Value Added Tax (VAT) recovery is a matter of great significance for businesses; therefore it is crucial to understand the correct procedures for ensuring successful recovery. Businesses can recover their incurred VAT through either their VAT return or by submitting a refund claim.
The deadline for submitting claims under the 8th Directive is rapidly approaching on 30 September 2023. Failing to meet this deadline could result in the rejection of your claim, emphasising the importance of thorough preparation in handling VAT recovery for your business.
To streamline the process and alleviate complexities associated with VAT compliance, utilising the services of a reputable provider like Sovos is highly recommended. By choosing Sovos, you gain access to language capabilities and valuable resources that facilitate your VAT compliance workload.
Participate in Sovos’ VAT expert-led session to enhance your understanding of the following key aspects:
VAT regulations can be complex and change often, posing significant challenges for companies operating in the distribution industry.
In this informative on-demand session, Sovos’ Senior Consulting Manager Russell Hughes and Sales Director Alexis Desjardins delve into the implications of VAT for distribution businesses, sharing valuable insights, real-life case studies and strategies to overcome these challenges.
Tune in to find out more about:
Don’t miss the opportunity to learn more about achieving VAT success. Watch our on-demand session on strategies for distribution today.
In July 2023, the French authorities postponed the implementation timeline. A new timeline will be announced with the adoption of the finance law for 2024.
When your organisation trades cross-border, regular changes to the regulatory landscape are a given. Whether those changes are brand-new requirements in a country where you do business or the evolution of existing legislation, you must be ahead of the developments to remain compliant.
With global tax authorities continually making progress with their digitization strategies, the e-invoicing revolution continues at speed.
In this quarter’s instalment of our VAT Snapshot webinar, Kelly Muniz and Enis Gencer from Sovos’ Regulatory Analysis and Design team, will look in detail at anticipated changes in countries with emerging digital strategies and discuss updates to some of the more established regimes.
They will cover:
Join our 30-minute update on 13 July for the latest news, and for an opportunity to put your questions to our speakers.
After a very long few years, we are finally seeing the return of in-person events and experiencing steady growth, especially as summer arrives. However, the industry has adapted to the new normal by utilizing technologies to create engaging virtual experiences.
The demand for events is increasing, whether in-person or online, and companies need to understand the VAT implications.
In this webinar, our VAT experts will cover the essential points your business needs to consider when planning events:
You can help drive the session by telling us which VAT exemptions you want to discuss.
Canada’s Border Services Agency (CBSA) has introduced CARM, a new process to modernise and digitalize import of goods in Canada.
The agency’s vision is to deliver a globally leading customs experience that facilitates legitimate trade, improves compliance and revenue collection and contributes to securing Canadian Borders.
CARM, which stands for CBSA Assessment and Revenue Management, is a mandatory multi-year initiative. CARM aims to simplify, modernise and streamline the importing process via the new web portal known as CARM Client Portal (CCP).
The agency will launch all functionalities of the CARM project in a phased roll-out of two releases. The first release has been live since May 2021, and the second will be live on 2 October 2023.
CARM will impact all importers, both resident and non-resident businesses, who import goods into Canada.
CARM is already available for voluntary registration to importers, customs brokers and trade consultants.
From the second release of CARM on 2 October 2023, all importers must register for the online CCP to continue importing goods into Canada. Otherwise, it will impede the importation of goods.
The critical element of CARM is that it consists of electronically communicating information regarding importing goods in Canada to the CBSA. It includes many changes to digitalize the communication process.
The most significant change is introducing a new customs form and abolishing previous forms in paper format. CARM will no longer accept current B2 (request for adjustments) and B3 (customs coding form) forms in a paper format.
The process will replace the forms with the new commercial accounting declaration (CAD).
B2 and B3 forms have been mandatory since 2013. They account for goods imported into Canada by reporting information about the value, classification, country of origin, tariff treatment and exchange rate of imported goods.
The submission of the new digital CAD will automate the customs process as the CARM system will automatically calculate the duties and taxes. The CAD form will enter into effect with the second release of CARM.
With the second release of CARM, the methods available for the electronic submission of the CAD are:
From 2 October 2023, every company that imports goods into Canada must register in the online CARM Client Portal (CCP). Any delay or failure to comply could impede the company’s importation of goods and its supply chain. Do you need help or further information? Just get in touch with one of our experts.
Argentina has recently expanded its perception VAT (Value Added Tax) collection regime to ensure efficient tax administration. It has included selling food and other products for human consumption, beverages, personal hygiene, and cleaning items under its scope.
The Argentinian Federal Administration of Public Revenue (AFIP) established this through Resolution No. 5329/2023 in early February 2023.
The new resolution aims to further expand the regime known as “Régimen de Percepción del Impuesto al Valor Agregado” to the categories related to food and other products for human consumption, beverages, personal hygiene, and cleaning items.
Taxpayers who issue invoices concerning these provisions must ensure compliance with the document data requirements, used as evidence of the collection for the final VAT calculation. This will be further discussed in this article.
The VAT Collection Regime in Argentina is a scheme by which the seller, designated as “Collection Agent”, charges the buyer an amount additional to the sale price. As a result, the supplier will charge the fee on top of the purchase value, which includes the price and the VAT.
This new regime obliges VAT-taxable persons to act as collection agents when selling food products for human consumption, beverages, personal hygiene and cleaning items. A few exceptions include meats, fruits and bread made exclusively from wheat flour, among others. Taxable people registered for VAT purposes will also be subject to this regime when acquiring said products.
The collection regime will only apply when each transaction amount exceeds ARS 3000.
The fee amount is determined by applying 3% to the net price of the operation resulting from the invoice or equivalent document.
This percentage will be 1.50% in the case of operations taxed with a rate equivalent to 50% of the general VAT tax rate.
The information and payment of the perceptions carried out under this regime will be reported through the Withholding Control System (SICORE), using code 602.
The resolution also establishes that the only valid document to prove the payment of the perceptions will be the invoice or equivalent document (issued under the current invoicing regulations). The document will record the amount received in a discriminated manner and with express mention of this regime.
Those taxable persons using “Fiscal Controllers” documents of “New Technology” to comply with the provisions of the preceding paragraph must use the section “Other Taxes” on the document.
The collection regime will be applicable for taxable events perfected as of 1 April 2023. As a result, sellers of food and other products for human consumption, beverages, personal hygiene and cleaning items will charge the buyer an additional 3% or 1.5% as appropriate on the sale price according to the applicable fee.
Need to ensure VAT compliance in Argentina? Get in touch with our tax experts.
Update: 8 March 2023
South Korea has recently approved a tax reform which introduces several measures for 2023, among which is the possibility of issuance of self-billing tax invoices.
This tax reform amends the current VAT law to allow the purchaser to issue invoices for the supply of goods and services.
However, this will only be allowed in specific circumstances, such as when the supplier cannot issue the invoice. The purchaser can claim a deduction for the related input VAT by issuing a self-billing invoice.
Therefore, issuing self-billing invoices for VAT-exempted supplies of goods and services will not be permitted. However, the issuance of self-billing invoices by the purchaser depends on confirmation from a district tax office.
This amendment will enter into force and apply to all supplies of goods and services from 1 July 2023.
This South Korean tax reform will expand the transactional scope of the country’s e-invoice issuance and continuous transaction control (CTC) reporting system (e-tax invoicing), as the transactions in the scope of e-tax invoicing are generally the same as those in the scope of VAT invoicing.
Interested in learning more about e-invoicing in South Korea? Contact a member of our expert team today.
Update: 17 January 2021 by Selin Adler Ring
Collection of real-time fiscal data is becoming one of the core public finance decision making tools. Transactional data provides a timely and reliable overview of the business sector, enabling governments to rely on analytical data in the decision-making process.
This is what has led many governments to adopt CTC regimes that require taxpayers to transmit their transactional data in real/ near-real time to government services. South Korea was one of the first countries to appreciate the benefits of a CTC regime and mandated reporting of e-invoice data to the government for certain taxpayers as early as 2011.
The year after the first implementation, the South Korean authorities expanded the mandate scope and the e-invoicing system became mandatory for more taxpayers. 2014 saw another expansion of the CTC mandate to reach its current scope.
The current system requires any business that is a corporate entity or an individual whose aggregate supply value for the immediately preceding tax year is KRW 300,000,000 or more to issue an e-invoice to the recipient of goods or services subject to VAT, as well as to report the invoice data to the government.
The South Korean e-invoicing system mandates the issuance of an e-invoice to the recipient and reporting of this invoice data to the government portal within a day of its issuance. Before e-invoices are transmitted, suppliers must digitally sign them with a PKI electronic signature. E-invoices are reported in an XML format to the National Tax Agency (NTS) Portal. Due to the near-real time reporting time-limit, the South Korean e-invoicing system falls under the category of CTC.
South Korea has implemented a comprehensive e-invoicing system from the beginning and as a result there haven’t been any major changes to the requirements or practices. This is a big relief for taxpayers in South Korea compared to other CTC jurisdictions where there are constant changes.
In addition to the benefits for taxpayers, a considered CTC regime is also less burdensome for the state as the implementation costs of the constant regulatory changes can be significant.
More and more governments are considering the adoption of CTC regimes and should look to South Korea as a success story for this approach which has worked well for both the government and taxpayers.
Please get in touch to discuss how Sovos can help your business comply with CTC regime reporting in South Korea or other jurisdictions subject to e-invoicing mandates.
The European Commission’s VAT in the Digital Age (ViDA) proposal continues to unfold with the latest details published on 8 December 2022. As a result, many EU countries are stepping up their efforts towards digitising tax controls – including mandatory e-invoicing.
While we see different approaches to initiate this transition across Northern Europe, the trend towards continuous transaction controls (CTCs) and e-invoicing mandates has accelerated.
Recent statements indicate that Germany is taking steps towards a B2B e-invoicing mandate, however, without a centralised reporting or clearance element – at least for now. During a VAT conference on 10 March, the Federal Ministry of Finance announced that a draft paper will be published in a couple of weeks for the introduction of the e-invoicing mandate.
It is worth noting that Germany had previously requested a derogatory decision from the European Commission to implement a mandatory e-invoicing regime, as announced by the Ministry of Finance in November 2022.
Sweden is another country where it would not be surprising to see an e-invoicing requirement emerge. The Swedish Agency for Digital Government (DIGG) has expressed the desire to implement mandatory e-invoicing in the country.
With the Swedish Tax Agency and the Swedish Companies Registration Office, DIGG has requested the government research the conditions for mandating e-invoicing in B2B and G2B flows, which would be added to the current B2G e-invoicing mandate.
The reasoning behind this request is that if the European Commission’s ViDA proposal is adopted, it will result in mandatory e-invoicing in cross-border flows. Therefore the national system should align for efficiency purposes. DIGG does not believe that alignment will occur voluntarily, but a mandate will be necessary.
In Finland, no mandatory B2B e-invoicing mandate is in place. However, buyers can receive a structured electronic invoice from their suppliers if requested. This regulation has been in effect since April 2020 for all Finnish companies with a turnover exceeding €10,000.
Furthermore, the Finnish government recently demonstrated their support of electronic invoicing by sending a letter to Parliament outlining its benefits. The government sees electronic invoicing as a means of increasing business efficiency and combatting VAT fraud through the ViDA package.
Lithuania is laying the groundwork for the broader use of e-invoices. It has announced plans to build a technological solution that complies with the European standard for the transmission of electronic invoices.
The platform is expected to be available free of charge to businesses for at least five years and should be ready by September 2023. Additionally, the platform will meet Peppol Network requirements and comply with Peppol BIS 3.0.
Denmark has also been working on digitizing the business processes by implementing a new bookkeeping law. The Danish Business Authority has initiated implementing the Bookkeeping Act’s digital bookkeeping provisions by adopting draft executive orders for standard digital bookkeeping systems and their registration.
As a result, providers of standard digital bookkeeping systems must adapt their systems to the new requirements by 31 October 2023 at the latest. The new provisions stipulate that traditional digital bookkeeping systems must support the automatic sending and receiving of e-invoices in OIOUBL and PEPPOL BIS format.
While Denmark has not announced the final dates, it expects taxpayers to adhere to the digital bookkeeping rules between 2024 and 2026.
Speak to a member of our team if you have further questions about e-invoicing.
Update: 4 October 2022 by Enis Gencer
The recent EU Commission report on the VAT in the Digital Age Initiative indicates that continuous transaction controls (CTCs) will become more prevalent across Europe. The final report suggests introducing an EU-wide CTC e-invoicing system covering both intra-EU and domestic transactions as the best policy option. While Eastern European countries have been at the forefront of local implementations, acting swiftly and introducing CTCs, it’s also worth keeping an eye on some of the developments in Northern Europe.
Following the 2021 national elections, the new coalition government in Germany identified VAT fraud as a policy question. It announced its intention to introduce a nationwide electronic reporting system as soon as possible, which will be used for the creation, checking, and forwarding of invoices. Although there are no details about the nature of the system, discussions are ongoing with stakeholders from the private sector, mainly focusing on the implementation timeline and the government’s role in such a system.
B2G e-invoicing has been mandatory for invoices issued to the federal administration since 2020. The scope was expanded from 1 January 2022 to include state-owned authorities in Baden-Wurttemberg, Hamburg, and Saarland, with the next states joining in 2023 and 2024. Moreover, the IT Planning Council, the Central Body for the digitization of administration in Germany, issued the decision 2022/31 advising all contracting authorities to accept electronic invoices via the PEPPOL network by 1 October 2023 to connect the entire public area in a uniform manner.
Denmark is also aiming to introduce new requirements to digitize the business processes of Danish companies. On 19 May 2022, the Danish Parliament passed a new accounting law requiring taxpayers to make their bookings electronically using a digital accounting system. The mandate will take effect gradually between 2024 and 2026, depending on the company’s form and turnover.
While the new accounting law doesn’t introduce any mandatory e-invoicing or CTC obligations, it is envisaged that the digital accounting systems must support continuous registration of the company’s transactions and the automation of administrative processes, including automatic transmission and receipt of e-invoices. The Ministry of Finance has been authorised to adopt rules requiring companies to register purchase and sales transactions with electronic invoices as the documentation of the transactions, which in practice would amount to an e-invoicing mandate.
The Danish Business Authority, Erhvervsstyrelsen, has prepared drafts for three executive orders concerning the new digital bookkeeping requirements. According to draft regulations, digital accounting systems are required to support the automatic sending and receiving of e-invoices in OIOUBL and PEPPOL BIS format. These systems must be able to share the company’s accounting data by generating a standard file, which is the Danish SAF-T Standard recently published by Erhvervsstyrelsen.
The draft regulations will be available for public consultation until 27 October and the requirements are expected to enter into force on 1 January 2023. There will be a conversion period until 1 October 2023 for digital accounting systems to comply with the requirements.
Sweden is another country looking at introducing digital reporting requirements. The Swedish Tax Administration, Skatteverket, is considering different ways to ensure the correct collection of VAT while obtaining useful economic data from businesses. The project is still at an early phase, and while such requirements could mean introducing Standard Tax Audit File (SAF-T) requirements or a type of CTC, e-reporting, or e-invoicing, the tax authorities would still strive to implement a smooth system for businesses.
The Latvian Ministry of Finance has been working on digitizing invoicing processes for a while. They conducted a public consultation and took into consideration opinions of companies and non-governmental organizations to find out the readiness to start using e-invoices in Latvia.
As a result, the Ministry of Finance prepared a report discussing the current situation and the implementation of e-invoices, and possible technological solutions. The report focuses on different e-invoicing systems, such as post-audit e-invoicing, centralised e-invoicing, and decentralised e-invoicing, comparing the advantages and disadvantages of such systems.
The report favours the PEPPOL BIS standard for the introduction of mandatory e-invoicing in B2B and B2G transactions and proposes the use of e-invoices must be defined as an obligation in Latvian regulations, setting a mandatory requirement for the use of e-invoices to start no later than 2025.
The Latvian government approved the report, and the necessary regulatory acts, hence implementation of technological solutions are expected to take shape in due course.
It’s clear that CTC initiatives are becoming increasingly popular among governments and tax authorities in Europe, with the Northern European countries starting to follow this trend, even if they seem to be acting more cautiously. It will be very interesting to see how and when these CTC projects take shape and be affected by the upcoming results from the EU Commission on the VAT in the Digital Age project.
Need help with e-invoicing requirements? Get in touch with our tax experts.
Update: 3 May 2024 by Dilara İnal
The Israeli Tax Authority (ITA) has postponed the rollout of the continuous transactions controls (CTC) mandate.
The deduction of input tax is allowed with this second postponement, even in the absence of an allocation number, until 4 May 2024. The previous cut-off date was 31 March.
Starting 5 May 2024, businesses engaged in B2B transactions exceeding 25,000 NIS (approx. EUR 6,500) are required to obtain an allocation number assigned by the ITA.
Contact our expert team for more information on Israel’s CTC changes.
Update: 2 November 2023 by Dilara İnal
On 23 October 2023, the Israeli Tax Authority (ITA) announced that it had extended the continuous transaction controls (CTC) implementation timeline to offer businesses more time to complete their technological development. According to the announcement, the ITA will allow the deduction of input tax from a tax invoice, even in the absence of an allocation number, until 31 March 2024.
The new Israeli invoicing framework will require businesses engaged in B2B transactions that exceed a specific threshold to obtain an allocation number. The first phase starts on 1 January 2024 for invoices exceeding 25,000 NIS. Businesses must ensure that their invoices include the allocation number to be eligible for input VAT deduction as of this date. In light of this recent announcement, buyers will receive an additional three-month period to comply.
It is important to emphasise that although the ITA has extended the time for input tax deductions, the clearance platform will be fully operational as originally planned from 1 January 2024. From this date, invoice issuers who will request allocation numbers will receive them.
Looking for more information on Israel’s invoicing developments? Find out more.
Update: 6 July 2023 by Enis Gencer
The Israel Tax Authority has released a set of guidelines encompassing technical details and other relevant information regarding the implementation of the Israeli Invoice model.
The guidelines state the new model will be a phased implementation that begins with a pilot program in 2024. A key objective of this new model is to address and mitigate the long-standing issue of fictitious invoices in Israel.
Under the newly introduced Israeli Invoice model, taxpayers involved in B2B transactions which exceed a specific threshold will be required to obtain an invoice number. This will be done by contacting the designated tax authority service via APIs and sending the invoice information prescribed by the tax authority.
The guidelines define the set of information that must be reported to the tax authority, including:
Once acquired, the invoice number must be included on the tax invoice. Without this number, taxpayers will not be eligible to deduct input VAT. It is important to note that the tax authority reserves the right to not assign the invoice number if there is reasonable suspicion of any legal inconsistencies concerning the invoice.
Buyers can use the invoice number to access invoice details through the tax authority service. This feature is designed to optimise the process of incorporating the invoice into the taxpayer’s accounting system.
The Israeli Invoice model will be a phased implementation, beginning with a pilot program in January 2024 for invoices exceeding 25,000 NIS (approximately 6,500 euros). During this phase, the tax authority can only reject the request for invoice numbers in cases of technical errors.
As implementation progresses, the threshold will be gradually reduced as follows:
Israel is quickly taking steps towards the introducton of its invoicing system by publishing technical details and its implementation timeline soon after introducing the system formally in February 2023. Taxpayers should now prepare their systems according to the legal and technical guidelines that the tax authority has recently published.
Looking for more information on Israel’s upcoming regulations? Contact our team of experts.
Update: 26 May by Enis Gencer
More details have emerged regarding the implementation of the continuous transaction control (CTC) model in Israel, which was announced to be introduced in the country in February 2023.
As we reported earlier, Israel’s government approved the 2023-2024 budget on 24 February 2023, setting the stage for the adoption of the CTC model. Since then, the proposal has gone through the standard legislative process and it has recently received approval from the Finance Committee, with some modifications.
According to the latest announcement, the modified plan introduces a CTC e-invoice clearance model for invoices exceeding NIS 25,000 (approximately 6,500 Euros) in business-to-business (B2B) transactions. Under this model, invoices must be issued through the tax authority’s system and obtain real-time approval. Taxpayers will not be allowed to use unvalidated invoices for deducting input tax.
The implementation of the CTC e-invoicing model is scheduled to start in January 2024, and by 2028, the threshold will be reduced to NIS 5,000, thus covering smaller amount transactions.
Despite the short implementation timeline, it is important that the authorities publish regulatory and technical specifications in time for taxpayers to prepare their invoicing systems to fully comply with the new requirements by January 2024.
Find more information about Israel’s current e-invoicing system here.
Update: 14 March 2023 by Enis Gencer
Israel’s government approved the 2023-2024 budget on 24 February 2023 to introduce a continuous transaction control (CTC) model in its tax system.
This long-awaited move will have significant implications for businesses operating within the country. It is essential to know the changes that may impact your company.
The new plan, prepared by the Ministry of Finance and approved by the government, envisages an e-invoice clearance model for invoices over NIS 5,000 (appx. 1300 Euros) issued between businesses. Under this model, invoices must be issued through a tax authority system and receive real-time approval.
The tax authority system will issue a unique number as proof of clearance for each invoice, which businesses can then use to deduct input VAT. The government has also proposed that the tax authority be entitled to refuse a request to assign a number and not clear the invoice if there is a reasonable doubt that the invoice is not issued legally.
While this plan is an exciting development, it is only the beginning of a long journey towards implementing a CTC model. The above proposal is currently only outlined in a budget document, which will be subject to further readings and approvals before the government can implement it.
Additionally, an amendment to VAT Law and the publication of technical details will be necessary to make it legally and technically enforceable.
For further information on the digitization of tax in Israel, speak to a member of our team.
Update: 9 April 2020 by Joanna Hysi
With the long-lasting problem of fictitious invoices in Israel, a move towards some form of mandatory e-invoice clearance might be the answer. After having been withdrawn once due to failing support, the idea of a continuous transaction control (CTC) model is being revived by the Israeli tax authority. The proposed model, similar to Chile’s e-invoicing system (clearance), would include a direct connection between the tax authority and businesses in real time for each transaction. The proposal, which is currently being reviewed with interested stakeholders, will be presented to the Knesset Finance Committee, with the hope of promoting legislation for implementing the planned reform measures as soon as a new government is formed.
Subject to final adoption in law, the core points of the reform are:
It’s an interesting observation that for years Israel appeared to be heading towards the EU approach of a post-audit system, yet recently they seem to have pivoted and be heading towards the more Latin American style of continuous transaction controls.
Either way, the Israeli tax authorities are now taking firm measures to combat VAT fraud, as to whether they go for a model similar to Chile, or something close to home in India or Turkey, we will have to wait and see.
Under the Freedom of Services (FoS), Croatia currently levies an Insurance Premium Tax (IPT), Compulsory Health Insurance Contributions (CHIC) and Fire Brigade Charge (FBC) on the premium amounts of insurance policies written by EU and EEA insurance companies.
In Croatia, IPT only applies to selected classes of business such as motor coverage, which includes the mandatory Motor Third Party Liability insurance policies. Only the latter policies are subject to CHIC. FBC is applicable only to fire premium amounts.
Read on to understand the different IPT requirements and classes of business in Croatia.
There are currently two different IPT tax rates in force for motor insurance policies in Croatia:
Motor vehicle IPT is an insured-borne tax that is required to be reported monthly and payable within 15 days following the end of the month. There is an annual Motor IPT Report obligation too, which must be submitted on 31 January following the end of the reporting year.
This contribution is payable to the Croatian Institute of Health Insurance but must be disclosed quarterly to the Croatian Tax Office. In addition, the annual return must be submitted to the Tax Office by 30 April.
Until 31 March 2023 the rate of the contribution rate was 4%. The rate was raised to 5% as of 1 April 2023.
The Act on Firefighting governs the fire brigade regime in Croatia. The FBC rate on fire insurance premiums is 5%.
The law does not include a definition for the fire premium. Sovos gained clarification on the definition of the fire premium from the Croatian Financial Services Supervisory Agency (HANFA), the body which supervises FBC. HANFA indicated there is no specific definition of the fire premium, but the insurance company should determine this amount on a case-by-case basis.
The declaration on the fire premium is due annually, by the end of February following the payment year. The return should be submitted to the Croatian Firefighter Association.
There is no set date in the law for the payments, but payments are said to be due at least quarterly.
5% FBC payments should be split and sent to:
If you would like to settle this tax compliantly:
Firstly: You need to know the postcode of the property. But what is the postcode of an immovable property?
Secondly: You need to match a county with a postcode. This would not be too challenging as the first two digits of the five-digit Croatian postcode reveal the county’s name if you search Croatian postcodes online.
Thirdly: You need to know your local firefighting organisation’s name and bank account number or, if these organisations have established an association, the association’s name and bank account number. That is difficult but not impossible if you know where to look.
Finally: In the annual return you need to list each payment you made in the previous year.
Following the complaint method might be time-consuming if the insurance firm has written multiple fire businesses in Croatia. Because there is no minimum contribution threshold, even EUR 0.01 cent FBC should be paid to the local firefighter’s organisation or association (i.e., 40% of FBC)
Sovos has developed a robust system to settle your Croatian fire brigade charges. We have also established a constructive relationship with the Croatian Firefighters Association and HANFA.
Please contact our representative for information, or if you would like to appoint Sovos as your IPT representative in Croatia.
Update: 12 January 2024 by Edit Buliczka
The Polish Financial Ombudsman Office (Rzecznik Finansowy), like other regulatory bodies such as the Italian IVASS, requires insurance companies to submit various reports about their activities. One of these is the Claims Report.
According to the Act on the Consideration of Complaints by Financial Market Entities and on the Financial Ombudsman (Act of 5 August 2015) a report titled “Handling of complaints and the number of cases” is due within 45 days of the reporting period ending.
Subsequently, the deadline for the 2023 reporting year is 15 February 2024. This report must be submitted through the Polish Financial Ombudsman Office’s website.
The regulation determines the scope of the financial market entities, including domestic insurance companies, branch offices and foreign insurance companies.
The form and instructions for producing this report are published on the ombudsman’s website during the first week of January.
The following information should be reported:
1) Number of complaints
2) Accepted and unacknowledged claims resulting from submitted complaints
3) Information on the value of claims submitted in lawsuits and amounts awarded by final court judgments to clients during the reporting period
For in-depth information on Insurance Premium Tax, read our guide.
Update: 16 October 2023 by Edit Buliczka
Withholding tax (“WHT”) is an income tax, not an insurance premium tax, and is governed by the Polish Corporate Income Tax Law (CIT Law). However, in the case of foreign insurers that are operating business in Poland on a Freedom of Services (FoS) basis, it could be an important element of the taxable base calculation for the Financial Ombudsman Charge (“FOC”).
In this blog, we will explain why the judgement of the Polish Administrative Supreme Court on the application of withholding tax is relevant from the perspective of IPT and FOC.
The Financial Ombudsman confirmed to Sovos that FOC is owed on the full premium amount as stated in the policy documents, with no deductions. This implies that even if the foreign insurer receives a reduced premium after deducting WHT, FOC will still be due on the whole amount of the premium.
The WHT was applied to insurance services because the Polish Tax Office considered insurance contracts to be “performance of a similar nature” to a guarantee under CIT Article 21(1)(2a) and so wanted to deduct WHT from the premium amount paid to a foreign insurer.
The Provincial Administrative Court in Wrocław in its decision on 24 August 2023 concluded that a contract whose content corresponds to the essentialia negotii (“essential elements”) of an insurance contract is not a “performance of a similar nature”. Therefore, Polish policyholders are not obliged to withhold income tax at source on insurance premium income.
This decision also determines that payments made by the Polish policyholder for intermediate insurance services, generally referred to as brokerage services, do not constitute payment for “performance of a similar nature.” As a result, the policyholder company is not required to deduct withholding tax on brokerage fees.
Looking for further information on the decision? Our Insurance Premium Tax specialists can help.
Update: 12 June 2023 by Edit Buliczka
The first annual FOC return is complete, and the first payment for the newly imposed Polish Financial Ombudsman Charge (FOC) has been made. The Ombudsman Office implemented the new charge in 2023, with an effective date of 1 January 2023. The first settlement was due on 31 March 2023.
Sovos obtained knowledge during the settlement process on how to proceed with the settlement of this new charge and what the transitional procedures are for transitioning from IOC to FOC. In this blog update, we summarise what we learnt during this process.
Speak with our Insurance Premium Tax experts to learn more or read more about Insurance Premium Tax in our guide.
Update: 14 March 2023 by Edit Buliczka
Although Poland still lacks an Insurance Premium Tax (IPT) system, there are various other taxes and fees in the country. The Insurance Ombudsman Charge (IOC) implemented in 2014 is one of the most well-known parafiscal charges. As of January 2023, the Financial Ombudsman Charge (FOC) replaces the Insurer Ombudsman Charge regulation.
There are differences and similarities between the new Financial Ombudsman Charge (FOC) and the previous Insurer Ombudsman Charge (IOC). We have also noticed some anomalies which we will discuss.
Both IOC and FOC are parafiscal charges that should be paid to the Ombudsman Office. Payment is still in PLN with a payment threshold of PLN 16.00.
As in the case of IOC, the FOC is declared online and with NIL report submission requirement.
Similarly to the IOC, the FOC is applicable to Domestic (DOM insurers) and foreign insurers writing business in Poland on a freedom of services (FOS) basis (FOS insurers). FOC rates for DOM and FOS insurers are different as was the case with the IOC regime.
The tax point date is the same for the IOC and the FOC and it is the date when the cash is received.
Sovos contacted the Ombudsman office to clarify some questions raised around anomalies with the Financial Ombudsman Charge. We have received responses so please get in touch if you would like to learn more.
Do you still have questions about the new ombudsman charge? Speak with our IPT experts.
Update 15 December 2021 by Kateryna Binkowska
Currently, Poland doesn’t have an IPT. Instead, there is a parafiscal tax called Insurance Ombudsman Contribution (IOC). It is currently charged at a rate of 0.02% and was effective from 1 January 2020 for all insurance companies operating under Freedom of Services (FOS) in Poland.
IOC applies to all 18 classes of non-life insurance. It is applicable to all insurance companies either selling insurance in Poland or collecting premiums from Polish persons. Prior to its origination date of 1 February 2014, it only applied to domestic insurers or foreign insurers with Polish branches.
The basis for IOC is the premium that must be paid to the insurer to obtain the insurance cover.
Reporting for IOC can be tricky because of the different name and numbering system for quarterly declarations. For Example: Quarter I (Quarter 1) of the current year covers October, November and December of the previous year. The quarterly submission is due 90 days from the reporting period. In this example, Q1’s declaration must be filed by 31 March of the current year.
All the payments made throughout the year are considered prepayments or advance payments. For instance, the liabilities that arose in Q1 2021 are declared in the Q2 2021 tax period as an advanced payment for Q2 2021.
The Annual Report is due by 30 June of the following year. This report is submitted to the Insurance Ombudsman summarising the actual premiums received in the previous year (i.e., for 2020, a report is submitted by 30 June 2021 summarising the total amount of premiums received by the insurer in 2020).
The Insurance Ombudsman then determines its funding requirements, and an adjustment is made based on the difference between the insurer’s share of the market percentage multiplied by the funding requirements and the previously made payments for the reporting year.
The Ombudsman’s adjustment may result in the tax authorities requiring additional funds or providing a refund. Either result is communicated by the authorities through Annual Settlement Letters that usually arrive by the end of October.
Insurers are obligated to keep records of insurance contracts and the documents required for tax declaration for five years from the contract’s expiry date.
If the taxpayer doesn’t declare and remit the tax in accordance with the regulations, the relevant authority may demand delayed interest and require an assessment of the tax. In such cases, the court can award a penalty fee and/or imprisonment of the company’s management for up to three years, as per the fiscal penalty code from 10 September 1999.
For any insurance company operating under FOS in Poland, understanding the details of the Insurance Ombudsman Contribution and the reporting requirements are key to ensuring compliance.
Need help to ensure your business stays compliant with current and upcoming changes to IOC? Contact the Sovos team today. For more information see this overview about e-invoicing in Poland, Poland SAF-T or VAT Compliance in Poland.
Update: 25 June 2024 by Dilara İnal
The German Ministry of Finance (MoF) released a draft guideline on 13 June 2024, detailing the upcoming B2B e-invoicing mandate which will roll out on 1 January 2025.
Although the current law only obliges taxpayers to issue and receive e-invoices for domestic B2B transactions, the MoF plans to introduce an e-reporting system for invoice details at a later stage, with no set date.
The highlights from the guidelines are:
The final version of the guideline is expected by Q4 2024.
Update: 26 March 2024 by Dilara İnal
The German parliament passed the Growth Opportunities Act (Wachstumschancengesetz – the Act) concerning various tax matters on 22 March 2024, including a nationwide B2B electronic invoicing mandate.
The Act was originally scheduled for a vote at the end of 2023, with enforcement planned for January 2024. However, the lack of consensus between the Bundestag and Bundesrat – lower and upper houses of the parliament, respectively – in various provisions of the Act delayed its finalisation.
The Mediation Committee of the Bundestag and Bundesrat concluded its negotiations about the Act on 21 February 2024, and the Bundestag approved the amended text on 23 February. The Bundesrat’s vote on 22 March completed the parliamentary process.
The implementation timeline for this mandate has been confirmed as follows:
Mandatory receipt of e-invoices for domestic B2B transactions will be required for all businesses. Additionally, businesses will have the option to issue e-invoices that are compliant with the approved syntaxes based on CEN 16931 voluntarily, without the Buyer’s consent.
Following this parliamentary approval, the Act will be signed by the President and subsequently published in the official gazette.
Acceptable invoice formats to issue in following years:
| Domestic B2B Invoices | 2024 | 2025 | 2026 | 2027 | 2028 |
| Paper Invoices |
Allowed |
Prohibited for large taxpayers |
Prohibited for all |
||
| E-invoices in EN 16931 format |
Allowed with Buyer’s consent |
Allowed |
Mandatory for large taxpayers |
Mandatory for all |
|
| EDI invoice not EN 16931 format |
Allowed with Buyer’s consent |
Allowed if are interoperable with the CEN, if the required information can be extracted into CEN | |||
| Other invoices in e-form (e.g. PDF, JPEG) |
Allowed with Buyer’s consent |
Allowed if are interoperable with the CEN, if the required information can be extracted into CEN** Please note that exchange on EDI is permitted if the e-invoice aligns with European standards. |
|||
Is your organization unprepared for the upcoming mandate? Our expert team can help.
Update: 6 November 2023 by Dilara İnal
In October 2023, The Federal Ministry of Finance (MoF) released additional information regarding electronic invoicing, one of the proposed tax measures included in the Growth Opportunities Act.
If the MoF’s proposal, with the details provided in the preceding updates, becomes law, the following will be applicable:
Besides MoF clarifications, the upper house of the German Federal Parliament, Bundesrat, addressed the Act during its session on 20 October. While the Bundesrat supports the introduction of mandatory e-invoicing, it has proposed a two-year delay so the mandatory receipt of electronic invoices commences on 1 January 2027.
In the next steps of the process, the lower house of the Parliament, Bundestag, is expected to vote on the Growth Opportunities Act in mid-November. The upper house’s vote should take place in mid-December.
Looking for more information on the global adoption of e-invoicing? Read our definitive E-invoicing guide.
Update: 20 September 2023 by Dilara İnal:
On 30 August, the German Federal Government approved the draft act known as the “Growth Opportunities Act,”. The act consists of several provisions on different tax matters, including the introduction of a nationwide B2B e-invoicing mandate.
Key dates for implementation of the mandate include:
The draft bill approved by the government does not change the previously communicated framework, however it extends the voluntary phase by one year. The voluntary phase will last until January 2027 for small companies with annual turnover of 800,000 EUR or less in 2025.
The Federal Parliament and the Federal Council are expected to give their approval to this reform by the end of 2023.
Looking for additional guidance on invoicing in Germany? Speak with our team of experts.
Update: 4 August 2023 by Dilara İnal
The German Federal Ministry of Finance (the Ministry) shared the draft “Growth Opportunities Act” with significant German business associations on 14 July 2023. This act introduces amendments to VAT law to implement mandatory e-invoicing, along with other national and international tax-related proposals.
Currently, issuing an electronic invoice requires the buyer’s consent. Proposed amendments will change this, with invoices for transactions between German resident taxpayers – known as domestic B2B transactions – required to be electronic.
The act also introduces a new definition for e-invoices. An electronic invoice is defined as an invoice issued, transmitted and received in a structured electronic format that enables electronic processing. An e-invoice must also comply with the eInvoicing standard of the European Committee for Standardization (CEN), EN 16931.
The Ministry previously shared its plan to roll out mandatory e-invoicing as of January 2025. This date remains the same in the amendment proposals, with transitional measures giving taxpayers some time and flexibility to comply with the new requirements:
Even though this act does not include any provisions for a transaction-based reporting system, it notes that such a reporting system for B2B sales will be introduced later.
The European Council authorised Germany to introduce special measures regarding mandatory electronic invoicing with its decision dated 25 July 2023.
Germany received the derogation from the VAT Directive from 1 January 2025 to 31 December 2027 or, if an EU directive is adopted earlier than planned, until the national transposition of the VAT in the Digital Age (ViDA) directive into German law.
Looking for additional guidance on invoicing in Germany? Speak with our team of experts.
Update: 21 April 2023 by Anna Norden
The German Federal Ministry of Finance sent a discussion proposal for the introduction of mandatory B2B e-invoicing in Germany on 17 April to significant German business associations.
The business associations are requested to provide their opinion on matters such as the following by 8 May:
The proposed e-invoicing mandate is a step toward implementing a real-time transaction-based reporting system for creating, verifying and forwarding e-invoices. This system is not part of the current proposal, but – as this is directly related to an e-invoice mandate – the ideas for such a system are laid out at a high level by the Ministry of Finance.
The final aims to provide a uniform electronic transaction-based reporting system for national and cross-border B2B transactions. The invoice exchange would be done via a central or private platform.
No verification of the full invoice content would be performed or interruption of forwarding of the invoice – however, the issuer’s platform would check (“Plausibilitätsprüfungen”) that all mandatory fields are present, whether structure and syntax are EN-compliant and so on.
The reporting of the invoice would be in real-time at the same time as the invoice is sent so that the supplier would not have to initiate two transactions.
The Ministry of Finance states the aim is for the new system to be aligned with ViDA but that Germany counts on having to use a derogation from the provisions of the VAT Directive to introduce the e-invoice mandate, should ViDA not be adopted in time.
While many have speculated around Germany going down the path of the Italian e-invoicing system, the message from the Ministry of Finance seems rather to be that the cues are taken from the French system, with the use of a centralised platform complemented with private service providers who serve to channel the invoices.
Need to discuss how Germany’s proposal to introduce continuous transaction controls could affect your business? Speak to our tax experts.
Update: 3 November 2021 by Joanna Hysi
There’s been increased discussion among different institutions about the introduction of continuous transaction controls (CTCs) in Germany to combat tax fraud and boost the competitiveness of the German market in Europe.
Proponents of the introduction of CTCs in Germany include, among others: the parliamentary group of the business-friendly Free Democratic Party (FDP), the German Association for Electronic Invoicing (VeR) and an independent judiciary body, the German Bundesrechnungshof (Federal Audit Office).
Recently, we’ve seen this topic included in tax policy negotiations of the coalition partners that emerged from the recent German government elections (the Social Democratic Party (SPD), FDP, and the Green Party).
While the discussions remain at a conceptual level, the new potential coalition parties display political will for reform in this area.
Specifically, the German Bundesrechnungshof proposed to the Ministry of Finance a real-time reporting system leveraging blockchain technology as an efficient system to combat VAT fraud. However, their proposal wasn’t accepted on the grounds that a cost-benefit analysis is required before such measures are proposed and implemented.
As part of a parliamentary process the FDP called for “an electronic reporting system comparable to the Italian SDI to be introduced nationwide as quickly as possible, for the creation and testing and forwarding of invoices”. The leading German industry association, the VeR, welcomed this proposal recognising its numerous advantages to companies and the German economy.
A VeR study on whether the Italian model can be used as a blueprint for Europe explains that although it doesn’t seem to have contributed significantly to reducing Italy’s VAT gap, the advantages of e-invoicing to companies and the Italian economy are convincing. It concludes that the Italian clearance system can serve as a model for the digitization of VAT in Germany, if not in Europe. In addition, the VeR experts offer their knowledge to develop such a CTC system in Germany.
It seems that the idea of introducing a CTC system in Germany – following in the footsteps of fellow Member States like Italy, France and Poland – is gaining traction and might not be far from becoming reality if the coalition partners indeed manage to reach a coalition agreement to succeed the currently ruling party.
To find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.
Update: 20 November 2023 by Dilara İnal
E-invoicing systems in the Middle East and North Africa are undergoing significant transformations, aiming to modernise the financial landscape and improve fiscal transparency. Recent updates have seen numerous countries implementing electronic invoicing solutions designed to streamline tax collection and reduce VAT fraud.
Saudi Arabia has made significant strides in e-invoicing, leading the way in the Middle East. The country has advanced to the second phase of its e-invoicing mandate where B2B invoices require clearance from the tax authority. As of November 2023, the Zakat, Tax and Customs Authority has announced eight waves of its Phase 2 integration – targeting taxpayers with varying annual turnover thresholds.
While Israel is not adopting a mandatory e-invoicing regime, the country is moving towards requiring taxpayers to submit their invoice data electronically. This move aims to tackle the issue of fictitious invoices. The Israeli invoicing model, a continuous transaction control (CTC) clearance system, is slated for a phased implementation starting in 2024.
The United Arab Emirates has also joined the movement, announcing its ‘e-billing system’ to implement mandatory e-invoicing for B2B transactions in phases.
In other jurisdictions in the region, Oman is poised to implement mandatory e-invoicing in 2024 and Bahrain has invited technology vendors to construct its central platform for an upcoming e-invoicing system. Lastly, Jordan is reported to be exploring the adoption of a mandatory e-invoicing regime.
Egypt introduced a mandatory e-invoicing system for B2B transactions in 2020 with a phased roll-out schedule but, as of April 2023, all companies in Egypt are covered by this mandate. In addition to e-invoicing, there is an e-receipt system in Egypt for B2C transactions.
Tunisia’s mandatory e-invoicing system, which rolled out in 2016, covers B2G and some B2B transactions. Also, Morocco is expected to join the ranks of countries where mandatory e-invoicing applies.
With the VAT landscape in the Middle East and North Africa rapidly evolving, tax digitization regulations necessitate close and continuous monitoring.
Read our E-invoicing Guide for more in-depth information about electronic invoicing’s development and adoption, globally.
Update: 24 June 2020 by Selin Adler Ring
The concept of e-invoicing as a vehicle for increased tax control and cost reduction, continues to spread into new areas of the world. The number of countries adopting e-invoicing regimes are rising in the Middle East and North Africa as both governments and businesses by now are well-aware of the benefits. While some countries in these regions have already embraced e-invoicing, others are on their way to adopt Continuous Transaction Controls (CTC) systems. Even though the countries in these regions follow different approaches, the initial goal is the same: digital transformation of tax controls.
In the Middle East there are many moving pieces. The United Arab Emirates, Saudi Arabia, Oman and Qatar have already permitted e-invoicing. Following the introduction of VAT in January 2018, Saudi Arabia also started promoting a national electronic invoicing platform called ESAL. Oman and Qatar have yet to implement VAT but once they have, e-invoicing will be even more significant for these countries and they’ll take inspiration from other countries in the region that are moving towards CTC regimes.
In Jordan, the tax authority is conducting research to analyze CTC regimes in different countries, which is a strong signal that they too may very soon announce their intention to introduce a new CTC e-invoicing system.
Israel has recently revealed its new CTC regime plans and advised accounting software vendors to prepare for the upcoming CTC regime. After Israel’s adoption of a CTC regime, developments in the region will accelerate in a domino effect.
Tunisia is a pioneer for e-invoicing. Since 2016, electronic issuing of invoices has been regulated in the Finance Law and e-invoicing is mandatory for larger taxpayers. The Tunisian e-invoicing regime requires e-invoices to be registered by a government appointed authority and therefore falls within the CTC framework.
Another country quickly moving towards a CTC framework is Egypt. The Egyptian Government has for some time been assessing best practices for CTC regimes. Finally, in April 2020, a decree mandating e-invoicing for all registered businesses was published in the country. However, the details of the e-invoicing system are yet to be disclosed. The technical controls and conditions to be adhered to and the stages of implementing the e-invoice system will be defined by the Egyptian Tax Authority.
Morocco has also been watching different e-invoicing systems. After Egypt’s e-invoicing initiatives, the Moroccan Government is a likely candidate to make a similar move towards mandating e-invoicing for taxpayers registered in the country.
It’s clear that e-invoicing, in all its shapes and versions, is a trend that is becoming increasingly popular across the Middle East and North Africa where the introduction of CTC regimes is expected in the coming years. Although there are likely to be similarities in the measures taken, each country has its own unique characteristics when it comes to taxation, tax control challenges and legal culture, and as a result diversity in each regime should be expected.
To find out more about what we believe the future holds, contact us and follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and other updates.