It also aims to eliminate tax fraud by tightening controls through the identification of invoicing software, identifying where invoicing terminals are located, the mandatory obligation to include a unique document code (UUID) in the tax document and, finally, identifying the location of the transaction.
According to the Decree-Law, invoices (paper or electronic) must be processed using certified invoicing software, which must, amongst other things, complete the invoice’s content in line with the VAT law. Simplified invoices (issued for less than €100 Euro) can, however, be processed by “other electronic invoicing means” such as cash machines. The Decree-Law also regulates contingency situations where the invoice must be based on pre-printed documents.
What’s new?
Scope extended for mandatory use of certified invoicing software
Having to use invoicing software that has been certified by the tax authority is not new in Portugal. However, the changes in the new Decree-Law mean that more taxpayers must now comply with the obligation as the mandate threshold has reduced. Previously it only affected companies (with a permanent establishment in Portugal) with a revenue in the previous year of €100K. It now includes companies with a revenue of over €75K (applicable during 2019) and reduces to €50K from 2020.
Unique invoice code
The decree also mandates that from 1 January 2020, invoices must carry a unique invoice code (UUID) following the government’s requirements. The code will also be represented as a QR code on printed invoices. Both requirements are new and software providers will have to adapt their solutions in the future to meet these new legal requirements.
Prior authorisation of invoice series
Another new requirement set by the Decree-Law is that taxpayers must communicate to the tax authority the invoice series used by each establishment before issuing any invoice. The tax authority will assign to each series a code that must be included in the new mandatory UUID. While not the same, a similar requirement applies in many other countries, more specifically, in countries that have introduced a clearance model. In fact, Latin American countries with a clearance system often require taxpayers to either request prior invoice ranges from the tax authority, or to have an invoice series authorised by the tax authority, or to have the numeration done directly by the tax authority in connection with the clearance process. A good example of the first scenario is in Chile or Colombia, where taxpayers must request prior authorisation of an invoice range by the Chilean tax authority. An example of the second process is Mexico, where the invoice is numbered by the state agent that intervenes in the clearance process. However, such a requirement is new in the EU context, demonstrating once more that Europe is drawing inspiration from Latin America’s success in closing their VAT gap.
Guaranteeing integrity and authenticity in paper and electronic invoices
When it comes to guaranteeing the integrity and authenticity of invoices, it is worth noting that the decree deviates from the Directive 2010/45/EU as the possibility to use business controls provides a reliable audit trail (hereinafter BCAT) as a method of guaranteeing integrity and authenticity is expressly limited to paper-based invoices only. Furthermore, such controls must be properly documented.
For electronic invoices (ie those that are issued and received electronically) integrity and authenticity are guaranteed when one of the following methods is used: qualified e-signature; qualified e-seal in accordance with e-IDAS Regulation; or electronic data interexchange (EDI) with secure and documented processes to ensure integrity and authenticity. Taxpayers have until 31 December 2020 to migrate to the new methods of guaranteeing integrity and authenticity for electronic invoices.
Portugal is implementing its own vision when it comes to guarantees of integrity and authenticity putting itself, once more, closer to Latin American clearance countries where such guarantees are only achieved by digitally signing e-invoices. The distinction between methods (BCAT for paper invoices vs. e-signatures and EDI for electronic invoices) is an explicit preference of e-signatures and EDI over BCAT methods as the most efficient way to guarantee e-invoice integrity and authenticity.
New obligations
In addition to the new invoicing requirements, the Decree-Law imposes taxpayers with new obligations to notify the tax authority with additional information. This includes:
Identification and localisation of the establishment from which invoices are issued
Identification of equipment used to process invoices
Invoicing software number used for each equipment
Identification of distributors or companies in charge of deployment of the invoicing solutions
Taxpayers who have already carried out activities subject to VAT must present the above-mentioned information by 30 June 2019.
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Sun Chemical consolidates its global tax obligation with Sovos
case study
Sun Chemical
Sovos made multinational reporting simple for Sun Chemical, allowing it to consolidate its compliance efforts.
Summary
Business Challenges
Sun Chemical sought to find the right solution to minimise the impact of changing mandates on 24/7 business operations.
The company needed to address language barrier among local and technical teams.
Solution
Sun Chemical needed a platform that could consolidate its compliance efforts across all its Latin American markets.
Benefits
The Sovos Business to Government regional solution minimises business delays and disruptions for 24/7 operations.
It offers local support in Spanish, English, and Portuguese, eliminating the language barrier issue.
Without the constant need for legislative monitoring, the Sun Chemical team can focus on innovation.
The Company
Sun Chemical is the world’s largest producer of printing inks and pigments. With more than $3.5 billion in annual sales, the company is a leading provider of materials to packaging, publication, coatings, plastics, cosmetics and other industrial markets in 56 countries. Sun Chemical operates 24 hours a day, seven days a week, and has hundreds of multinational suppliers and partners from around the world.
The Challenge
Sun Chemical cannot afford business disruptions or shipping issues due to its operating schedule. Its e-invoicing process must be seamless across throughout the process, including SAP configuration, middleware performance, connections to the local authority’s compliance server, and printing.
Because of e-invoicing mandates in Latin America, Sun Chemical faced the challenge of conducting constant legislation reviews to determine new requirements that needed to be converted into the system. The language barrier also posed a challenge. With technical requirements being communicated in local languages, fluency to understand the mandates and to convert changes into the system was required. For parties without a high level of technical proficiency in the local language, this caused lag time and confusion, contributing to reduced efficiencies.
The Solution
Based on individual compliance needs, Sun Chemical initially elected to implement different solutions in each country. In Argentina, it selected the regional Sovos Business to Government Reporting solution to maintain its compliance platform. In Chile and Mexico, it selected two separate local providers with two different models, and in Mexico, it implemented an internal solution. Get in touch with our experts for your compliance journey.
“Change is happening, but we’ll automatically solve it with the [Sovos] solution. Converting a legal requirement in a local language into a configuration plan is very complex, so the service of automatic updates to the new legislation was a clear key point of help for us.”
Aldo Magenes
SAPAnalyst, Sun Chemical
The Benefits
The metrics showed a large production support advantage in Argentina, where Sun Chemical had implemented the Sovos Business to Government Reporting regional platform. The company elected to expand its partnership with Sovos to cover its operations in Chile, Mexico and Brazil as well.
The Results
With local support in English, Portuguese and Spanish, the Sovos Business to Government Reporting regional platform helped Sun Chemical isolate its compliance problems and focus on driving business results. The Sovos solution alleviated the need to monitor every single change and translate each of those changes into system configuration plans, saving the team valuable time and reducing the risk of penalties.
Why Sovos?
Sun Chemical evaluated each of its four Latin American e-invoicing compliance solutions with a series of analytics measuring cost and benefits. Company leaders knew the internal team’s time was best spent on innovation and improving business and customer relationships, so they were looking for the solution that would minimise delays and disruptions and keep the team focused where it mattered most.
Real-time processes and responses required by mandates impacting business operations
Limited IT resources to monitor and implement requirements
Solution
Brown Forman selected Sovos’ Business to Government regional reporting platform for:
Brazil Nota Fiscal
Mexico CFDI
Mexico eContabilidad
Benefits
Seamless integration with SA
Constant monitoring and support has resulted in zero business disruptions
Ability to redeploy resources to core business functions
Need for ongoing SAP upgrades and IT burdens eliminated
The Company
Brown-Forman is one of the ten largest spirits companies in the world, distributing products in more than 160 countries. Based in Louisville, Kentucky with offices across the globe, Brown-Forman manufactures iconic brands such as Jack Daniels, Southern Comfort and Woodford Reserve.
The Challenge
International expansion has been integral to Brown-Forman’s success, but this growth strategy placed a great demand on its IT team. The company’s SAP systems needed to comply with the constantly changing financial legislation around the world, and e-invoicing mandates threatened to exceed the Brown-Forman IT team’s bandwidth. This was especially a concern in Brazil and Mexico, where the company operates nine facilities and regulations change frequently.
Demanding real-time processes and responses, any e-invoicing oversight in these countries would affect both the finance and supply chain teams, and could significantly impact business operations.
The Solution
With limited in-house IT resources to monitor and implement each country’s fiscal requirements, Brown-Forman needed a solution that would help it adapt to the ever-changing Latin American landscape and also integrate into its single global instance of SAP ERP.
Given the extensive scope of its operations in Latin America, Brown-Forman realised that it needed a specific subject matter expert. In addition, the company required a predictable cost structure during its heavy expansion.
“Because Sovos provides the network upgrades as well as the SAP ERP configurations, we have been able to work with one vendor across multiple countries and confidently manage the changes to Brazil’s Nota Fiscal and Mexico CFDI’s legislation.”
Randy Isdahl
Director, SAP Process Architecture at Brown-Forman
The Benefits
Sovos provides Brown-Forman with constant monitoring and support, ensuring no compliance-related business disruptions. Plus, the Sovos solution seamlessly integrated within Brown-Forman’s existing systems, allowing the company to manage multi-country compliance directly within its internal SAP system.
The Results
With Sovos e-invoicing compliance in place, Brown-Forman was able to redeploy resources to core business functions, including account receivables and account payables, and focus on supply chain and logistics enhancements. In addition, the partnership has eliminated the ongoing SAP upgrades and IT burdens caused by the constantly changing e-invoicing regulations.
Why Sovos?
Brown-Forman selected the Sovos eInvoice and eAccounting regional solutions to simplify its compliance efforts in Brazil and Mexico. The company sought a solution that could help it cut down on human resource capital and technology investments, and Sovos’ SaaS platform allowed it to accomplish that goal.
W.R. Grace eliminates the burden of ERP maintenance with Sovos
case study
W.R. Grace & Co.
Sovos relieved the burden of managing SAP modifications and maintenance internally for W.R. Grace & Co., allowing the company to focus on its global expansion initiatives.
Summary
Business Challenges
Multiple on-premise solutions
Difficult to support due to lack of subject matter expertise
Unbudgeted updates to SAP as a result of changing country requirements
Solution
W.R. Grace selected the Sovos Business to Government Reporting regional platform to manage compliance for:
Brazil’s Nota Fiscal
Mexico’s eContabilidad
Benefits
Regional platform works seamless with SAP
Changing regulations can be implemented with no business disruption
One system of record means no inconsistencies in government reporting
The Company
W.R. Grace & Co is a global leader in chemicals and materials, offering innovative products, technologies and services that improve their customer partners’ products and processes in over 150 countries around the world. Grace employs approximately 6,500 people in more than 40 countries.
The Challenge
W.R. Grace had to take a hard look at how it was managing the complex and demanding compliance landscape in Latin America. Each Latin American country in which Grace was doing business had previously implemented a different on-premise e-invoicing mandate. These various requirements and the frequent changes in the compliance landscape were causing multiple business issues across the organisation, including:
A need to patch each solution per constant changes in business-to-government regulations
Unbudgeted and unplanned efforts to update SAP with every country change
The Solution
Ultimately, the impact of this complex technology infrastructure was resulting in higher maintenance costs and increased exposure to business shutdowns should any of their e-invoicing solutions go down, prompting the company to seek a regional solution across Latin America. One of Grace’s top requirements was a regional platform that would work seamlessly with SAP ERP.
“We selected [Sovos] because they provide a single platform to handle our regional requirements including Brazil Nota Fiscal and Mexico CFDI. Their solutions are specifically tailored to multinationals managing a global SAP ERP landscape.”
Srini Vanga
Director of Enterprise Applications, W.R. Grace & Co.
The Results
The power of on-premise integration with the cloud eliminates the burden of managing SAP modifications and maintenance internally. The added benefit of SAP now being the system of record for reporting back to government dramatically reduces the risks and costs of compliance with local regulations throughout Latin America.
With the everyday burden of complying across Latin America resolved, Grace can now focus their internal resources on global innovation instead of constant regional changes to SAP.
Why Sovos?
W.R. Grace evaluated its options and eventually selected the Sovos Business to Government Reporting regional platform to help with e-invoicing regulations, starting with Mexico and Brazil.
The Sovos cloud platform offers a simplified compliance landscape for Grace, allowing changes in regulations to be implemented faster, with minimum business disruption. Daily process support and government integration within SAP eliminates the need to allocate resources to proactively monitor and respond to each country’s regulatory changes.
More than six months ago the Greek authorities announced their intention to introduce mandatory e-invoicing and e-bookkeeping rules, and enough information is now available to assess what the proposed rules will mean for Greece.
Although formal legislation has yet to be published, it’s expected the new e-invoicing measures by the Independent Public Revenue Authority, the Greek authority responsible for all tax matters (AADE; in Greek, “ΑΑΔΕ”), will be mandated by January 2020.
The Director of AADE recently stated that e-invoicing is incomplete without e-reporting, so the proposed rules must encompass both areas of tax compliance. By January 2020 the goal is for reporting to occur in real-time at the same time as the invoice is issued. The new rules would make e-invoicing and e-reporting mandatory, with a real-time connection from the invoicing system (by transmission of all relevant invoice data) to the electronic system (TaxisNet) of the Greek tax authorities.
Scope of reform
e-invoicing
So far, no real action has been taken regarding the implementation of the new e-invoicing system, e.g. the e-invoicing process, e-invoice format requirements and the software systems to connect to the tax authority have not yet been defined. However, the Ministry of Finance recently published a Decision establishing certification requirements and describing the certification process and responsibilities for e-invoicing service providers, who would be able to perform services of issuance, delivery and archiving on behalf of the taxable person.
Real-time reporting
By comparison, more progress has been made for implementing real-time reporting. AADE has published the technical specifications for transmission of invoice data – however, the scope of the reporting framework covers other tax as well as invoice data – e.g. income tax – to the government portal (TaxisNet) and invoice data will need to be reported on a daily basis (instead of periodically as currently). These technical specifications apply to the connection from the so-called Greek “electronic fiscal devices” – which is the most commonly used compliant method for issuing (and ensuring integrity and authenticity of) B2C invoices in Greece – to TaxisNet, as well as the data transmission software operated by e-invoicing service providers.
For B2B invoices, whose integrity and authenticity can be guaranteed by any method of the EU Directive, no technical specifications have been published yet. Further clarification and legislative action by the tax administration is required. Details about service providers’ software systems and the government infrastructure are expected to be finalised by mid-2019.
Until the implementation of the new reporting framework whereby invoice data will be reported in real-time at the same time as the invoice is issued, AADE is working on the alternative that invoice data will be reported on a regular basis by the issuer only, and not the buyer, which should minimise the overall reporting workload and ensure uniqueness of data. The buyer will be able to amend the relevant reporting field on TaxisNet where there is insufficient invoice data from the supplier.
B2G transactions
On 29 October 2018 the Government published a Bill to transpose the Directive 2014/55/EU on e-invoicing in public procurement; it however still needs to be approved. The Bill makes e-invoicing mandatory for both the supplier and the buyer/government in public procurement scenarios as of 1 April 2019.
Opportunity for structural change
AADE has clearly stated that mandatory e-invoicing would be incomplete without some type of combined transactional reporting; data should be created once and not several times as is currently the case. Therefore, we expect a type of “clearance” e-invoicing model in Greece, however at this stage it’s still too early to categorise the reform as being similar to Italy (“real” clearance e-invoicing) or more like Hungary (real-time reporting as soon as the invoice has been issued). Clearly, Greece is in line with the EU paradigm shift towards increased governmental control over transactional data and recognises the benefits of tighter tax compliance and in taking steps to close its tax gap.
Even if the new measures aren’t particularly welcomed by many individuals in Greece – much in the spirit of a well-held opposition against EU austerity measures which have led to riots and social unrest in the past – these new measures are well positioned to provide the Greek tax administration and government with an opportunity for structural change. The use of technology will enable more effective tax controls and enforcement as well as a more efficient tax environment for business, leading to a positive knock-on effect for future restructuring and rebuilding of the Greek economy.
Take Action
Find out how Sovos can keep companies compliant with e-invoicing regulations in Greece and around the world.
Companies struggling to meet Italy’s electronic invoicing deadline of January 1 will get some relief from financial penalties if they can’t immediately issue invoices at the moment of supply, but it seems the Italian Tax Authority will not delay rolling out the system.
The government had stated that invoices that did not comply with the new mandate after January 1 would be subject to penalties ranging from 90 to 180 percent of the applicable tax. The tax authority will consider invoices not correctly formatted or not issued through the new SDI reporting system to be non-compliant.
But many businesses, especially smaller firms, have had trouble transitioning from their existing processes to the new e-invoicing framework that requires real-time e-invoice clearance through the state-operated Sistema di Interscambio, or SDI, platform.
In response to business concerns, the government is opening up to a grace period of sorts: Instead of postponing the e-invoicing roll-out as such, Italy will waive penalties for delayed clearance transmission. Furthermore, as of July 2019, Italy will loosen the main rule for when an invoice must be issued, which effectively will allow businesses more flexibility in the e-invoicing process.
Businesses get a grace period for Italian electronic invoicing penalties
The new rules on penalties allow for a short grace period. The tax authority will not apply penalties for e-invoices that are issued and cleared by the SDI within the VAT liquidation period to which the invoice belongs – in other words, by the 15th of the following month in which the invoice should be issued and consequently cleared (according to Decree n. 100 from 1998, updated in 2018). For e-invoices that the SDI issues and clears by the end of the following VAT liquidation period (usually the end of the following month), the tax authority will reduce the penalty by 80 percent.
For example, if a business can’t transmit invoices in compliance on January 1, it can delay the clearance transmission of an invoice that should have been issued to February 15 without any penalties for the delay. If the business still needs more time, it can delay the clearance transmission of invoices through the SDI until March 15 and pay an 80 percent reduction of the regular penalty.
Italy eases timing of electronic invoicing issuance
Italy is also loosening its requirement for the timing of issuing an invoice. Since 1972, Italian VAT law has stated that suppliers must issue invoices to the government at the point of supply. However, beginning in July, suppliers will be able to issue invoices through the SDI platform within 10 days of supply. Invoices not cleared by SDI are not valid for fiscal purposes, so taking 10 days to issue an invoice could cause delays in receiving payment.
For companies doing business in Italy, the relief is welcome, but it is also a sign that Italian e-invoicing is moving forward on schedule. That means companies with Italian operations need to get their systems ready to comply with the new mandate or face penalties by mid-February.
Takeaways: What this means for doing business in Italy
What is also clear from the latest developments is that e-invoicing regulations in Italy can change at any time. The problem becomes exponentially more difficult to solve when businesses figure in similar changes happening all over the world. Adopting a system that automates e-invoicing and provides a single source of truth for data in both accounts payable and accounts receivable is essential.
Take Action
Sovos has been keeping companies in compliance in Italy for more than a decade. Find out how Sovos saves clients from penalties, cancelled shipments and other potentially expensive e-invoicing pitfalls.
Companies dealing with complex sales and use tax determination, VAT regulations and other tax challenges across the globe know that SAP alone is not equipped to support the varying requirements from country to country. As SAP sunsets support and updates for ECC and R3, companies must move to HANA to keep their systems up to date. With this inevitable change to S/4HANA or HANA Enterprise Cloud, now is the perfect time to step back and develop a comprehensive strategy to managing tax worldwide.
SAP users must migrate to HANA by 2025, but a majority have not yet started the process. Since the move requires major changes to ERP infrastructure, SAP users with global operations should take advantage of the unique opportunity to be more strategic in their implementation. With the right approach, companies can future-proof their solutions in a way that ensures they can keep pace with constant changes in tax regulations throughout Latin America, Europe and beyond.
Learn how to minimise business disruption during an SAP S/4HANA upgrade project in the wake of modern tax: Read Preparing SAP S/4HANA for Continuous Tax Compliance and don’t let the requirements of modern tax derail your company.
Governments around the world are implementing technology for tax enforcement. In order to keep up, companies must make the digitisation of tax a core pillar of their HANA migrations.
In the move to HANA, companies must consider the new world of tax, which includes:
Constant change management – Companies must be able to anticipate and quickly adapt to major tax reform legislation and smaller rate and field changes while not disrupting operations or risking non-compliance.
Internal processes – Compliance often requires changes to basic processes, procedures and technologies employed by global companies. For example, in Latin America, logistics can be impacted by VAT regulations because many countries now require e-invoices to act as a bill of lading, created before products can ship.
Required automation – Standardisation requirements in Latin America and Europe are designed to quickly identify errors and data discrepancies by eliminating paper-based reports in favour of automated processes. Companies must automate their own operations to avoid errors and audit triggers.
The move to S/4HANA or HANA Enterprise Cloud requires companies to move all of their processes, customisations and third-party add-ons to the new platform. As such, there are several critical considerations.
What to migrate, and when
Since most companies’ SAP ERP systems have been built and customised over many years, many will benefit from a phased approach to HANA implementation. The less customised modules, such as Financial Accounting (FI) and Controlling (CO) will be easier to move than Materials Management (MM) or Sales and Distribution (SD), which will need a long-term plan for customisations.
What to do with customisations and third-party apps
Many SAP configurations have become a patchwork of customised code and bolt-on applications. This is especially true when it comes to sales and use tax determination, e-invoicing, and VAT compliance and reporting, since requirements are vastly different in every jurisdiction a company operates. The move to HANA gives companies the opportunity to consolidate, eliminating local configurations in favour of a global strategy. Companies that proactively plan can help to ensure that the next 15 years are simplified, without the constantly changing configurations needed in the previous 15 years as governments have gone digital.
Take Action
With an upcoming migration to SAP HANA, businesses must consider a solution that maintains SAP as the central source of the truth while keeping pace with constant regulatory change. Learn how Sovos is helping companies do just that, safeguarding the value of their HANA implementation here.
By Andy Hovancik – President & CEO
Today, we announced the acquisition of Stockholm-based TrustWeaver to create a clear leader in modern tax software.
TrustWeaver has become a seal of approval for the world’s largest procure-to-pay and AP systems. This is a testament not only to the effectiveness of its e-invoicing software and integrations, but also to its ability to monitor and interpret regulatory change around the world.
With the acquisition, we are poised to do three big things together:
Create the first complete solution for global e-invoicing, handling both post-audit and clearance models in 60 countries.
Combine the talented teams that pioneered e-invoicing software — and in the process, shape the future of digital tax compliance worldwide.
Deliver a complete tax solution, including tax determination and reporting, in the world’s leading purchasing and AP systems, including SAP Ariba, IBM and Coupa.
We’ve reached a tipping point in modern taxation.
Governments are quickly adopting digital models to better collect every type of transactional tax, including VAT, GST and sales & use tax. As a result, businesses are faced with mounting complexity, rising costs and unparalleled risks.
Last month, the European Commission granted Italy permission to mandate e-invoicing, making it the first country in the European Union to do so. Italy’s move paves the way for rapid expansion of real-time, transaction-level reporting in Europe.
The game is changing
Here at Sovos, we’ve assembled the only solution capable of dealing with the complexities of modern tax, a complete software platform with global tax determination, complete e-invoicing compliance and a full range of tax reporting solutions including e-accounting and e-ledger.
TrustWeaver is our third e-invoicing acquisition in two years, and it’s one of the most important acquisitions in our history.
TrustWeaver has built up coverage across Europe, the Middle East, Africa and Asia Pacific regions, complementing our strength in Latin America. And, it adds support for “post-audit” compliance, including e-signatures in compliance with the eIDAS Regulation, which is an onerous set of standards for electronic trust and identification in Europe.
With the addition of TrustWeaver, we’re one step closer to our mission, which is to reduce the friction between businesses and governments so commerce can grow faster and communities can thrive by simply collecting the tax they’re already owed.
Royal Philips eliminated unnecessary manual infrastructure maintenance and improved its reporting process by implementing the Sovos Business to Government Reporting solution.
Summary
Business Challenges
Philips had over 140 legacy systems, which created a massive support burden and used substantial internal resources.
The company’s existing on-premise platform was due for a significant upgrade to process impending NF-e.
Solution
Sovos Business to Government Reporting replaced the outdated on-premise solution, eliminating the need to manually maintain infrastructure requirements.
Benefits
Philips saw an 80 per cent reduction in maintenance costs and a 25 per cent increase in employee productivity.
The company also enjoyed automation in its reporting processes, cutting down on necessary internal resources devoted to reporting.
The Company
Royal Philips of the Netherlands focuses on improving people’s lives through meaningful innovation in the healthcare, consumer lifestyle and lighting segments. Headquartered in Amsterdam, the company is a leader in cardiac care, acute care and home healthcare; energy efficient lighting solutions and new lighting applications; male shaving and grooming; and oral healthcare.
The Challenge
Philips’ global architecture and IT department is dedicated to providing innovation and support services to various business units throughout Brazil. However, its technology was already showing signs of obsolescence and creating a support burden as Philips’ 140+ legacy systems required extensive labour to complete routine annual maintenance. The problem was further compounded when Philips’ then-current on-premise system required an upgrade.
The Solution
Philips either needed to substantially upgrade its existing system to issue e-invoices (NF-e) and keep its infrastructure intact, or find a SaaS solution that could perform the necessary processes more efficiently. The company analysed the market and realised it needed to break away from its outdated practices.
“Our biggest challenge was that Philips had a global IT architecture and strategy based on our ERP platform…the international team not only approved the adoption of the [Sovos] system; the solution became part of the overall architecture strategy.”
Alexander Quinze
CIO & Head of Operational Excellence at Royal Philips
The Benefits
By implementing the Sovos Business to Government Reporting solution, Phlips saw an 80 per cent reduction in maintenance costs, since it was no longer responsible for infrastructure management. The company was also able to free up internal resources from the tedious reporting process.
The Results
Philips has achieved a 25 per cent increase in productivity among employees across all business units of the Brazilian multinational due to the Sovos platform’s availability and reliability. The migration process was smooth and had no impact on users’ daily routines, and ongoing operations are backed by an enterprise support team with a Service Level Agreement (SLA) of 99.9 per cent.
Because of the product’s unprecedented nature, Philips’ corporate IT team extensively audited the Sovos solution. The teams only required a small change in the final architecture — due to a company-specific security requirement — in the aftermath of the evaluation. The successful implementation in Brazil has opened up opportunities for Philips to deploy the solution in other Latin American countries in which it operates.
Why Sovos?
After a competitive selection process that included four different vendors, Philips chose the Sovos Business to Government Reporting regional platform. The company found solace in Sovos’ ability to automate its reporting processes and eliminate its need to manually perform maintenance on a complex system.
The project was divided into two phases: The issuance of NF-e was the first priority, while implementation across the organisation occurred gradually over the course of three months.
