In a blog post earlier this year, we wrote about how several Eastern European countries have started implementing continuous transaction controls (CTC) to combat tax fraud and reduce the VAT gap. However, it’s been an eventful year with many new developments in the region, so let’s take a closer look at some of the changes on the horizon.

Latvia

Latvia has recently revealed its new CTC regime plans. The Latvian government approved a report prepared by the Ministry of Finance to implement an electronic invoicing system in the country. The concept described in the report envisages the introduction of electronic invoicing as mandatory for B2B and B2G transactions from 2025 under the PEPPOL framework. The details about the system, including the legislation and technical documentation, are expected in due course.

Serbia

Serbia is another country moving rapidly towards a CTC framework, and apparently, various stakeholders find this movement rather quick. The Ministry of Finance recently announced that upon the request for a transition period to adapt to the new system of e-invoices, they have decided to postpone the date for entry into force of CTC clearance for B2G transactions until the end of April 2022. It must be noted that there has been no delay concerning B2B transactions.

Slovenia

Slovenia is also looking to introduce CTCs. In June 2021, the Ministry of Finance submitted a draft law to the Slovenian parliament, aimed at introducing mandatory B2B e-invoicing in the country. According to the draft regulation, all business entities would be obliged to exchange e-invoices exclusively in their mutual transactions (B2B). In the case of B2C transactions, consumers could opt to receive their invoices in electronic or paper form. However, the Ministry of Finance withdrew the draft law due to disagreement with various stakeholders but intends to review it by simplifying the process and reducing the administrative burden on businesses.

Discussions around the introduction of CTCs in the country continue among various stakeholders, e.g., the local Chamber of Commerce. However, seeing as national elections are expected in Slovenia in April 2022, the CTC reform is not expected to gain much traction until summer 2022 at the earliest.

Slovakia

Earlier this year, we reported that the Slovakian Ministry of Finance had prepared draft legislation to introduce a CTC scheme. The aim was to lower Slovakia’s VAT gap to the EU average and obtain real-time information about underlying business transactions. Public consultation for the draft law was completed in March 2021. However, no roll-out timeline was published at the time.

Over the past months, the Slovakian government has launched the CTC system and published new documentation. The CTC system is called Electronic Invoice Information Systems (IS EFA, Informačný systém elektronickej fakturácie) and is a unified process of electronic circulation of invoices and sending structured data from invoices to the financial administration. The timeline for the gradual roll-out of entry into force looks as follows:

Poland

There have been serious developments regarding Poland’s CTC framework and system, the Krajowy System e-Faktur (KSeF). The CTC legislation was finally adopted and published in the Official Gazette on 18 November 2021. Starting from January 2022, KSeF goes live as a voluntary system, meaning there is no obligation to use this e-invoicing system in B2B transactions. It is expected that the system will be mandatory in 2023, but no date has been set yet for the mandate.

Romania

With the largest VAT gap in the EU (34.9% in 2019), Romania has also been moving towards introducing a CTC regime to streamline the collection of taxes to improve and strengthen VAT collection while combating tax evasion. In October 2021, Government Emergency Ordinance (GEO) no. 120/2021 introduced the legal framework for implementing e-Factura, regulating the structure of the Romanian e-invoice process and creating the framework for basic technical specifications of the CTC e-invoicing system. While the Romanian e-Factura went live as a voluntary system on 6 November 2021, no timeline has yet been published for a mandate. Suppliers in both B2B and B2G transactions may opt to use this new e-invoicing system and issue their e-invoices in the Romanian structured format through the new system.

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The EU e-commerce VAT package was introduced in July 2021. The new schemes, One Stop Shop (OSS) and Import One Stop Shop (IOSS) bring significant changes to VAT treatment and reporting mechanisms for sales to private individuals in the EU.

In the last of our series of FAQ blogs, we answer some of the more common questions asked on the IOSS.

Q: What is IOSS VAT?

IOSS VAT is the VAT collected at the time when the supply takes place and subsequently remitted to the tax authority in the Member State of Identification (MSI).

Under the old rules, when goods imported from third countries were sold to private individuals, the normal steps would require the supplier to account for import VAT, then account for the VAT on the subsequent supply (the sale to the private individual) then deduct the import VAT.

Instead, with IOSS, the VAT on the import is exempt and only the VAT on the subsequent supply is to be collected and remitted to the tax authority.

Q: What is IOSS?

IOSS is short for Import One Stop Shop. This is a special scheme that simplifies the registration obligations for taxpayers who carry out distance sales of goods imported from third countries to private individuals in the EU.

Similar to the OSS, the IOSS scheme allows taxpayers to register in a single EU Member State where they account for VAT that was actually due in other Member States.

Here’s an example. A business registered for IOSS in the Netherlands, can account for its sales to German, French, Italian, Polish etc. customers in its Dutch IOSS return thus avoiding the requirement to register in multiple jurisdictions.

The scheme, however, is restricted to consignments of up to €150. Additionally, signing up for the scheme requires careful analysis of the taxpayer’s profile, the way the supply chain is structured and other factors. All of these would affect the business’ eligibility for the scheme, and the requirements to appoint a special type of representative for the purposes of the scheme that is required in certain cases.

If such representative is required, they will be jointly and severally liable with the taxpayer’s IOSS obligations. It’s also important to note that such representative must be established in the EU.

Q: What is an IOSS number?

An IOSS number is the specific identification for the IOSS scheme that is designated by the MSI (the country where the taxpayer is eligible or decides to register for the scheme) to the taxpayers that have decided to make use of this mechanism.

Although IOSS identification is a type of VAT identification it’s not an actual resident VAT registration in the MSI.

Instead, it’s an IOSS number specifically for the purposes of the scheme. In this sense only the eligible type of supplies can be accounted for using the IOSS number and the IOSS registration. In case the taxpayer will carry out other type of supplies which require a regular VAT registration the latter should be obtained for the purposes of being compliant.

Q: How much does IOSS cost?

The cost of IOSS compliance can vary depending on multiple factors. This would be ultimately affected by:

Q: Who needs an IOSS number?

An IOSS number is required for any taxpayer that wants to make use of the IOSS special scheme. This mechanism isn’t mandatory hence there’s no obligation to apply for an IOSS number.

However, it is advisable that any taxpayer that carries out supplies eligible to be reported using IOSS should consider this option as it has some considerable advantages. Of course, the consideration should also include the numerous requirements and conditions that must be met if a person opts to use the IOSS scheme.

Q: What’s the difference between IOSS and OSS?

Both are special schemes used to simplify the registration obligations for taxpayers involved in B2C supplies. They provide an option to account for VAT, that is due in multiple EU VAT jurisdictions, using a single registration and only one IOSS or OSS return.

The difference between both schemes is the different types of supplies that can be accounted for. More precisely:

Considering the above, the main difference is that with IOSS the goods are located in a third country (outside the EU customs territory) at the time of the sale, whereas with OSS the goods are located within the EU’s territory.

Q: Do I need to register for IOSS?

No, IOSS is currently an optional scheme for taxpayers. If not used, the taxpayer’s supplies are subject to the normal rules and depending on the way the supply is structured normal VAT registration/s may be required instead.

Q: What is IOSS tax ID?

IOSS tax ID is the special IOSS VAT number assigned to a taxpayer that has chosen to opt in for the IOSS scheme. It‘s not a regular VAT number that is assigned in the course of a normal VAT registration but is instead used to identify a taxpayer specifically for the purposes of the scheme.

Also, in more practical terms, the IOSS number must be indicated in a specific way on each shipment/supply in order to identify it as eligible under the IOSS as this would allow for:

In our previous blog, we completed the compliance cycle with tax authority audits. However, that’s not the end of the challenges businesses face in remaining compliant in the countries where they have VAT obligations. VAT rules and regulations change as do a business’s supply chains – these need to be carefully reviewed and appropriate action taken so that the business remains complaint.

Changes in supply chain

Supply chains develop over time for a variety of reasons: changes are made to improve efficiency, provide a better customer experience in delivery times or because of entry into new markets. Sometimes, these changes are instigated by the business seeking optimisation, whereas others are forced by external changes such as Brexit forcing businesses trading between the UK and EU to alter supply chains following the UK’s exit from the EU.

Whatever the reason for the change, it’s essential to review the impact on the VAT position of the business. This involves determining the VAT obligations that arise from the new transactions – which we covered in our previous blog. An early warning system of impending supply chain changes is required so they can be reviewed before the new transactions commence. Key to this is awareness of the importance of VAT within the business; the supply chain changes cannot be reviewed if the finance team is not aware of them.

Also, it’s not possible to undo a transaction once it’s taken place so the business must deal with the consequences even if they are adverse. Proactive action can ensure that the business goes into the new supply chain prepared and aware of all the consequences.

There are different ways to structure a supply chain to achieve the same commercial aim; they can have differing VAT implications so consideration of the consequences should form part of the evaluation process to determine the appropriate strategy.

Changes in legislation

Whilst businesses can control some element of when their supply chains change, responding to changes in legislation is much more difficult.

The first step is to be aware of what has changed. Changes can happen on a pan-EU basis or in an individual Member State so a mechanism needs to be in place to identify changes as soon as they are announced. Often this will require external support, especially if there are obligations in multiple territories.

Once the change has been identified, the next step is to determine the impact on the business. Some changes will have minimal impact whereas others will require proactive action to be compliant with the new rules. Significant changes may require a redesign of the supply chain. An action plan with clear responsibilities and timescales should be put in place to manage the necessary changes.

Managing new mandates

The EU has seen the introduction of numerous new mandates over recent years, often in respect of continuous transaction controls (CTCs), and this is set to continue as Member States seek to reduce the VAT gap.

The latest information published by the European Commission is for 2019 where the VAT gap was €134 billion. Whilst this showed a reduction from the previous year, it still represents 10.3% expressed as a share of the VAT Total Tax Liability.

Governments need to generate revenue in a post-pandemic world and addressing the VAT gap provides one solution without imposing additional tax burdens as it involves collecting tax that should already have been charged. Based on current trends, it will take 13 years to eradicate the gap so new initiatives are needed, hence the increase in CTCs.

Managing these new mandates will be a critical challenge for business in the coming years as they are introduced in more Member States. A clear strategy is essential to avoid becoming overwhelmed by disparate local requirements.

Over this series of blogs, we’ve looked at the key aspects of ensuring ongoing VAT compliance. Once the necessary processes and controls are in place, businesses can focus on trade knowing that VAT compliance is assured. However, maintaining VAT compliance is a continuous process which should be constantly reviewed to maximise efficiency and minimise risk.

The EU e-Commerce VAT Package is nearly six months old and businesses should have submitted their first Union One Stop Shop (OSS) return by the end of October 2021. Union OSS provides a welcome simplification to the requirement to be registered for VAT in multiple Member States when making intra-EU B2C supplies of goods and services.

Whilst a simplification, there are several conditions that need to be met on an ongoing basis to continues its use. The European Commission produced a number of guides on the application of Union OSS prior to its introduction which provided guidance on its operation. However, there are still several questions about how Union OSS interacts with other compliance obligations in place for e-commerce sellers around the EU.

Union OSS – interaction with Intrastat

Intrastat is the EU’s mechanism to provide details of intra-EU trade in the absence of customs borders. It’s made up of two components: dispatches declarations submitted in the Member State where the transport starts and arrivals declarations in the Member State of delivery.

E-commerce businesses selling intra-EU goods have long had to comply with Intrastat obligations when they exceeded the reporting thresholds. For lots of businesses an obligation arose in the Member State from where the goods are dispatched given that goods were delivered to multiple other EU countries, so thresholds were often exceeded.

In addition, larger e-commerce sellers also had obligations to submit arrivals declarations in the country of delivery of the goods even though they were not the purchaser of the goods. The very largest may also have had obligations to submit dispatches declarations in the Member State of their customer because of returned goods.

There is no mention of Intrastat in any of the European Commission’s guides about OSS so no guidance is provided on how it will apply when a business adopts Union OSS. Furthermore, many Member States do not currently seem to have a finalised position on the interaction with Union OSS.

The position in the Member State of dispatch of the goods seems clear but there are potentially complexities when goods are dispatched from more than one Member State especially if there is no VAT registration in that country. Whilst this is unlikely, there are circumstances where no VAT registration is required or even allowed.

The real complexity is with regards to Intrastat arrivals declarations. The principle of Union OSS is that no VAT registration is required in the Member State of the customer for intra-EU supplies. There may be other reasons for a VAT registration there but for many e-commerce sellers, they will not have to be registered in the Member State of delivery.

This raises the question of whether arrivals declarations are required in those territories. Some Intrastat authorities have provided guidance and those that have are taking different routes. Some are clear it is not required for arrivals when using Union OSS whilst others still require declarations to be made even though there is no local VAT registration in place.

We continue to monitor the situation and will update further as more information is available.

Unions OSS and other declarations

E-commerce sellers of goods can have other compliance and tax obligations in the countries to which they deliver goods. These include meeting local country rules with regards to environmental taxes. For example in Romania there is a requirement for e-commerce sellers to submit Environmental Fund returns even if the business has opted to use Union OSS. This creates complexity as the Romanian VAT number is normally used to file the returns. A separate registration seems to be possible to ensure compliance with the environmental regulations.

There is also potentially an issue in Hungary with the retail tax that is payable by businesses with a turnover in excess of HUF 500 million. There is still a liability to pay the tax even if there is no VAT registration because of Union OSS. Affected businesses will need to ensure that they remain compliant.

Teething problems can be expected with any new regime but there is an argument that some of these should have been predicted and clear guidance provided, especially for Intrastat. It is clear that some authorities have not considered the matter at all prior to Union OSS’s introduction. We will continue to monitor the situation and provide further updates when more information is available.

In our previous blog, we looked at the challenges that businesses face in submitting VAT and other declarations on an ongoing basis. However, the compliance cycle doesn’t end there as tax authorities will carry out audits for a variety of reasons to validate declarations.

Why do tax authorities carry out audits?

When VAT returns consisted of only numbers, audits were carried out to obtain more information about the business activities taking place behind those numbers. The increased amounts of transaction data provided to tax authorities via SAF-T, local listings and continuous transaction controls (CTCs) means this is changing. Audits are still carried out even with the additional VAT information, mainly to determine that VAT declarations accurately reflect the activities of the business.

Whilst the frequency of audits varies considerably between Member States, it is common across the EU for an audit to be carried out if the business requests a repayment of VAT. In some countries, this will happen whenever a repayment is requested, whereas others will take a more risk-based approach and only audit if the repayment is higher than expected from a business that regularly receives repayments.

Speed is of the essence for audits as cashflow is impacted until the repayment is made. This needs to be at the forefront of whoever is managing the audit but careful consideration of the questions being asked by the tax authority and responses being made by the business remains essential.

Preparing for an audit

Audits can either be done in-person or via correspondence although In-person audits are currently less common due to Covid-19. The audit is normally carried out via correspondence if the taxpayer is not established in the country of registration, which in some countries requires a local advisor.

This leads to a key question: whether to handle the audit in-house or bring in external expertise. Whilst managing an audit in-house will save fees, it is essential to consider the consequences of the audit. An external advisor could be brought in at a later stage but they may be hampered by responses provided to the tax authority at the outset of the audit. Proper consideration should be given to utilising specialist external advisors, especially if there is a significant amount of VAT or complex issues are involved.

The priority for any audit is to successfully resolve it as quickly as possible with no detrimental impact to the business. This will minimise the amount of management time, fees and exposure to penalties or interest.

Managing the audit process

Many audits will start with the tax authority asking some specific questions – this could be about the business generally or about specific transactions. The questions are asked for a reason so businesses need to consider why they’re being asked to determine how to respond and minimise the risk of problems later in the audit.

Managing deadlines is important as failure to do so can have detrimental effects. Some tax authorities impose very short deadlines so prompt attention is required. It may be possible to agree an extension, but this is not always the case. Providing clear unambiguous answers and supporting documentation is essential to obtain the desired outcome.

Once the audit has been concluded, any corrective action needs to be taken. In the ideal situation, nothing must be done and the business can continue to trade successfully. If an adverse decision or payment request has been issued by the tax authority, consideration needs to be given as to whether to appeal the decision; again, strict deadlines must be met.

Even without such a decision, the audit may have highlighted areas where work is required to avoid problems arising in the future. An action plan should be created with clear responsibilities and deadlines.

Once all work has been done, the business can return to the normal compliance cycle of submitting VAT returns and other declarations. An ongoing challenge is making sure the business successfully manages changes in their VAT position, and we will be looking at this in our final blog in this series.

As we inch closer to the implementation date of 1 January 2022 for Norway’s new digitized VAT return, let’s take a second look at the details.

Norway announced its intentions to introduce a new digital VAT return in late 2020, with an intended launch date of 1 January 2022. With this update comes the removal of box numbers, which will be replaced by a dynamic list of specifications. The report will also repurpose the Norwegian Standard Tax Codes from the SAF-T financial file to provide more detailed reporting and flexibility. It’s important to note that the obligation to submit a SAF-T file will not change with the introduction of this new VAT return.

This change is for the VAT return only – with the SAF-T codes being re-used and re-purposed to provide additional information. Businesses must still comply with the Norwegian SAF-T mandate where applicable and must also submit this new digital VAT return. With the new VAT return, the Norwegian Tax Administration (Skatteetaten) seeks to simplify reporting, better administration, and improved compliance.

Details on technical specifications

Skatteetaten has created many different web pages with detailed information for businesses to look through over the next few months, including the following:

Submission method

Norway is encouraging direct ERP submission of the VAT return where possible. However, the tax authorities have announced that manual population via the portal will still be available.

Login and authentication of the end user or system is carried out via the ID porten system. Originally, Norway didn’t allow for XML upload; however, the tax authorities have recently updated their guidance to ensure that XML upload will be accepted. Changing numbers or notes in the uploaded XML file will not be possible, but it will be possible to upload attachments.

Additionally, Norway has provided a method for validation for the VAT return file, which should be tested before submission to increase the probability that the file is accepted by the tax authorities. The validator will validate the content of a tax return and should return a response with any errors, deviations, or warnings. This is done by checking the message format and the composition of the elements in the VAT return.

Please note that Norway is not allowing for any grace period for the submission of this newly designed return.

What’s next?

In addition to the new VAT return, Norway has also announced plans to implement a sales and purchase report by 2024. The proposal is currently in the mandatory public consultation phase, which ends on 26 November 2021.

Romania Issues Last-Minute Amendments to B2B E-invoicing Regulations

After the implementation of Romania’s new B2B e-invoicing regulations, effective January 2024, the country introduced Government Emergency Order No. 115/2023 with last-minute amendments.

We can summarise the key amendments from the new legislation in three categories:

1. Exemptions from the e-reporting and e-invoicing mandate are clarified

2. New five-calendar-day deadline to report e-invoices from July 2024

From July 2024 onwards, the requirement to issue e-invoices for transactions between established entities persists. The amendment states that in the event of a taxpayer’s failure to generate an electronic invoice, they are obligated to submit it to the RO e-Factura platform within five calendar days.

3. Penalties for businesses in the scope of e-invoicing

From July 2024, established entities that fail to comply with the issuance and receipt of e-invoices will receive a fine equal to 15% of the total invoice amount.

Additionally, those who fail to report the invoice which was not issued and automatically transmitted to the RO e-Factura within the additional five calendar days will be fined:

Romania Publishes Draft Legislation For B2B E-invoicing Mandate

The Romanian Ministry of Finance has published draft legislation proposing new budgetary measures, among which is the implementation of the highly anticipated electronic invoicing mandate.

Even though the draft legislation maintains the January 2024 roll-out date previously approved by the EU Council, it proposes an invoice reporting system to operate in the first six months with the electronic invoicing system (RO e-factura) being fully implemented in July 2024.

Additionally, a three-month grace period – from January 2024 to March 2024 – is foreseen where penalties are not imposed.

Romania’s new B2B e-invoicing mandate timeline:

The first phase of implementation where taxpayers report invoices to the RO e-factura system – instead of issuing the invoices directly through that system – is an addition of the draft law.

This reporting obligation is a transitional measure to help businesses prepare and adapt their systems to the new e-invoicing requirements. Between January and June 2024, the draft legislation also foresees an obligation for the supplier to send the cleared invoice out-of-band to the buyer whenever the latter is not registered with the RO e-factura system.

The scope of the new B2B draft mandate applies to all B2B transactions carried out by established or VAT-registered suppliers deemed to take place in Romania.

Looking to better understand e-invoicing regulations ahead of Romania’s mandate? Our guide can help.

Romania Authorised to Implement Mandatory B2B E-Invoicing

The EU Council has approved the proposal from the EU Commission to authorise Romania to introduce mandatory e-invoicing starting from January 2024. The decision was adopted on 25 July and published in the Official Journal of the EU on 27 July.

Romania’s e-invoicing journey

Romania has been progressing towards implementing a continuous transaction controls (CTC) e-invoicing regime for some time now. The country introduced the e-invoicing requirement for B2B transactions of high-fiscal risk products in December 2021 and B2G transactions in May 2022, both implemented as of July 2022.

In addition to these requirements, Romania aims to make e-invoicing mandatory for all B2B transactions. To this end, the country applied to the European Commission on 14 January 2022, requesting authorisation for a special measure to derogate from articles 218 and 232 of Directive 2006/112/EC, which was granted on 25 July. This measure would allow for the introduction of mandatory electronic invoicing for all transactions carried out between taxable persons established in Romania.

Key takeaways from the derogation decision

What’s next?

The Romanian authorities will need to make the necessary amendments to local legislation to implement mandatory e-invoicing, following the derogation decision received by the EU Council.

The Romanian tax authority, ANAF, is expected to issue an order within 30 days from the date of the derogation which will define the scope and timeline for the implementation of the mandate. The order will provide more specific details about the upcoming mandate.

Considering the mandate could come into effect as early as January 2024, it’s crucial that taxpayers start preparing their systems for mandatory e-invoicing from now.

Romania Authorised to Implement Mandatory B2B E-Invoicing

Romania’s e-invoicing journey

Key takeaways from the derogation decision

What’s next?

The Romanian authorities will need to make the necessary amendments to local legislation to implement mandatory e-invoicing, following the derogation decision received by the EU Council.

Considering the mandate could come into effect as early as January 2024, it’s crucial that taxpayers start preparing their systems for mandatory e-invoicing from now.

Romania’s B2B E-invoicing Mandate for High-risk Products and E-transport System

With the most significant VAT gap in the EU (34.9% in 2019), Romania has been moving towards a CTC regime to improve and strengthen VAT collection while combating tax evasion.

The main features of this new e-invoicing system, e-Factura, are described further down in this blog. Here, we’ll take a closer look at the roll-out for B2B transactions and the definition of high-fiscal risk products, as well as the new e-transport system that was introduced through the Government Emergency Ordinance (GEO) no. 130/2021, published in the Official Gazette on 18 December.

What are high fiscal risk products?

According to GEO no. 120/2021 (the legislative act introducing the legal framework of e-Factura), the supplier and the recipient must both be registered with the e-Factura system. The recently published GEO no. 130/2021 establishes an exception for high fiscal risk products and ensures that taxpayers will use the e-Factura system regardless of whether the recipients are registered.

In line with the GEO no. 130/2021, the National Agency for Fiscal Administration has issued an order to clarify which products are considered high fiscal risk products.

High fiscal risk products are defined based on the nature of the products, marketing method, traceability of potential tax evasion and degree of taxation in those sectors. Detailed explanations, as well as product codes, can be found in the Annex of GEO no. 130/2021.

The enforcement timeline of this requirement means that businesses that supply these types of products must be ready to comply with the new Romanian e-Factura system as follows:

Looking ahead: introduction of an e-transport system

Another reform that shows the intention of the Romanian authorities to combat tax fraud and evasion is the introduction of an e-transport system.

Taxpayers will be required to declare the movement of goods from one location to another in advance. Once declared, the system will issue a unique number written on the transport documents. Authorities will then verify the declaration on the transport routes.

Moreover, it is stated in the justification letter that the e-transport system will interconnect with the Ministry of Finance’s current systems, Romanian e-invoice, and traffic control, much like similar initiatives in other countries, such as India, Turkey and Brazil.

The introduction of the e-transport system is still pending as the Ministry of Finance has not yet issued the order regarding the application procedure of the system. According to GEO 130/2021, the Ministry of Finance had 30 days to do so after GEO 130/2021 was published in the Official Gazette. However, the deadline expired on the 17 January, and no announcement has been made yet. Therefore, the details of the system are still unknown.

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E-Factura – Romania’s New E-invoicing System

In March 2020, Romania launched an e-invoicing pilot program, e-Factura, to streamline the collection of taxes to improve and strengthen the collection of VAT whilst combating tax evasion.

The decision to launch e-Factura was taken after closely monitoring the Italian e-invoicing model and analysing the economic impact and efficiencies that electronic invoicing has had for both B2G and B2B transactions in Italy.

E-Factura is to implement a new e-invoicing system for B2G transactions but also lays the foundation for the extension of the platform for further developments and provides the necessary know-how to develop an e-invoicing system in B2B.

In October, Government Emergency Ordinance (GEO) no. 120/2021 introduced the legal framework for implementing e-Factura, regulating the structure of the Romanian e-invoice process and creating the framework for achieving basic technical specifications of the e-invoice system.

Further documentation regulating the use and operation of e-Factura and technical documentation such as API specifications and draft e-invoice schemas have also been published.

According to published documentation, the B2B e-invoicing process is not expected to differ from the B2G e-invoicing process, whose framework and relevant requirements are defined to a clearer standard.

Taxpayers can expect the same requirements to apply to B2G and B2B e-invoicing. However, certain aspects for B2B e-invoicing must still be clarified, such as the authentication process and requirements for accessing and using the e-invoicing system through the API for taxpayers and their service providers.

Main features of e-Factura

The Romanian e-Factura went live as a voluntary system on 6 November 2021, just six months from the announcement of the Ministry of Finance of the roll-out of a new e-invoicing system and only one month after publication of enacting legislation. Suppliers in both B2B and B2G transactions may opt to use this new e-invoicing system and issue their e-invoices in the Romanian structured format through the new system.

The Romanian e-Factura is a clearance system where e-invoices are sent, cleared, and received through the central platform. The structured invoice is issued in XML format and sent to the central platform for validation. The validation checks relate to the compliance of the structured invoice with the schema requirements, the authenticity of the origin regarding the identity of the issuer who is authenticated in the system and the integrity of the invoice content after transmission. An XML invoice that passes validation and is signed by the Ministry of Finance is considered the legal invoice.

Final remarks

The initial implementation timeline must be – by international comparison – considered short for the roll-out of an extensive new CTC system. This could be explained by the fact that the roll-out of the voluntary system is not as disruptive as that of a mandatory system.

If, or when, a mandate is announced or relevant e-invoicing incentives are introduced, a longer implementation timeline is likely to follow to facilitate for taxpayers to comply with the new requirements in time.

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Need to ensure compliance with the latest Romania e-Factura requirements? Speak to our team.

Electronic invoicing is rapidly becoming a standard business process. Governments are pushing for the adoption of B2G invoicing to optimize the public procurement process and also to provide a boost to the adoption of e-invoicing between businesses.

Apart from countries that have introduced general e-invoicing mandates to improve fiscal controls – most of which have so far been in Latin America – countries in Europe and some in Asia are looking towards the PEPPOL framework to generate both business process and fiscal benefits through standardization.

PEPPOL was established to simplify interoperability, initially for public procurement transactions, but it is being built upon to encompass fiscal reporting or invoicing ‘clearance’ concepts as well.

B2G e-invoicing in Europe with PEPPOL

As part of harmonizing and digitizing public procurement processes within the EU, governments and other public bodies under Directive 2014/55/EU are required to be able to send and receive electronic invoices in accordance with the European Standard EN-16931.

All EU Member States’ public administrations had to be able to receive e-invoices at least for public procurement transactions either by November 2018 or by April 2019, with the possibility for Member States to extend the deadline by one extra year for sub-central authorities.

Several countries have taken the opportunity to generally mandate B2G electronic invoicing when implementing the Directive 2014/55/EU, so that both the public sector and private sector supplier will be obliged to send invoices electronically in B2G transactions.

Examples of countries that have introduced B2G mandatory e-invoicing are Sweden, Croatia, Estonia, Lithuania and Slovenia, and there is an upcoming mandate in Portugal that will come into force for all companies by January 2022. Finland is aiming for the same effect through a buyer-initiated mandate for the supplier to send e-invoices.

What is PEPPOL?

The PEPPOL project was initiated in 2008. One of its main objectives was standardization of the public procurement process in European governments. PEPPOL is a set of artifacts and specifications created to enable cross-border e-procurement, supported by a multi-lateral agreement structure which is owned and maintained by the OpenPEPPOL association.

PEPPOL aims to remove complexity around interoperability, as all parties that use PEPPOL will adhere to the same regulations and technical standards to exchange e-documents. Through the PEPPOL network, companies can exchange electronic procurement documents including e-Orders, e-Advance Shipping Notes, e-Invoices and e-Catalogues via access points based on what is known as a four-corner model – meaning that suppliers and buyers are represented by service providers that process data on their behalf.

While PEPPOL is known to have its initial focus in Europe, it is expanding beyond the EU to Asia and recently has also received more attention in the Americas. Singapore was the first country in Asia and the first outside Europe to establish a PEPPOL Authority, facilitating the framework on a national level, but was soon followed by other countries.

Currently, there are OpenPeppol members in 31 countries. In addition to countries in Europe, these include Australia, Canada, China, Japan, Mexico, New Zealand, Singapore and USA, with Japan being the newest addition.

Recent developments in B2G e-invoicing

As explained above, several EU Member States took the opportunity when transposing the Directive 2014/55/EU to make B2G e-invoicing mandatory.

What is next?

Developments in B2G e-invoicing can no longer be considered separate from B2B e-invoicing. After all, many companies supply goods or services to public authorities, and investments in complying with government customer requirements under schemes like PEPPOL will drive the use of these same standards and rules in the business-to-business sector.

This also means that initiatives towards business-to-business electronic invoicing as a way for tax administrations to receive VAT-relevant data in real-time or near-real-time are increasingly influenced by concepts from the public procurement world.

This spillover goes well beyond conceptual inspiration. In Italy, for example, support for mandatory e-invoicing for VAT control purposes in 2019 was built on a massive data processing platform that was initially designed to facilitate public procurement. France and Poland are far down the path of similar architectures for their continuous transaction controls plans.

As PEPPOL becomes more popular as a standard to make country-specific public procurement methodologies more easily accessible for suppliers abroad, its concepts will increasingly penetrate the broader worlds of electronic invoicing, electronic trade and fiscal compliance.

Ministry Publishes Draft Guideline on B2B E-Invoicing

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.

German Parliament Passes the B2B e-Invoicing Mandate

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.

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.

Additional Information Released for Germany’s B2B E-Invoicing Plans

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.

Federal Government Approves Mandatory B2B E-Invoicing and Extends Voluntary Phase

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.

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.

Next steps for the e-invoicing mandate

The Federal Parliament and the Federal Council are expected to give their approval to this reform by the end of 2023.

German Regulatory Changes For Mandatory E-invoicing

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.

European Council issues derogation decision

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.

Germany Takes Another Step Towards CTC by Proposing an E-Invoicing Mandate

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.

Germany Steps Closer to Introducing Continuous Transaction Controls

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.

Supporters of a CTC reform

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.

Proposals on CTC reform

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.

Conclusion: Will Germany be the next EU country to introduce CTCs?

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.

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Ensure VAT Compliance Within Global Supply Chains

Vat Services

Transforming global supply chains

From food distribution to automotive manufacturing and logistics, companies are distributing their supply chain activities around the world to reduce costs, expand into lucrative markets and launch new products faster.

165 countries worldwide levy a form of VAT. Each has its own set of rules for both compliance and reporting. From differences in local VAT legislation to evolving international VAT reporting trends, if you trade cross-border you’ll be subject to change. This may create new requirements for invoicing, VAT registrations and VAT reporting obligations.

Companies that ignore the importance of VAT compliance could easily erase the benefits of a global supply chain, disrupting operations and cash flow, and negatively impacting the bottom line in the process.

This is why VAT compliance needs to be a critical factor in supply chain planning.

Cross-Border Supply Chain Review and Transaction Mapping

A holistic view of your full business activity, mapped against the changing legislative, political and economic landscape, to deliver clarity to all functions within your business so you can trade with confidence.

Download our infographic for full details of our cross-border supply chain review and transaction mapping service.

Ensure global VAT compliance and minimise risk

VAT Reporting

Sovos’ VAT reporting meets extensive tax authority output requirements across both EU and non-EU jurisdictions including VAT returns, EC Sales and Purchase Lists, Intrastat Declarations, complex reports (including SAF-T) and other country specific declarations.

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Benefits of Sovos solutions for supply chain VAT compliance

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Guidance to help with your tax strategy to ensure VAT compliance and maximise the benefits of an efficient global supply chain.

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Guide

Understanding VAT Obligations: European Events

Global events are popular once again and conferences and exhibitions often create VAT registration obligations in different European Union Member States that your business operates in.

Navigating these complex place of supply rules can be challenging. Legislation varies country-to-country and the type of event you’re organising affects this. Download our helpful guide to understand what your VAT obligations are.

Place of Supply Rules

When determining where tax applies to an event, it’s important to consider the place of supply rules.

These can be confusing and hard to interpret. When organising events and conferences, there are two basic rules to think about:

Does the service being supplied fall under the general place of supply rules, in which case, if the supply is B2B, VAT is due where the customer is based. In this scenario if the customer is established outside the UK, then the customer has to account for VAT on behalf of the supplier in the country they are established in under the reverse charge rules in the EU or potentially equivalent if non-EU.
Does the supply fall under any of the exceptions to the main rule? The most common example being admission to conferences and events whereby VAT is due where the event is held.

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As you can see, VAT and events is a complex affair.

Admission to events, exhibitions and conferences in the EU is subject to VAT in the country where the event takes place. In addition to admission, other considerations include stand rental, local suppliers, sponsorship packages and catering services.

Our guide covers these topics:

VAT registration – where should I register and what VAT rules should I consider?
Event organisers – what VAT liabilities apply and how does it affect clients?
Online events – how do the rules differ for online events, both for B2B and B2C?
Hybrid events – are these taxed differently?
VAT reclaims – what claims are possible and what VAT can I recover?

Tour operators margin scheme (TOMS)

In addition to these common concerns, the Sovos Understanding VAT Obligations: European Events guide also explores TOMS – the tour operators margin scheme.

If a business buys in and sells services such as hotel accommodation, passenger transport or excursions to its clients/delegates in its own name, TOMS may well apply. The supply of services that fall under the scheme receive a different tax treatment to most supplies of services. They can require the undertaking of a complex calculation.

Also covered is a summary of non-EU events and how to apply VAT when hosting an event outside of the European Union.

For example, some non-EU countries will apply similar rules to the EU and a registration may be

Needed. However the issues will often be complex and require a business to carefully consider the organisation of the event at the outset. VAT recovery in non-EU countries will also vary and not all countries will allow refunds to overseas businesses.

Compliance peace of mind with a complete, global VAT Managed Service from Sovos

Whatever your VAT implications, Sovos has the expertise to help you navigate your global events and the complexities of cross-border VAT obligations. Our VAT Managed Services ease your compliance workload while mitigating risk wherever you operate today. In addition, we ensure you’re ready to handle the VAT requirements in the markets you intend to lead tomorrow.

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Ask our VAT experts how Sovos VAT Managed Services can ease your compliance needs.

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Tax in Romania: All you need to know about Romania’s VAT regime

Romania introduces measures to digitally transform its tax administration and close the VAT gap

Seeking to close its VAT gap, the Romanian tax authorities have been discussing the idea of implementing measures to combat the country’s ever-increasing VAT gap. After years of discussion, the country announced its Standard Audit File for Tax (SAF-T) initiative which began in January 2022.

Have questions? Get in touch with a Sovos expert on tax in Romania

Tax in Romania: Romania’s SAF-T reforms

The Organisation for Economic Co-operation and Development (OECD) introduced SAF-T in 2005, and Romania joins a long line of European Member States adopting this form of tax legislation.

From 1 January 2022, companies in the General Directorate for the Administration of Large Taxpayers list must report their VAT electronically to the Romanian tax authorities. Transaction and accounting data must be reported through Declaratiei Informative D406 (SAF-T Romania).

This move is not uncommon and follows the trend being seen across the EU with tax administrations requiring increasingly granular data in real-time in Italy, Spain and Hungary paving the way for pre-populated VAT returns.

For more information see this overview about SAF-T in Romania.

Romania SAF-T quick facts

D406 must be submitted electronically in PDF format with an XML attachment and electronic signature. The combined file size must not exceed 500MB for it to be accepted at the portal.
Submission deadlines can be periodically, annually or on demand.
There is currently a six-month grace period from 1 January 2022.
Asset information is expected to be required annually, though no date has officially been announced.

Continuous transactions control (CTC) reforms

The ANAF, Romania’s tax authority, has introduced the RO e-Invoice system. It is optional in the first phase, aiming as a first step at the relationship between companies and the state (B2G) and as a second step, the B2B transactions with high-risk products.

The ultimate goal, as is often the case when a tax administration wants visibility of more data so they can take steps to close their national VAT gap, looks set to be a system that ‘clears’ each supplier invoice prior to it being sent to a buyer.

In this respect, as of 1 July 2022, suppliers will be obliged to use the RO e‑Invoice system in B2B transactions, including high fiscal risk products. Moreover, Romania wants to expand the implementation of e‑invoicing to a broader economy as a next step.

Finally, the Ministry of Finance has announced the introduction of a mandatory e-transport system for monitoring certain goods on the national territory from 1 July 2022. The transportation of high-fiscal risk products must be declared in the e-transport system a maximum of three calendar days before the start of the transport, in advance of the movement of goods from one location to another.

The system will generate a unique code (ITU code) following the declaration. This code must accompany the goods being transported in physical or electronic format with the transport document. Competent authorities will verify the declaration and the goods on the transport routes.

For more information see this overview about e-invoicing in Romania.

Romania CTC quick facts

E-invoices must be submitted in XML format.
Use of the RO e-Factura system will be mandatory for high-fiscal risk products in B2B transactions from 1 July 2022. High-risk fiscal products include:
- Vegetables, fruits, roots and edible tubers, other edible plants
- Alcoholic beverages
- New constructions
- Mineral products (natural mineral water, sand and gravel)
- Clothing and footwear
Suppliers of high fiscal risk products must use the RO e-Factura system even if their buyers are not registered with the system.
The transportation of high-fiscal risk products must be declared in the e-transport system.

Mandate rollout dates for SAF-T and CTCs

Romania SAF-T

September 2021: Voluntary test period began with D406T allowing taxpayers to become familiar with the data extraction and mapping requirements.

January 2022: Large taxpayers included in the Romanian tax authority’s list in early-2021 must comply with new SAF-T regulations.

1 July 2022: Large taxpayers added to the list in November 2021 must comply with the new SAF-T regulations.

1 January 2023: Medium taxpayers must begin submitting SAF-T data.

1 January 2025: Small taxpayers must begin submitting SAF-T data.

Romania CTC

March 2020: Pilot program launched.

November 2021: Voluntary participation of B2G scheme.

1 April 2022: Voluntary participation of suppliers in B2B transactions including high-fiscal risk products scheme.

1 July 2022: Mandatory e-invoicing for B2B suppliers of high-fiscal risk products and mandatory issuance of e-transport document for the transport of high fiscal risk products.

2023: Mandate expansion to other B2B flows expected.

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Romania’s SAF-T Requirements

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Romania CTC Requirements

Understand more about Romania’s CTCs including when businesses need to comply and how Sovos can help.

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How Sovos can help with tax in Romania

Need help to ensure your business stays compliant with the evolving VAT obligations in Romania?

Learn how Sovos’ solutions for Romania SAF-T reforms and e-invoicing VAT compliance can help companies stay compliant.

The IDC MarketScapes highlight Sovos as “dependable cloud tax software capable of supporting the compliance and regulatory demands on businesses of every size”

BOSTON – October 11, 2021 -Global tax software provider Sovos today announced it has been recognized as a Leader in both the “IDC MarketScape: Worldwide SaaS and Cloud VAT Software 2021 Vendor Assessment” and “IDC MarketScape: Worldwide Cloud-Enabled Sales and Use Tax Automation Software for Enterprise 2021 Vendor Assessment” reports. This marks the second time Sovos has been recognized as a Leader by the IDC MarketScape¹. According to the IDC MarketScape, Sovos is ideal for companies “looking for dependable cloud tax software capable of supporting critical tax compliance and regulatory demands.”

IDC MarketScape is the premier vendor assessment tool for the information and communications technology (ICT) industry. The report provides in-depth technology market assessments of ICT vendors for a wide range of markets. The comprehensive assessment of market competitors offers critical information needed to evaluate technology solutions.

“Sovos combines local expertise with a seamless, global customer experience across its full suite of compliance solutions,” said Kevin Permenter, IDC research director, financial applications. “They are a strong choice for companies of any size looking for cloud tax software and services to meet compliance and regulatory demands anywhere they do business.”

A secure, reliable, scalable and flexible cloud platform for the demands of modern tax

The IDC MarketScape reports highlight Sovos’ strong cloud software platform, which is the world’s first complete solution for modern tax. It combines tax determination and reporting tools for sales and use tax, value-added tax (VAT) and other transactional taxes with modern, digital reporting and e-invoicing compliance software. The solution is supported by the proprietary Sovos S1 Platform, an architecture, development framework and cloud infrastructure built to deliver tax compliance software wherever and whenever businesses need it, without fail.

In addition, the report noted Sovos’ advanced APIs and its multiple physical data center approach, which recently achieved active-active status, delivering the security, reliability, scalability and flexibility businesses need to meet the escalating demands of modern tax.

“Digital tax compliance is a complex problem every business needs to solve. That’s why our mission is to Solve Tax for Good® and why we’ve built the most complete solution available for modern tax through organic innovation and strategic acquisitions,” said Andy Hovancik, President and CEO, Sovos. “Sovos’ positioning in the IDC MarketScape reports reflect our ongoing commitment to ensure frictionless commerce for our customers everywhere they conduct business.”

The only scalable, end-to-end solutions for VAT and sales and use tax compliance

Governments across the globe – from Chile to India – are enacting complex new policies to enforce VAT mandates, obtain unprecedented insight into economic data and close revenue gaps – but every country writes its regulations differently. As a result, companies – from small and medium businesses to multinational corporations – are challenged to ensure compliance despite diverse VAT enforcement approaches. The IDC MarketScape highlights Sovos’ use of automation and advanced technology to provide continuous and real-time e-invoicing compliance.

According to the VAT report, “multiple customer references cited Sovos’ capability with e-invoicing as one of the major benefits of choosing their solution.”

For Sales and Use Tax for Enterprise, the report states, “Sovos’ Global Tax Determination Cloud scales horizontally to handle unlimited transaction volume. It delivers active-active clusters across globally distributed, secure data centers to enable differentiated reliability and no downtime, even in the event of a data center outage.”

Sovos was also named a leader in the “IDC MarketScape: Worldwide SaaS and Cloud-Enabled Sales and Use Tax Automation Software for Small and Midsize Businesses 2021 Vendor Assessment.” This MarketScape report noted that “Sovos has flexible deployment options, with modern APIs, certified integrations, batch processing, and localized calculation.”

Accelerating local expertise and global reach

Sovos continues to expand its global footprint with expert teams around the world. In fiscal year 2021, Sovos completed nine acquisitions in six countries, an increase of more than 100% in mergers and acquisitions activity over the previous fiscal year. As a result, Sovos now has expert teams in 13 countries and supports customers operating in 70 countries.

¹IDC MarketScape Worldwide SaaS and Cloud-Enabled Sales Tax and Automation Applications. IDC# US43263718e. January 2019.

Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe, and is owned by Hg and TA Associates. For more information visit www.sovos.com and follow us on LinkedIn and Twitter.

IDC MarketScape vendor assessment model is designed to provide an overview of the competitive fitness of ICT (information and communications technology) suppliers in a given market. The research methodology utilizes a rigorous scoring methodology based on both qualitative and quantitative criteria that results in a single graphical illustration of each vendor’s position within a given market. IDC MarketScape provides a clear framework in which the product and service offerings, capabilities and strategies, and current and future market success factors of IT and telecommunications vendors can be meaningfully compared. The framework also provides technology buyers with a 360-degree assessment of the strengths and weaknesses of current and prospective vendors.

Marketscape Report

Sovos Named a Leader in “IDC MarketScape for Worldwide SaaS and Cloud VAT Software”

Marketscape Report

Sovos Named a Leader in “IDC MarketScape for Worldwide SaaS and Cloud VAT Software”

Citing multiple customer references, IDC identified Sovos’ capability with mandated e-invoicing as a major benefit.

“Sovos combines local expertise with a global customer experience across its full suite of compliance solutions. They are a strong choice for companies of any size looking for cloud tax software and services to meet compliance and regulatory demands anywhere they do business.” – Kevin Permenter, IDC research director

Download The IDC MarketScape For Value Added Tax

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On 26 November, Black Friday presents another opportunity for retailers to drive e-commerce sales and boost revenue. Retailers will be working hard to prepare the best deals to entice shoppers, but do you know where you stand with VAT compliance in the EU?

In our latest webinar, learn how the new EU e-commerce VAT rules will apply to retail businesses ahead of this year’s annual shopping event. In addition, we’ll explain how this year B2C retailers can – for the first time in respect of goods – account for VAT on Black Friday sales in the EU using the VAT One Stop Shop (OSS) schemes. These schemes can greatly simplify VAT compliance by removing the need to register for VAT in multiple Member States.

Join Consulting Services Director Andy Spencer and Strategy Programs Director Anna Higgins in this webinar to learn:

Need more information? Sovos’ VAT managed service provides a full OSS service for your business. Let us handle the initial registration, monthly filling and any potential intermediary requirements. Click here to find out more.

Saudi Arabia - E-Invoicing

Saudi Arabia leads the way to continuous transaction controls in the Gulf

Saudi Arabia e-invoicing from December 2021

Saudi Arabia introduced an e-invoicing regime with a phased approach in December 2021. Having only introduced VAT on 1 January 2018, the country is already leading the way in digitizing tax compliance in the Gulf Region.

According to the finalised rules published by Saudi Arabia’s tax authority, Zakat, Tax and Customs Authority (ZATCA) the go-live date of the second phase is 1 January 2023.

In addition to other requirements, Phase 2 also introduced integration with a digital ZATCA platform for continuous transaction controls (CTCs), requiring taxpayers to clear invoices ahead of transmission to buyers.

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Mandate Quick Facts

Phase 1 – Mandatory e-invoicing generation with post audit controls: Started on 4 December 2021

Applies to all resident taxable persons in Saudi Arabia.
Requires taxpayers to generate, amend and store e-invoices and electronic notes (credit and debit notes) across B2B, B2C and B2G transactions, including exports.
Businesses must generate e-invoices and their associated notes in a structured electronic format.
Electronic invoices and notes must contain all necessary information.
Any structured electronic format permitted.
B2C invoices must include a QR code.
All invoices must contain a time stamp.
Integrity of e-invoices is explicitly required.
Storage requirements same in both Phases 1 and 2. Documents can be stored on Cloud, a direct link to the online data must be available. In case the storage is outsourced, documents must be kept by a third party established within the territory of Saudi Arabia.
Suppliers must store e-invoices in a structured format regardless of how they’re exchanged with buyers.
Certain prohibited functionalities for e-invoicing solutions.

Phase 2 – CTC regime: Started on 1 January 2023, requiring taxpayers to transmit e-invoices in addition to electronic notes to tax authority ZATCA for clearance

A phased implementation approach based on taxpayers’ revenue.
Voluntary participation in Phase 2 before the taxpayer’s enforcement date arrives.
B2B invoices operate under a clearance regime, while B2C invoices must be reported on ZATCA’s platform within 24 hours of issuance.
All e-invoices must be issued in the mandatory XML format.
Tax invoices can be sent in XML or PDF/A-3 (with embedded XML) to buyers. B2C invoices must be presented in paper form. However, based on mutual agreement by the parties, B2C invoices can be shared electronically or through any other way where the buyer can read it.
A compliant e-invoicing solution must have the following features:
- Generation of a universally unique identified (UUID) plus invoice sequential number.
- Tamper-resistant invoice counter.
- Some ability to save and archive e-invoices and electronic notes.
- Generation of a cryptographic stamp for B2C invoices, a hash, and a QR code for each e-invoice and electronic note.

Important dates for e-invoicing in Saudi Arabia

Phase 1: 4 December 2021 – All resident taxable persons in the Kingdom to generate, amend and store e-invoices and electronic notes (credit and debit notes).

Phase 2: 1 January 2023 – Additional requirements for taxable persons to transmit e-invoices and electronic notes to the ZATCA. It will be a phased adoption starting with larger companies, with more gradually coming into the scope of the mandate. Companies can expect six months’ notice before the deadline by which they must comply.

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Saudi Arabia CTC Requirements

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How can Sovos help?

Need help to ensure your business is VAT compliant in Saudi Arabia? Sovos serves as a true one-stop-shop for managing all e-invoicing compliance obligations in Saudi Arabia and across the globe. Sovos uniquely combines local expertise with a seamless, global customer experience.

The VAT Import One Stop Shop (IOSS)

Simplify EU VAT with IOSS in one single return

The Import One Stop Shop (IOSS) is here. Simplify your EU VAT compliance into a single VAT return – grow your sales in the EU, avoid fines and penalties and enhance the customer experience by removing unexpected fees for buyers.

Since its launch, we’ve been helping e-commerce businesses of all sizes make the switch to the new scheme. Our IOSS service provides you full access to our VAT compliance software solutions and a team of indirect tax specialists. Let us handle the initial registration, monthly filing and intermediary requirements so you can continue to focus on what you do best.

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What is IOSS?

Since July 2021, all goods imported into the EU, regardless of value, are subject to VAT. As of the same date, businesses selling imported goods valued at less than EUR 150 can now use IOSS to collect, declare and pay VAT to the local tax authorities in a single VAT return. IOSS simplifies your EU VAT compliance – unlock the full potential of the EU e-commerce market, maximise your cash flow, and provide an excellent customer service.

In order to obtain a registration, non- EU businesses need to appoint an intermediary. They can then obtain an IOSS VAT registration number in the Member State where the intermediary is established.

Full IOSS service

Let us handle the registration process, obtain a VAT number for your business and file the monthly IOSS returns. All included, no hidden fees.

We act as your IOSS Intermediary

Non-EU businesses can only register for the scheme through an intermediary. We can act as your intermediary for you.

What are the benefits?

Goods move through customs faster – IOSS calculates and accounts for VAT ahead of time instead of applying upon import
With an IOSS VAT registration number, the VAT is accounted for at the point of sale
Reduced charges for customs clearance – without an IOSS VAT registration, import VAT will be due when the goods are cleared in the EU and there are likely to be higher customs clearance costs

Quick Facts

The IOSS simplification is available to use now for any qualifying transactions
The scheme requires additional record-keeping: businesses must retain more detailed records of transactions than previously
IOSS VAT declarations are monthly
Businesses can correct previous IOSS VAT returns in the next one
Non-EU businesses may need to appoint an intermediary and obtain an IOSS VAT registration in the intermediary’s country of establishment in the EU

Depending on the nature of business activity/supply chains, non-EU retailers may need to report under the Union One Stop Shop (OSS) and non-Union OSS schemes.
Businesses need at least one ‘standard’ VAT registration and possibly more due to warehouses or similar if they are to use Union OSS. No other VAT registrations is needed for IOSS or non-Union OSS.

Penalties and Fines

Local tax authorities can issue penalties and fines to businesses if returns and payments are not submitted on time. In addition, repeated noncompliance can lead to a two-year exclusion from the scheme. Businesses would then need to register for VAT in all Member States where they import goods or have alternative arrangements in place to deal with the import VAT.

Businesses that want to use IOSS may require an intermediary. If an intermediary is required you can’t do it alone. Our comprehensive service handles all your registration, filing and intermediary requirements.

It’s time to get EU VAT compliance right with IOSS and Sovos

Our IOSS service gives you full access to our team of indirect tax specialists and VAT compliance software. Let us handle the initial registration, monthly filing and intermediary requirements so you can focus on what you do best.

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.

Latvia

Serbia

Slovenia

Slovakia

Poland

Romania

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Sovos SAF-T Solutions

Automate the process of preparing robust, accurate and compliant SAF-T files

Sovos SAF-T Extraction

Sovos SAF-T Analysis

Sovos SAF-T Generate

Experience end-to-end handling for compliance peace of mind with Sovos’ SAF-T triple play

Enhance decision-making with full visibility of system data through an intuitive and user friendly interface.

Assess accuracy, integrity and quality of data to ensure compliance with each country’s distinct SAF-T obligations.

Perform cloud-based platform diagnostics of your financial and tax health.

Review ERP source data to determine if errors originate with extraction/mapping or system configuration.

Conduct forensic tests to pinpoint possible anomalies in your data.

Analyze syntax accuracy to ensure file compliance and the integrity and quality of the data.

Maximize operational efficiency by identifying tax anomalies that may cause business problems.

Ensure alignment between SAF-T data and financial statements in advance preparedness for inevitable inspections.

Ensure alignment of all your businesses’ data from any source or format.

Q: What is IOSS VAT?

Q: What is IOSS?

Q: What is an IOSS number?

Q: How much does IOSS cost?

Q: Who needs an IOSS number?

Q: What’s the difference between IOSS and OSS?

Q: Do I need to register for IOSS?

Q: What is IOSS tax ID?

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Changes in supply chain

Changes in legislation

Managing new mandates

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Union OSS – interaction with Intrastat

Unions OSS and other declarations

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Why do tax authorities carry out audits?

Preparing for an audit

Managing the audit process

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Details on technical specifications

Submission method

What’s next?

Take Action

Romania Issues Last-Minute Amendments to B2B E-invoicing Regulations

1. Exemptions from the e-reporting and e-invoicing mandate are clarified

2. New five-calendar-day deadline to report e-invoices from July 2024

3. Penalties for businesses in the scope of e-invoicing

Romania Publishes Draft Legislation For B2B E-invoicing Mandate

Romania’s new B2B e-invoicing mandate timeline:

Romania Authorised to Implement Mandatory B2B E-Invoicing

Romania’s e-invoicing journey

Key takeaways from the derogation decision

What’s next?

Romania Authorised to Implement Mandatory B2B E-Invoicing

Romania’s e-invoicing journey

Key takeaways from the derogation decision

What’s next?

Romania’s B2B E-invoicing Mandate for High-risk Products and E-transport System

What are high fiscal risk products?

Looking ahead: introduction of an e-transport system

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E-Factura – Romania’s New E-invoicing System

Main features of e-Factura

Final remarks

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B2G e-invoicing in Europe with PEPPOL

What is PEPPOL?

Recent developments in B2G e-invoicing

What is next?

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Ministry Publishes Draft Guideline on B2B E-Invoicing

German Parliament Passes the B2B e-Invoicing Mandate

Additional Information Released for Germany’s B2B E-Invoicing Plans

Federal Government Approves Mandatory B2B E-Invoicing and Extends Voluntary Phase

Next steps for the e-invoicing mandate

German Regulatory Changes For Mandatory E-invoicing

European Council issues derogation decision