For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
With the publication of Resolution 097-2023, the National Superintendency of Customs and Tax Administration of Peru (SUNAT) has established the procedure for refunding the general sales tax (IGV) to tourists.
The establishment of this facility previously required a series of reforms and adjustments to Peruvian regulations. This regulation is preceded by Supreme Decree No. 226-2020-EF which modified the regulations of the General Sales Tax and Selective Consumption Tax Law to incorporate tax refunds for tourists – defined as foreign natural persons not domiciled in the country and who remain for no more than 60 days.
At the beginning of 2023, SUNAT published Resolution 005-2023 through which the regulation of payment vouchers and the rules on electronic issuance were modified. The administration changed the rules to allow the issuance of invoices to tourists entering the country.
This invoice can be issued at authorised establishments when goods are sold. In this case, the identification data of the purchaser will not be RUC but a passport.
SUNAT published Resolution 091/2023 in April 2023 to establish rules for the Register of Authorized Establishments (REA) to regulate the registration, permanence and exclusion of taxpayers for the right to return the IGV to tourists.
On the date of their departure from Peru, tourists who have not exceeded the authorised time of stay in the country can initiate the return procedure with the collaborating entity. Tourists can use the self-management kiosk or the mobile application, which is available inside international air or sea terminals.
The VAT refund procedure for tourists is as follows:
The payment to the credit or debit card will be made within five calendar days from the request being registered, discounting the commission that the collaborating entity charges for this service.
The checkpoint has been enabled since 2 May 2023 in the pre-boarding control area on the first floor of the Jorge Chávez International Airport.
Seeking more information on this change in Peru? Contact our team of tax experts.
Refer to this page about tax rules in different countries if you’d like to learn more.
Sovos is one of a short list of applicants to register as a Partner Dematerialization Platform (PDP). The company, with its 20 years of international business process and data expertise in international tax compliance, will benefit from an SAP extension, one of the few available on the market.
London, 27, June 2023 – International tax compliance software provider Sovos announces its application for registration as a dematerialization platform partner (PDP).
France is introducing a major e-invoicing and e-reporting reform which will be rolled out in a phased approach initially to the largest companies from 1 July 2024 and run beyond 2026. Since the beginning of May this year various software publishers and ERPs have been able to submit their applications to the French government to become an approved PDP.
PDPs are playing a key role in this VAT reform. As trusted third parties, these portals will act as the interface between companies and the French government and will be directly involved in issuing and receiving invoices. The aim is for companies to choose the methods and formats for exchanging their electronic invoices (incoming/outgoing) with the obligation to communicate invoicing, transaction and payment data to the authorities.
International e-invoicing experience
Sovos has 20 years of business process and data expertise and a global reach with modern cloud architecture that currently processes over 6 billion compliant transactions a year.
The company has extensive experience as a delegate of tax authorities around the world, with several certifications already obtained in various countries in Latin America, as well as in Turkey, where electronic invoicing is now well established. In addition, Sovos is set to be one of the only platforms to feature an extension for SAP, which is designed to provide dematerialization operator (DO) capabilities.
“We’ve seen high demand for a demo of our solution and initial demonstrations to many of the companies that rely on Sovos have been extremely positive and have provided valuable feedback. Our solution not only integrates the legal and technical requirements for France, but also leverages all the best practices from our decades of experience, and the compliance suite we’ve built, supporting complex obligations for tens of thousands of companies in other jurisdictions” says Cyril Broutin, Product Manager at Sovos.
Providing agility and anticipating future regulatory changes
E-invoicing regulations are regularly modified and updated and are therefore constantly evolving. In Italy, for example, the e-invoicing mandate has been revised more than 40 times. In France, the tax authorities have already published four versions of the specifications for the next reform, which are likely to be further amended or supplemented. Added to this is the European “VAT in the Digital Age” (ViDA) initiative and the many changes it will bring. Sovos intends to assert itself as a PDP capable of supporting companies over the long term, taking into account the regulatory changes which will occur after the application of the reform, at both national and European level. Indeed, the e-invoicing reform is part of a more global drive to digitalize taxation.
“Sovos believes that companies want to remain agile and not be held back by the changing compliance requirements they face in France and around the world. That’s why we’ve adopted a deliberate strategy of loosely coupling tax compliance obligations with the process automation requirements sought by businesses. Our aim is to enable companies to focus on their core business by removing the friction of complex tax digitization mandates. ” explains Cyril Broutin.
About Sovos
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 sovos.com and follow us on LinkedIn and Twitter.
Implementing certified add-ons in SAP S/4HANA on-premise or a private cloud environment will allow you to expand the capabilities of your system. However, it is necessary to maintain a pristine core by strictly adhering to the most effective procedures.
This blog details the most important steps companies should take to design an add-on with a clean core.
Ensure that all umbrella modules of the add-on have been SAP certified for SAP S/4HANA compatibility. This will prove that the add-on satisfies the requirements for integration and avoid investment risk for non-certified modules that use objects forbidden by SAP.
For each major release from SAP, non-certified modules may no longer work to the expected requirement. At Sovos, we make it a point to guarantee that all of our SAP modules are certified against the latest releases. Examples of these modules include VAT Determination (Sales, Purchasing, Monitoring & Reporting, and VAT ID Validator) and continuous transaction controls (CTC) frameworks.
It is important to provide comprehensive user training on the add-on’s functionalities and document changes or upgrades made throughout the installation.
Using the appropriate software is essential for compliance and efficiency when dealing with indirect taxes. Avoid taking quick routes. Make a choice based on accurate information that helps tax procedures run smoothly.
By adhering to these standards, businesses can successfully implement certified add-ons into SAP S/4HANA while keeping the system core clean. This method, which restricts the use of customisations, prioritises the employment of standard functions and ensures an uninterrupted connection – resulting in the production of an SAP S/4HANA system that is highly effective and optimised.
Are you a SAP user that cares about tax compliance? Download our free eBook 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.
Many companies utilise SAP for their tax processes, but limitations in native software functionality add a layer of complexity.
Custom coding is often required for businesses to achieve their desired results, producing the need for ongoing customisation and optimisation – this creates a hefty burden for companies, in addition to their tax compliance obligations. SAP-certified add-ons can lighten the load.
Have you considered purchasing an add-on for the SAP S/4HANA system that you have? Ensure that SAP certification is a top priority, including checking the certification of any umbrella modules that a service provider offers.
The following points highlight the importance of using certified add-ons.
When an add-on is certified by SAP, both the vendor and SAP share some level of accountability and confidence in the add-on. Before deciding on a non-certified alternative, it is essential to conduct adequate research because not all add-ons are subjected to the certification process.
Consider the vendor’s past success in deployments similar to yours, as well as their customer references and reputation. Complete due diligence against prospective vendors to ensure they are financially stable and invest in certification and continuous research and development.
Remember to make a decision based on the prerequisites and potential risks of the SAP S/4HANA environment you work in.
At Sovos, we make it a point to guarantee that all of the modules that make up our SAP product line are certified against the latest releases from SAP. Examples of these modules include VAT Determination (including Sales, Purchasing, Monitor & Reporting and VAT ID Validation products) and Continuous Transaction Controls (CTC) frameworks for SAP.
Download our free eBook on SAP S/4 migrations and tax compliance for more information.
The Ledger of Economic Operations (Libro Registro de Operaciones Económicas), also known as LROE, is a main compliance element of the Batuz tax control system. This system is under implementation in the province of Bizkaia, located in the autonomous Basque community in Spain.
Taxpayers under the Batuz mandate must comply with both TicketBAI and LROE obligations. While TicketBAI applies to invoice issuance, LROE rules require taxpayers to electronically record and report data on income, expenses and other fiscally relevant information to the tax authority in a structured format.
Regardless of size or business volume, individuals engaged in economic activities and organizations must meet LROE requirements if subject to Bizkaia regulations on Personal Income Tax, Corporate Tax or Non-Resident Income Tax for permanent establishments. The rule will come into effect on 1 January 2024 and includes taxpayers currently subject to Bizkaia’s SII (Immediate Supply of Information) mandate.
LROE is the electronic ledger where taxpayers must document several economic activities and report such financial information to the tax authority. Individuals engaged in economic activities report this information via model 140, while companies use model 240.
For compliance with LROE, taxpayers must record and transmit their sales, purchases and other financial data in a structured XML format according to legal technical specifications. Taxpayers can send the data in the ledger either through webservices or manually uploaded via the portal provided by the Bizkaia Tax Authority.
The structure of LROE information for companies and non-resident taxpayers with permanent establishment (model 240) is comprised of the following:
Certain chapters also contain subchapters. The chapter of issued invoices, for example, has a subchapter of issued invoices with guarantor software which requires transmitting data from invoices generated using TicketBAI.
In the case of Bizkaia, as taxpayers do not need to submit the TicketBAI XML (generated with the invoice) directly to the tax authority, they will send this data via the LROE subchapter in a specific TicketBAI field.
The deadline to submit the LROE files to the tax authority varies according to the type of taxpayer under the obligation.
The general deadline is quarterly. Taxpayers must report the data from when the transaction is carried out until 25 April, 25 July, 25 October, or 25 January – depending on the specific quarter.
The deadline for companies under the Bizkaia SII obligation to submit LROE records is four days from the operation’s completion, in line with the general SII deadline. The SII obligation will be considered fulfilled by submission of the LROE.
Failure to comply with the requirement to keep and submit LROE records electronically will result in a monetary fine. The proportionally calculated penalty is 0.5 percent of the transaction amount the taxpayer failed to report, with a quarterly minimum of 600 EUR and a maximum of 12,000 EUR.
By using the TicketBAI invoicing system and reporting the LROE, taxpayers will provide information to the tax authority so that it can fulfil the third element of the Batuz tax control system.
The third element of Batuz entails the preparation of pre-filled VAT draft returns and Corporate and Personal Income declarations, which will be available for taxpayers in Bizkaia from 2024 forward.
Need more information about Batuz LROE or tax in Bizkaia? Contact our team of experts today.
For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
Significant inflation increases have impacted most of the world’s economies, with the UK still above 10% in 2023. This increase means a reduction in the purchasing power of consumers. Together with increases in the cost of raw materials, this has created uncertainty regarding growth of entire industrial departments and reduced profit margins for companies.
The above is the perfect environment for an increase in the value of ‘safe-haven’ assets, such as houses, gold and works of art and antiques.
When we think about fine paintings, elegant furniture or statues, these can be valuable financially and generally increase in value over time.
However, investing in art may have certain VAT implications and, in the near future, it is one of the areas included as part of:
Following Brexit, France’s art market has increased, with a 7% global market share and $4.7bn in total sales in 2021.
One of the key factors of France’s success is the favourable reduced VAT rate of 5.5% for works of art.
Italy has a reduced VAT rate of 10% for art under certain conditions, and in the UK, the rate is 5%.
Along with general VAT rates rules, several existing derogations allow certain EU Member States to apply lower rates. Specific geographical features, social reasons for the benefit of the final consumer, or general interest justify these lower rates.
This creates a complicated map of VAT rates for operators to navigate.
There are two significant VAT changes due in 2025 that could impact the art sector:
Second-hand goods supplied under the margin schemes, works of art, collectors’ items and antiques will be subject to distance selling rules as of 1 January 2025. These rules make these goods subject to VAT in the Member State of arrival.
If works of art or antiques are not transported or dispatched, or if the transport starts and ends in the same Member State, the supply will be subject to VAT in the place where the customer is established, has their permanent address or usually resides.
This extension of the single VAT registration under the One Stop Shop (OSS) scheme will allow a company to register for VAT uniquely in one EU Member State and report their B2C supplies in quarterly VAT Returns
The EU Directive 2022/542 of 5 April 2022 (that amends previous Directives 2006/112/EC and EU 2020/285), on rates of value added tax, aims to “safeguard the functioning of the internal market and avoid distortions of competition“. The Directive will enter into force on 1 January 2025.
This will require the application of the standard VAT rate to art. This potential change has already raised some concerns in the art market in France.
Italy views this change as an opportunity, with Undersecretary for Culture Vittorio Sgarbi saying that Italy intends to implement the EU directive that reduces VAT on the import of works of art from 10% to 5%.
The changes are ongoing and we will keep you updated on developments to art VAT rates across Europe as they unfold.
Need to discuss reduced VAT rates for art in Europe? Speak to our team of tax experts about how the upcoming changes could affect your business.
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.
Expertise in technology and regulatory provides stability for companies during period of uncertainty
BOSTON – APRIL 20, 2023 – Global tax software provider, Sovos, today announced that world-renowned VAT expert, Christiaan Van Der Valk, vice president of strategy and regulatory will headline the E-Invoicing Exchange Summit Miami, April 24 – 26, 2023. His scheduled presentation, ViDA and the Global Tax Digitization Tsunami: Overcoming Business Pitfalls will be his first public presentation on the topic since the European Commission (EU) announced its plans for ViDA in December of 2022.
VAT in the Digital Age (ViDA) will change how trade within the EU is conducted and reported forever. It will require changes in approach from both a regulatory and technology perspective to remain compliant with all local laws and mandates. To help keep businesses informed of new developments and help guide them through the proposed changes, Sovos has established a ViDA HUB page that will be updated continuously as information becomes available.
As part of Sovos’ ongoing commitment to assist businesses in navigating ViDA successfully, we are working with KPMG to produce a series of video segments that address the primary issues behind ViDA, lessons learned from tax digitization pioneers in Latin America, and what companies need to be doing now to best prepare for ViDA. Participating in these segments will be Kathya Capote Peimbert, Tax Managing Director, Indirect Tax, KPMG, Vinicius Pimentel de Freitas, CTO, Inter-American Centre of Tax Administrations and Christiaan Van Der Valk. Parties interested in receiving this video content can pre-register here and will receive an alert when it is available.
“ViDA, at its core, is about Data. The ViDA proposal is an indication that governments within the EU are no longer content to receive after the fact tax filings that only provide superficial insight into aggregated data,” said Christiaan Van Der Valk, vice president of strategy and regulatory, Sovos. “By leveraging technology, tax administrations can now receive authenticated transaction data detailing every sale and purchase straight from companies’ source systems. By moving tax controls much closer to the actual business operation, tax administrations can also respond to anomalies in near-real-time. My advice? Do not wait, ViDA will be your new reality sooner than you think.”
About Sovos
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.
Note: The Finance Law for 2024 has been officially adopted and published in the Official Gazette on 30 December 2023. Our blog, France: B2B E-Invoicing Mandate Postponed, is promptly updated whenever there are changes to the rollout of the French mandate.
Tax compliance in France is already complicated. New e-invoicing and e-reporting regulations being introduced by the DGFIP will mean companies doing business in the French Republic face some of the most onerous compliance obligations of all VAT jurisdictions.
One significant change for many businesses will be the need to use Partner Dematerialization Platforms, also known as PDPs. The role of a PDP is highly specialised. Indeed, strict legal requirements and technical specifications must be met to become a registered PDP.
The timeline affecting all businesses is clear. However, depending on your industry, you may need to rely on a PDP to ensure you’re fully compliant with the new requirements. Key industries include:
Companies that need to use a PDP to achieve compliance with the French mandate face an additional, critical decision in what is already a complex new process to navigate. The need for a PDP raises the stakes, making it crucial to have dependable answers to the following:
We’ve created a rundown of key questions to consider when choosing a PDP.
In addition to the existing requirement for B2G invoices (Public Procurement), the French Mandate reform will require B2B invoices to be exchanged electronically. As each B2B e-invoice is progressed, its status will shift. There are 14 status possibilities that need to be communicated between trading parties. Of these 14, 4 must also be automatically reported to the tax authority platform. The result will be a huge amount of additional data flowing in multiple directions.
Additionally, the transaction details of B2B cross-border sales and purchases – excluding non-EU imports of goods – and B2C sales and payment data for Services Sales must be reported electronically to the tax authority.
Meeting these processing and capacity demands will be a significant undertaking for solution providers. For context, 100 million B2G e-invoices are processed annually. With the addition of B2B e-invoicing to the French mandate, this number will now be in the billions.
Why does this matter?
You want to be able to trust that your PDP can cope with increased capacity and processing needs as well as evolving compliance requirements. You want to set yourself up for success for France as well as to deal with the growing obligations across Europe and beyond.
The French Mandate is part of a global trend towards tax digitization. E-invoicing mandates are constantly changing, being modified and updated.
Take Italy, for example. Since January 2019, the e-invoicing mandate has been revised over 40 times.
The French tax authority has already released four versions of the upcoming French Mandate specifications and these will continue to evolve. Will your chosen software solution be robust enough to handle these changes so they don’t negatively impact your business? By asking the right questions, you may find that some aspiring PDPs, who also happen to be existing e-invoicing providers, are out of their depth.
On top of this, there’s the EU-wide VAT in the Digital Age initiative and the changes it will bring. Your future PDP must have the bandwidth and agility to keep up with the inevitability of these future developments. You will also need to consider whether this PDP can take care of your compliance needs beyond France too.
Trust is everything. A seasoned partner with experience navigating and solutioning for diverse e-invoicing obligations is important for your business. As government interest in business data grows, it’s essential to avoid blind spots, often created by complex supply chains, across multiple countries, within and beyond the EU. You’ll need a holistic view of your data that’s broader than e-invoicing and CTCs (continuous transaction controls). Think SAF-T and the other domestic obligations you face, alongside compliance challenges like VAT determination and periodic reporting.
If you’re also doing business beyond France, these need your attention too.
Let’s be clear. Despite what you may have heard about France’s e-invoicing mandate, this is not more of the same.
Yes, electronic invoice requirements used to be relatively manageable. They needed to be readable and unalterable, providing clear proof of the original supplier’s identity.
The scheme that will be introduced with France’s mandate complicates matters, adding requirements for:
Failure to meet the exact stipulations of the reform will result in invalid invoices.
Without legally valid invoices, not just VAT collection and VAT recovery are jeopardised: This would impact your company revenues and your trading partners, creating cash flow and profitability risks.
Make no mistake, the commercial and reputational impact of not meeting these minimum requirements are even more significant than the potential penalties.
French companies may be used to correcting e-invoice errors at a later date, but soon that will no longer be an option. The mandate ushers in continuous transaction controls, so any data or syntax errors will be glaring. If problems arise with e-invoicing, it won’t be possible to revert to paper or PDFs producing a significant cash flow risk for suppliers. E-invoices must be correct and compliant first time, every time.
Reliance on an experienced and knowledgeable PDP for e-invoicing and associated compliance obligations doesn’t just join the dots in your data. It makes good business sense.
For traditional e-invoicing, a large business network has been a supply chain advantage. A large network allows any one business to connect with a multitude of suppliers and buyers that choose to automate billing and invoice payments.
However, the interoperability requirements of the upcoming mandate erode the power of network size. Every supplier and buyer will need to connect through France’s e-invoicing system (Portail public de facturation or PPF) either directly, or indirectly through a PDP. Giving you more freedom when selecting the right PDP for your business.
While each registered PDP is required to cover both inbound and outbound invoice flows, they’re not required to cover all 36 specific use cases mentioned in the official documentation so far. Each use case needs an adapted treatment, which creates complexity that PDPs must address.
It’s important to ask any PDP you’re considering about their plans to address these use cases and any future ones that could arise as requirements evolve.
Our experts remain close to the requirements of the French Mandate. Especially as these evolve. Make it easy for yourself; connect with us.
Speak to us about our future-proof tax compliance solution, for the French Mandate and beyond, or download our deep dive guide on preparing for France’s mandatory continuous transaction controls.
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.
On 10 February 2023, the Italian Tax Authority introduced the possibility for 2.4 million professionals and companies to view and download the pre-filled Annual VAT declaration related to transactions carried out in 2022.
This return must be submitted by 2 May 2023.
The service is available for taxpayers defined by the provisions of announcement no. 183994 of 8 July 2021 and announcement no. 9652/2023 of 12 January 2023.
These are taxable residents established in Italy who carry out quarterly VAT payments. Exclusions include those operating in sectors of activity or for which special regimes are provided for VAT purposes, including:
This service is not available for companies established outside of Italy that are registered for VAT in Italy through direct registration or a fiscal representative.
The Italian Tax Authority prepared the pre-filled draft thanks to the following data:
Taxpayers can access this new functionality by entering their credentials in the ‘Invoices and fees’ (‘Fatture e corrispettivi’) portal of the Italian Tax Authority. They must access the section dedicated to pre-filled VAT documents where the new “Annual VAT return” section is present.
Pre-filled returns were made available on 15 February. Since then, taxpayers have been allowed to modify the pre-filled draft, integrate it and proceed with the submission.
Taxpayers using the aforementioned portal will be allowed to:
Taxpayers should cross check the data in the pre-filled Annual VAT Return and the data in their management systems and edit the return accordingly before accepting and submitting.
If you have more questions about the pre-filled Italian annual VAT return or need support with tax compliance in Italy talk to our 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: 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.
Note: The Finance Law for 2024 has been officially adopted and published in the Official Gazette on 30 December 2023. Our blog, France: B2B E-Invoicing Mandate Postponed, is promptly updated whenever there are changes to the rollout of the French mandate.
France will implement a mandatory B2B e-invoicing and an e-reporting obligation. Every company operating in France is affected.
Electronic invoicing in France requires using a (partner) dematerialization platform. The already enacted legislation leaves the choice of which platform up to companies.
Should you use the public platform (‘PPF – Portail Public de Facturation’, i.e. Public Invoicing Portal) or a third-party private platform (‘PDP – Plateforme de Dématérialisation Partenaire’, i.e. Partner Dematerialization Platform)? And which organisation registered as a PDP should you opt for?
There is a lot to consider – including the type of invoices, data management, customer/supplier relations, transmission, functionalities, and more – this blog will help you make a decision.
The electronic invoicing process includes formatting, controlling, reporting, routing tracking, transactions, whether between trading parties (domestic B2B e-invoices) or with the PPF (domestic B2B e-invoices, cross-border B2B sales and purchases, B2C sales, payments received on services). In this respect, PDPs are essential.
French legislation allows companies to choose their dematerialization platform for submitting and/or receiving domestic B2B invoices and reporting transactions. A public solution exists, the PPF, alongside which other PDPs position themselves.
What parameters should you consider when choosing a dematerialization platform? What are the conditions for becoming a PDP and when will they be operational?
This blog discusses the elements that enable companies to understand the role of dematerialization platforms in managing electronic invoicing. If you wonder how to choose the right PDP for your organization, read this blog about Choosing the right PDP – 5 Questions to ask Yourself.
The need to use a dematerialization platform is part of the electronic invoicing requirements, which come into force for business-to-business (B2B) transactions with go-live of the mandate.
An electronic invoice must be delivered in a structured format, leaving it to the trading parties and their PDPs to agree on the standard. By default, PDPs must be able to process the three core set formats, UBL, CII, or UNCEFACT, with the obligation for the platforms to produce a legible version of each invoice, or Factur-X hybrid format (XML+PDF/A-3).
PDPs may also offer to process any other structured formats (e.g. EDI formats such as EDIFACT), subject to acceptance by both the buyer and the seller. In both cases, PDPs will have to extract mandatory data from the issued e-invoice and map it into one of the core set formats – and then report them to the PPF within 24 hours of the e-invoice issuance.
The corresponding flows can be exchanged under various communication protocols (EDI, API, etc.)
Using a PDP isn’t mandatory from a legal point of view. However, using a PDP will be necessary for companies who want to exchange invoices in specific formats due to the specificities of the invoice flow (not supported by the PPF).
The PPF will be used for the obligatory transmission of invoice data to the tax authorities.
It will manage the following for companies:
The PPF performs other functions including management of the Central Directory (in which any registered company subject to VAT will be identified), data collection and transmission to the tax authorities, and retention of e-invoices.
Like the PPF, a Partner Dematerialization Platform (PDP) ensures the submission of invoices and conversion into one of the three core-set formats – CII, UBL or Factur-X.
But, contrary to the PPF, they will allow the exchange of invoices in any EDI format (other than the three core-set formats).
The PDPs will allow the following:
In addition to these mandatory functionalities, they may also offer the following:
A PDP is a platform registered and authorised by the French tax authorities. The official registration number will be issued based on an application file submitted by an operator. This file will have to document how the regulation requirements (decree and order published in October 2022) are met, particularly the ability to perform the functions expected of a PDP. These requirements are meant to be slightly revisited with a new decree/order to be published beginning of 2024 (more precisely, with the removal of connectivity tests with TA Platform as a PDP Registration Criteria)
In addition to the guarantee provided by this registration (mainly from the point of view of compliance with stringent security rules), what distinguishes a registered platform from a simple dematerialization operator is the possibility of transmitting invoices to other dematerialization platforms (PPF or other PDPs).
This registration is valid for three years and then must be renewed, based on audits to be regularly provided by the PDPs (first audit to be conducted no later than 12 months after the registration entering into force).
The first certified PDPs should be announced in the beginning of 2024 and will be published on the tax authority’s website.
Find out how Sovos can help you comply with e-invoicing regulations by speaking with one of our experts.
It’s essential to stay on top of your company’s VAT requirements. This requires sound knowledge of the rules and what authorities expect of businesses. This includes dealing with supplies of goods and services outside standard VAT obligations.
Not every product or service incurs VAT. This is VAT exemption.
Some goods and services are exempt from VAT. This depends on the sector and country you are selling within.
For more information on how to comply with European VAT, download our free eBook or read our comprehensive guide to the EU VAT e-commerce package.
If a supply is exempt from VAT, it may be because the EU considers the goods or services as essential. VAT exempt supplies include:
If your company only sells VAT exempt products or services, your business operates differently. It is a VAT exempt business and:
For example, if a company solely provides education and training services in the UK, the government would consider it an exempt business. The above rules would apply.
In some circumstances, a business might be partially exempt from VAT. Partial VAT exemption applies to VAT-registered companies that carry out both taxable and VAT exempt supplies of goods or services.
If your business is partially exempt from VAT, you can still reclaim any VAT incurred when producing or acquiring non-VAT exempt goods or services you sell to customers.
Additionally, partially exempt businesses need to keep separate records. These records should cover VAT-exempt sales and provide details on how VAT was calculated for reclamations.
VAT exemption is not the same as 0% VAT. No extra charges are added to the original sales price for either zero-rated or VAT-exempt supplies, but there are a few significant differences.
Unlike VAT-exempt supplies, zero-rated goods and services are part of your taxable turnover. Zero-rated supplies should be recorded in your VAT accounts – whereas, in some countries, businesses might only record non-taxable sales in regular company accounts.
Furthermore, in contrast to VAT exemption, you can reclaim the VAT on any purchases for zero-rated goods or services.
VAT rates and exemptions vary across the world, so we will use the UK as an example to illustrate the concept.
In the UK, most goods and services are subject to a standard VAT rate of 20%. However, some are subject to a reduced VAT rate of 5% or 0%.
Goods and supplies with a VAT rate of 5% include:
Goods and supplies with a VAT rate of 0% include:
These reduced rates may only apply to certain conditions, or in particular circumstances depending on the following:
Continuing with our UK example, if you sell, send or transfer goods out of the UK, UK VAT is often not included as they are considered an export.
You can send most exports to a destination outside the UK with a zero rating if you meet the necessary conditions:
VAT exemptions are always changing. Don’t get caught out. Contact our team for advice on how your business should manage its VAT obligations if it is exempt from VAT.
The EU Commission’s VAT in the Digital Age proposals include a single VAT registration to ease cross-border trade.
Due to enter into force on 1 January 2025, the proposals are part of the commission’s initiative to modernise VAT in the EU. The single VAT registration proposals would mean only registering for VAT once across the EU under a wider number of in-scope transactions, reducing VAT administration costs and time.
The One Stop Shop (OSS) is a pan-EU single VAT registration. While optional, it can be used to report and pay the VAT due on Business to Consumer (B2C) distance sales of goods and B2C intra-community supplies of services in all EU Member States.
The scheme has been well-received and implemented by many companies. There are discussions of broadening the scheme to further simplify VAT in the region.
To further modernise the EU VAT system, the Commission has proposed an expansion of the OSS scheme for e-commerce to include:
Despite rumours of altering the Import One Stop Shop (IOSS) threshold, the current EUR 150 consignment threshold for imported B2C sales will remain for the foreseeable future. The scheme will also stay optional for businesses.
However, IOSS will become mandatory for platforms facilitating non-EU distance sales of goods under EUR 150 for low value consignments. The EU will enhance the security of IOSS by granting EU customs authorities access to information about IOSS-registered businesses.
Regarding Business to Business (B2B) supplies, the EU Commission wants to harmonise the application of the extended reverse charge in article 194 of the EU VAT Directive. When implemented in the EU Member State, it applies to non-resident suppliers and reduces their obligation to register in a foreign country for VAT purposes.
Currently, only 15 EU Member States apply the article mentioned above – and not all in the same way.
Introduction of the new mandatory B2B reverse charge will be for certain sales of goods and services if transactions meet the following conditions:
Finally, the EU will abolish provisions in the VAT Directive regarding call-off stock arrangements from 31 December 2024. Beyond this date, new stock transfers under those arrangements cannot be affected as the simplification will not be needed. However, goods supplied under pre-existing arrangements can continue with the regime until 31 December 2025.
Get in touch for expert help with easing your business’s VAT compliance burden, reviewing your Tax Code mapping and verifying how you can improve your cash flow. If you want to learn more about VAT in the Digital Age have a look at VAT in the Digital Age for digital reporting and e-invoicing or at this blog about the platform economy and VAT in the Digital Age.