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Sovos Partner Network drives digital transformation of tax compliance for customers while offering significant profit potential and borderless growth to partners
BOSTON – October 6, 2022 – Global tax software provider Sovos today announced the launch of its new Sovos Partner Network designed to guide partners in addressing the critical needs of their customers as they navigate the complexity of digital compliance and changing tax regulations around the world. With access to Sovos’ complete portfolio of compliance solutions, along with its unmatched regulatory and tax expertise, this new program enables partners to bolster their tax compliance offerings and expand their business opportunities.
“Government authorities have gone increasingly digital with the calculation, reporting and compliance of taxes and Sovos continues to invest heavily in tax technology solutions. Collaborating with Sovos allows KPMG to bring both its leading technology and tax and implementation experience to clients,” said Niren Saldanha, Partner, Tax, KPMG LLP.
The Sovos Partner Network was built to align to our partners’ business models, whether they resell, co-sell, implement or embed Sovos solutions. Competitive incentives and other business-related program benefits were designed to assist partners in expanding their businesses in ways that best fit their go-to-market strategies. The modern program includes a rich array of consistent and accessible tools, training and a self-service partner portal. Industry leaders such as Oracle, NetSuite, SAP and KPMG have already partnered with Sovos to increase customer support, in addition to hundreds of other partners across the globe, both large and small. Collectively, these partners share Sovos’ core mission to Solve Tax for Good®.
Sovos’ global commitment to partners extends to Latin America. “EY Brazil brings tax transformation and automation to its clients by leveraging process and tax automation software in the market, such as Sovos Taxrules,” says Giovanni Schiavone, Tax Transformation Partner at EY Brazil. “We conduct ‘Tax Transformation Projects’ that evaluate our clients’ GAPs and then suggest automations using the most advanced features of solutions like Sovos to help create a high-performance tax area, aligned with current and future Brazilian compliance needs.”
The Sovos Partner Network offers many ways to create mutually beneficial opportunities, including:
“Strong partner relationships are a key component of our strategic business approach. This new global program represents the next step in our ability to support the evolving needs of customers in today’s global tax and compliance marketplace,” said Jonathan Eisner, vice president, global alliances and chief channel officer, Sovos. “Investing in a stronger ecosystem that better supports and rewards our partners is a critical part in solving these dynamic challenges.”
To learn more about the Sovos Partner Network or apply to become a partner, click here.
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.
The European Commission has announced its long-awaited proposal for legislative changes in relation to the VAT in the Digital Age (ViDA) initiative. This is one of the most important developments in the history of European VAT, and affects not only European businesses, but also non-EU companies whose businesses trade with the EU.
This guide about VAT in the Digital Age will provide you with an overview.
The proposal requires amending the VAT Directive 2006/112, its Implementing Regulation 282/2011, and Regulation 904/2010 on Administrative Cooperation on the combat of fraud in the field of VAT. They cover three distinct areas:
This regulatory change proposal will still need formal adoption by the Council of the European Union and the European Parliament under ordinary legislative procedures before it can come into force. In tax matters such as these, the process requires unanimity among all Member States.
This blog focuses on VAT digital reporting obligations and e-invoicing, whereas future updates from Sovos will address the other two areas.
The European Commission has, at this stage, chosen not to propose regulation regarding the transmission channel of the reported data to the tax authorities. This is currently left to Member States to decide on.
The reason for this decision is likely because it’s a technical issue, and that the discussion would have slowed down the process of publishing this proposal. The European Commission also appears ambiguous about whether it would want to regulate this in the future.
Many countries primed to introduce continuous transaction controls (CTCs) have been waiting for EU regulators to provide an answer to what rules the individual Member State will need to abide by. It remains to be seen whether this proposal will embolden these Member States to move ahead with plans, despite the non-final status of the proposal. It’s noteworthy that Germany filed for a derogation from the current VAT Directive to be able to mandate e-invoicing just a few days before the original date that the Commission had planned to publish this proposal – 16 November 2022.
Speak to our tax experts to understand how these proposed changes will affect your company.
Part V of V – Christiaan Van Der Valk, vice president, strategy and regulatory, Sovos
Click here to read part IV of the series.
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our vice president of strategy and regulatory, Christiaan Van Der Valk to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Christiaan Van Der Valk: The digitization of VAT and other taxes considerably expands the scope of the finance and transactional systems that need to meet specific – and ever-changing – government requirements. This phenomenon of broadening and decentralizing tax compliance in a company’s system and process landscape happens at the same time that more of these applications (for accounts payable automation, EDI, procurement, supply chain automation, travel and expense management, order-to-cash, customer communications management etc.) are used on a SaaS basis in multitenant mode.
This requires you to take stock of the applications that may come within the scope of VAT requirements in all relevant jurisdictions, and to review vendor contracts to ensure clarity as to responsibility for compliance. Procurement practices to license such external applications may also need to be reviewed to ensure proper contracting around tax compliance from the start.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Christiaan Van Der Valk: A key success factor is the degree to which IT and tax can team up to affect change in the organization. The default response to indirect tax changes will be to view these as evolutionary and best resolved by local subsidiaries. The introduction of CTCs, however, is a paradigm shift and one of the consequences is that solving these challenges in a decentralized manner can be harmful to a company’s digital transformation potential. IT and tax need to work closely together to raise awareness among all corporate and country stakeholders on the importance of a coordinated, strategic response to this profound change. The role of tax technologists who specialize in these interdisciplinary challenges cannot be underestimated.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
Part IV of V – Ryan Ostilly, vice president of product and GTM strategy EMEA & APAC, Sovos
Click here to read part III of the series.
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our vice president of product and GTM strategy, Ryan Ostilly to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Ryan Ostilly: IT teams will have to work hard to ensure their core finance and transactional tax systems have the enhanced capability to extract, transform, remit and consume real-time data with all tax jurisdictions across their global footprint, in compliance with an ever-changing myriad of legal and procedural requirements. With the pace of disruption accelerating, governments are rewriting the rules on taxpayer control and engagement, forcing direct connection and intimacy with the data itself.
I fear that in a growing number of cases, the owners of the data may be functional departments. The IT department will need to evolve its role in this relationship, viewing the government as a critical business partner – one with whom they must always be connected, continuous and complete.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Ryan Ostilly: In this modern era of government-initiated tax transformation, the successful IT department will pursue a proactive strategy that prioritizes a connected, continuous and complete framework for government mandates and Continuous Transaction Controls (CTCs). These three principles are:
Connected – Architect a simplified integration and vendor strategy. Reduce exposure to multiple integrations and heavy projects when adopting new jurisdictions or implementing changes.
Continuous – Partner with regulatory and legal experts on a regular basis. Review upcoming mandates and assess the impact on your current and future business requirements.
Complete – Think beyond technical aspects and schemas. Partner with tax subject matter experts when translating and validating mandate requirements, as these outputs will define the financial and tax position of your company with the tax authorities in real time.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
Update: 3 November 2022 by Russell Hughes
From Tuesday 1 November 2022, businesses filing VAT returns in the UK will no longer be able to submit via an existing online VAT account unless HMRC has agreed to an exemption from Making Tax Digital (MTD). Businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023.
By law, all VAT-registered businesses must now sign up to Making Tax Digital and use compatible software for keeping VAT records and filing returns. HMRC has advised that from January 2023, any VAT registered businesses that fail to sign up for MTD and file returns through MTD-compatible software will incur .
Making Tax Digital’s aim is to help businesses get tax right first time by reducing errors, making it easier for them to manage their tax affairs by going digital, and consequently helping them to grow. More than 1.8 million businesses are already benefitting from the service, and more than 19 million returns have been successfully submitted through Making Tax Digital compatible software so far.
If a business hasn’t already signed up to Making Tax Digital or started using compatible software, they must follow these steps now:
If your turnover is under the VAT threshold of £85,000 and you haven’t signed up to Making Tax Digital in time to file your next return by 7 November 2022, you can still use your existing VAT online account for that return only.
New businesses not yet registered for VAT will be automatically signed up for Making Tax Digital while registering for VAT through HMRC’s new VAT Registration Service (VRS). Registering on the VRS provides a quicker VAT registration and improved security. It also helps new businesses fully comply with MTD requirements from day one, subject to using the correct software.
Still have questions about Making Tax Digital compliance? Speak to our tax experts.
Update: 17 March 2022 by Andrew Decker
Beginning in April 2022, the requirements for Making Tax Digital (MTD) for VAT will be expanded to all VAT registered businesses. MTD for VAT has been mandatory for all companies with annual turnover above the VAT registration threshold of £85,000 since April 2019. As a result, this year’s expansion is expected to impact smaller businesses whose turnover is below the threshold but who are nonetheless registered for UK VAT.
Update: 3 March 2021 by Andrew Decker
Since April 2019, the UK has required the submission of VAT returns and the storage of VAT records to be completed in accordance with the requirements of its Making Tax Digital (MTD) regulations.
One of these requirements is that data transfer between software programs be achieved through ‘digital links.’ This requirement was initially waived during a ’soft landing’ period which is set to expire on 1 April 2021. As a result, to remain complaint with MTD requirements, businesses must ensure they can meet the digital link requirement.
Under MTD, businesses must digitally file VAT returns using ‘functional compatible software’ which can connect to HMRC’s API. Additionally, businesses must use software to keep digital records of specified VAT related documents.
A digital link is required whenever a business is using multiple pieces of software to store and transmit its VAT records and returns pursuant to MTD requirements. For example, if a business stores its VAT records in its accounting program but then submits its VAT return using an approved piece of bridging software, the data must be transferred between the accounting and bridging software via a digital link.
A digital link occurs when a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications without the need for or involvement of any manual intervention.
The key to this requirement is that once data has been entered into a business’s software there shouldn’t be any manual intervention in transferring it to another program. This means that data cannot be manually transcribed from one program into another. Additionally, using a ‘cut and paste’ feature to transfer data doesn’t constitute a digital link.
For example, manually typing or copying information from one spreadsheet into another doesn’t count as a digital link but connecting the two spreadsheets using a linking formula does.
Additional examples of digital links include:
The digital links requirement will apply to all businesses subject to MTD rules, however businesses that fulfill certain requirements can request an extension to delay the requirement.
For more information on MTD, including details on extension requests and criteria see VAT Notice 700/22: Making Tax Digital for VAT on HMRC’s website.
Important dates to remember regarding MTD for VAT
1 April 2019 –Business with annual turnover of £85,000 and over became liable to follow Making Tax Digital rule for VAT
1 April 2021 –Digital links requirement will be enforced
1 April 2022 – Taxpayers with turnover under £85,000 will be required to comply with making tax digital (MTD)
Sovos’ Advanced Periodic Reporting technology is fully compliant with Making Tax Digital, including digital link.
Part III of V – Eric Lefebvre, chief technology officer, Sovos
Click here to read part II of the series.
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our chief technology officer, Eric Lefebvre to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Eric Lefebvre: Centralization is the key, but there is a process that needs to be followed to execute correctly. At the outset, centralization needs to start with business processes, practices, tools and standardization on data push/pull technologies across the organization. Next, IT needs to consider data based on SLA-based needs. Starting with:
Delivery Data:
Once this has been solidified, IT can then focus on operational data, which contains:
IT departments need to focus on availability of data by adding multiple replicated sources of that data. Location of data is another critical need driven by mandates mostly shifting to keeping data local, as we are seeing in countries such as Saudi Arabia and many other East Asian nations. IT departments need to ensure that satellite data stores can be provided, which are critical to countries with those specifications. Centralization of processes and tools for delivery of data is step one. For step two, data needs to be split, moving away from storing data for years in a single data store, making it impossible to move/replicate and make it available.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Eric Lefebvre: As organizations make the move to a centralized approach, they need to be aware that the blast radius of “failure” affects more than a single country. To combat this, IT organizations need to have strong procedures and plans in place that help to both avoid these situations and quickly limit the damage if a problem does occur. I view it as three distinct focus areas:
Change control procedures. Strengthen impact controls not just for code changes or operational updates, but also include regulatory changes and configuration changes.
Testing procedures. Step away from just regional scope testing and incorporate global end-to-end synthetic testing, starting from the edge service to all the backend servers and back.
Incident management. Pivot from backend monitoring to a central monitoring and outage single pane view, supported by a global operations center in a follow the sun style model.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
It might not quite be THAT red phone that’s ringing, but rest assured, management is currently dealing with a serious problem, and they are looking at IT to solve it for them.
There are two things that make Boards and C-Suites nervous beyond all else. Risks that have the potential to impact the bottom line and company/brand reputation. This current issue can do both and fast if not dealt with timely.
I’m talking about government tax mandates.
Now you may ask, haven’t government mandates been around for decades? Why the urgency now? Yes, they have been around for a long time, but they have never existed in their current form or had the ability to impact your operations so quickly.
Allow me to explain. In the past, organizations around the world were required to report on transactions after the fact and pay the amounts they were legally obligated to pay. If they didn’t, the government might get around to auditing them a few months or years down the road and assess a penalty if things were found to be out of order. In the grand scheme of things, it was a minor inconvenience for businesses and not a real deterrent for having faulty processes or negligence.
That all began to change a few years back when governments began looking at a tax gap that was growing with no easy solutions to reign it in. Think I’m exaggerating? According to the 2021 report on the VAT Gap issues by the European Commission, in 2019 alone EU countries lost out on €134 billion in Value-Added Tax (VAT) revenues legally owed to them by businesses.
This was a wake-up call to every country that employs the VAT system of taxation anywhere in the world. Not only were they losing out on much needed revenues, but the problem was growing worse. Something needed to be done and done fast or they wouldn’t be able to fund vital programs in their countries.
Fast forward to today. Countries have taken a serious look at the problem and have decided that technology is the answer. They have invested heavily in digitization and have brought their capabilities not only up to par with business, but in many cases, probably for the first time in history, have surpassed the capabilities of private industry to monitor and report on financial transactions.
Today, there is no more reporting after the fact. Governments have set up shop right in your data stack and are reviewing transactions in real-time. And with real-time monitoring has come real-time enforcement. If you are not reporting the information the way the government has mandated, you can expect swift action ranging from expensive fines right up to the revocation of your business license in that country. Both would be devastating shots to your company’s financial outlook and reputation.
This is why there is so much urgency to get IT on board and have a strategy to address the issue on a global basis. Things are only going to get more complicated and the ability to scale systems to meet changing tax mandates in all places you do business has become a top priority for companies.
It’s a new world out there as far as VAT is concerned and this is a lot to come to terms with. If this is new information to you or you are in the process of coming to terms with how it impacts your organization, I’d encourage you to remember and share the following five things with your colleagues:
1. The government is in your data
Real time tax reporting is becoming the new norm for businesses worldwide. Governments are no longer satisfied with receiving data after the fact and are now requiring a permanent presence in your data stack.
2. Government data mandates are taking control away from companies
With government mandated e-invoicing taking the world by storm, businesses are left with little time to prepare for this shift. To remain operational and comply with these mandates, IT must create a strategy to ensure that they are meeting mandate obligations while keeping with the parameters of long-term plans and budgets.
3. Data mandates are moving and evolving quickly
As governments are rapidly moving towards mandated e-invoicing implementation, organizations are now faced with an extremely short window to update their tax codes and mandates. For IT departments, overseeing and executing these changes will become one of their top priorities.
4. Data mandates lack consistency from country to country
For international organizations staying up to date on new processes, technologies and regulations are all essential components to running a successful business. However, the different approaches being adopted by each individual regulatory authority are causing a lot of uncertainty for businesses. The challenge for IT is to create the infrastructure that allows the business to meet the individual mandates of each country’s regulatory authority, while also integrating with one another to provide a real time global dashboard of the organization’s compliance status.
5. Governments have increased the severity and speed of enforcement
Tax authorities are becoming more aggressive than ever to close tax gaps. With the use of digital tools and processes, governments can quickly expedite compliance and track tax fraud effectively. In today’s digital world, penalties can be swifter and more severe than in the past. IT needs to ensure that transaction data is presented to regulatory authorities in the format and time frame they demand.
I’m hopeful this information will give you some things to think about as you work through the changing realities of global tax mandates.
After reading this, if you have questions, feel free to reach out to our experts.
Invoicing in Chile is changing on 1 December 2022. This is when resolution 66 from the Chile Internal Revenue Service comes into force.
This new regulation concerns organisations with foreign currency operations. Banks, stockbrokers, exchange houses and financial institutions are affected. Other intermediaries or entities that carry out foreign currency purchase and sale operations themselves or on behalf of third parties are also included.
All these organisations must issue the following:
Every electronic tax document must consider the specifications described by “Electronic Tax Document Format”. This document is available on the Internal Revenue Service’s website and is regularly updated.
Resolution 66 also contains technical instructions. These establish the details necessary for electronic tax documents that support foreign currency purchase and sale operations.
The resolution states the following must be included:
There are other requirements not listed above, so it’s important to check the guidelines.
This change allows the Internal Revenue Service to receive, validate, and process electronic tax documents. This ensures the operations are accurately reflected and prevents inconsistencies.
In the case of commissions, the taxpayer must issue an invoice or electronic ticket containing all the information indicated by the Technical Annex.
If the document doesn’t include an affected item, consider the following:
An example is when there is no commission.
Likewise, when differences in collections and values are subject to VAT, an electronic credit or debit note must be issued.
The following information must be recorded separately as well:
Are you in financial services or working at a bank with more questions about invoicing in Chile? Speak to our tax experts.
A recent preliminary ruling request to the European Court of Justice, Case C-664/21, NEC PLUS ULTRA COSMETICS, has re-emphasised the importance of collecting documentation when carrying out a zero-rated supply in the EU. The 2017 NEC PLUS ULTRA COSMETICS case involved a company established in Switzerland selling cosmetics products under the Ex Works clause from their warehouse in Slovenia to business customers established in Romania and Croatia. Ex Works (EXW) is an Incoterms rule, a set of definitions outlining the responsibilities of buyers and sellers in international transactions. With Ex Works the transport obligations, costs and risks are the buyer’s responsibility.
The tax administration of the Republic of Slovenia inspected NEC PLUS ULTRA COSMETICS and requested evidence and supporting documentation relating to these supplies to verify that goods had been transported to another EU Member State.
NEC PLUS ULTRA COSMETICS provided copies of the invoices and of the ‘Convention relative au contrat de transport international de marchansises par route’ (CMR) consignment notes. The company failed to provide the evidence requested by tax officers to prove the right to tax exempt the supplies to their customers (delivery notes and other documents mentioned in the CMRs).
The company clarified that the reason for the late submission was that the Hamburg office responsible for supplies to Croatia ceased its activities in August 2018, making it more difficult to find the documents asked for by the tax officers.
Consequently, the Slovenian tax authorities provided the company with an additional VAT assessment notice and ordered it to pay the relevant amount.
In the implementation of the Quick Fix related to the proof of transport in 2020, the European Commission has clarified that where the supplier arranges transportation of the goods, it must be in possession of either:
If the acquirer is responsible for transport of goods (i.e. under the Ex Works clause), they must provide the vendor with a written statement by the 10th of the month following the date of supply that the goods have been transported by the acquirer or on the acquirer’s behalf. The written statement must include the following:
In the case of the Ex Works clause:
If you don’t feel reassured by your customer, change the agreement and Incoterms clause before the supply takes place.
Still have questions about VAT exempt supplies and the Incoterms Ex Works clause? Speak to our tax experts.
Part II of V – Oscar Caicedo, Vice president of product management for VAT Americas, Sovos
Click here to read part I of the series.
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our vice president of product management for VAT, Oscar Caicedo to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Oscar Caicedo: For me, this breaks down into four distinct categories:
1. Business Process Architecture – As regulatory entities become more advanced, it is important to look at the overall functional business process, not only the technical mechanism to report. Many business processes were solidified much before current capabilities were readily available. It is important to revisit the business process to be able to determine the best technical path forward.
2. Source of Truth – With the complex environment IT departments must navigate, you need to redefine the expectations of data/process source of truth. Back-end system ecosystems were not built with current compliance/regulatory needs in mind. In mature markets, where governments continue to advance technical capabilities, it is critical to have a clear strategy to protect against source-of-truth risks. Otherwise, local regulatory entities tend to become the ultimate source of truth.
3. Data Aggregation/Reconciliation – A lack of clarity on the source of truth for each functional business process can lead to major risks. Registering data in real time with local regulators was the initial challenge. The current challenge is ensuring all systems involved are maintained in sync and are always fully harmonized. IT departments must recognize it is now a must-have to navigate the current environment.
4. Master Data – Data in back-end systems was already complicated enough to support in a centralized manner. Once real-time regulatory needs were introduced, the data issue got exponentially larger. Data structures, data libraries and extraction programs are all attempts to solve the problem, but normally these attempts fail due to gaps in understanding what is mandatory vs. optional. Clear guidance on the local needs is critical before deciding on a technical strategy.
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Oscar Caicedo: I would prioritize a clear regulatory understanding of the markets/geographies in which you operate. This seems obvious, but it is not always the case. Ninety-nine percent of the time when I speak with a large multinational organization, they are not clear on the needs of the local market. Efforts to centralize or take a cohesive approach fail because key IT decision makers didn’t understand the regulation.
In addition, you need to focus on business processes and the data requirements to make them successful and solve the problem end to end. The challenge does not end with registering data. The problem ends when you have the proper visibility, maintenance, support, reconciliation and intelligence to be fully prepared.
Don’t take chances. The regulatory environment is very dynamic, so it is important to ensure the proper testing of all business scenarios needed to operate. Failure to have clear testing scripts can lead to surprises in production environments, which can carry large implications for the operation.
Finally, consolidate as much as possible. This means simplifying end points, communication protocols, data structures, etc. This will allow for a more efficient way to manage the mandated processes in the different jurisdictions.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
Imagine this scenario.
Your business partner changes the rules on you mid-stream and your ability to conduct business with them is now contingent on changing your entire reporting structure to meet their new demands.
Oh yeah, I should also mention the time frame to meet these demands is extremely tight and if you don’t, you can forget about doing business in their region until you get it right. And if at any point moving forward you fail to live up to these standards, they can fine you or shut you down.
Sound farfetched? It isn’t. It’s exactly what is playing out in major economic markets from Brazil to Italy and parts of Asia and Africa. You see, governments have caught up to businesses when it comes to technology, and in many ways, they have moved past them when it comes to digitization.
It means that governments have now taken on a more proactive approach to reviewing financial transactions and are demanding real-time reporting. As part of that, they have implemented real-time enforcement to ensure that it’s meeting the proper mandated specifications. To accomplish this, they have taken up permanent residence within your data stack. And make no mistake, when it comes to e-invoicing, they are calling the shots.
Governments throughout the world are implementing mandated e-invoicing for its ability to facilitate compliance and track fraud quickly and efficiently. After the fact reporting, which had been the norm until now, was more difficult to enforce and took lengthy and costly audits to recoup what was rightfully owed. Many organizations didn’t take the penalties seriously and would simply set aside some money to deal with these inconveniences as they emerged.
This approach resulted in a tax gap that is continuing to grow. In 2019, the VAT gap of the European Union’s 28 member states was over 134.4 billion euros for all member states combined. This had become unsustainable and unacceptable to many governments and thus a new technology that focused on digitization was made to ensure that all legally owed revenue was being collected timely and in full. Failure to comply would lead to faster and more impactful enforcement measures.
This trend is growing rapidly with countries across the globe adopting new mandates and methodologies for tracking and enforcing the rules. In the next five years nearly every country that employs the VAT system of taxation is expected to update their systems to some degree.
Make no mistake. Due to the demands for real-time information, this is an IT problem, not a tax issue. For multinational companies that do business in dozens of countries, there could be some painful moments along the way if they don’t plan early and develop a sound strategy for each of the locations in which they have operations.
IT should focus on the end goal: implementing a centralized approach to managing these government mandated e-invoicing laws to ensure a globally consistent approach to all digital filings. I can’t overstate the importance of implementation synergies as requirements increase and expand. This is only going to get more complex as time goes on.
And perhaps most importantly, don’t be afraid to ask for help. This is complicated stuff that is changing by the day. This is not the time or the issue to try going it on your own.
Reach out to our experts for more help and information.
Part I of V – Steve Sprague, chief commercial officer, Sovos
Government-mandated e-invoicing laws are making their way across nearly every region of the globe, bringing more stringent mandates and expectations on businesses. Inserted into every aspect of your operation, governments are now an omni-present influence in your data stack reviewing every transaction in real time as it traverses your network. Real-time monitoring has also brought about real-time enforcement that can range in severity from significant fines to shutting your business down completely. All of this has created a new reality for IT leaders who need a strategy to deal with these global changes. We asked our chief commercial officer, Steve Sprague to offer his guidance on how this will affect IT departments and how they can best prepare.
Q: With government authorities now in companies’ data and demanding real or near real-time reporting, what impact will this have on IT departments?
Steve Sprague: CIOs need to make a choice – do they pivot with these changes and adopt a centralized approach to their data, systems, business processes and applications, or do they run a decentralized platform where every country is left to make their own decisions? More than 95% of companies have implemented a decentralized approach as these mandates have grown country by country. However, as Latin America has grown from only three countries instituting these mandates in 2014 to more than 14 countries implementing them now, and with another 30 countries around the globe beginning the process of implementing similar regimes, including economies across Asia and Europe, like France and Germany – a decentralized approach leads to several long-term problems, including:
• Limited visibility outside of the country
• Multiple tools and vendors across different countries
• Disjointed processes with a focus on fulfilling local obligations only
• Solving the “problem at hand” vs. looking at the bigger picture
• Poorly defined roles and responsibilities
• Inconsistent approach to implementing additional countries
Q: To meet government mandates and ensure operations continue uninterrupted, what should IT prioritize? What approach would you recommend?
Steve Sprague: IT should focus on the end goal: implementing a centralized approach to these government mandated e-invoicing laws to ensure a globally consistent approach to all digital filings. There will be cost reduction as the number of vendors and tools are consolidated, and risk will be further mitigated through increased standardization and visibility. I can’t overstate the importance of implementation synergies as requirements increase and expand. This is only going to get more complex as time goes on. The clarity of roles and responsibilities is the other benefit to IT teams, as this approach will lead to clearly defined areas of focus for the team. Finally, alignment of analytics through one data hub will now be possible, providing a centralized dashboard for your global operations.
A lot has changed in the world of government mandated e-invoicing. Continued investment in technology by government authorities has put regulators in the position to demand greater transparency along with more detailed and real-time reporting. To meet these demands, companies are looking to their IT organizations. The good news is you don’t need to go it alone. Sovos has the expertise to guide you through this global evolution based on our experience working with many of the world’s leading brands.
Need help keeping up with global mandates? Get in touch with Sovos’ team of tax experts.
France is implementing a decentralised continuous transaction control (CTC) system where domestic B2B e-invoicing constitutes the foundation of the system, adding e-reporting requirements for data relating to B2C and cross-border B2B transactions (sales and purchases).
Under this upcoming regime, data or invoices can be directly sent to the Invoicing Public Portal ‘PPF’ (Portail Public de Facturation, so far known as Chorus Pro) or to a Partner Dematerialization Platform ‘PDP’ (Plateformes de Dématerialisation Partenaires). In addition, there are also Dematerializing Operators (Operateurs de dématérialisation) that are connected to either the PPF or a PDP.
Requirements for these portal and platforms have been published.
The Ministry of Economy published Decree No. 2022-1299 and Order of 7 October 2022 on the generalisation of e-invoicing in transactions between taxable persons for VAT and the transmission of transaction data (together known as ‘new legislation’), providing long-awaited details for PDP operators and PPF.
The new legislation introduces rules concerning the application process for PDP operators. Although French establishment isn’t required, PDP operators must fulfill a number of requirements, such as operating their IT systems in the EU.
France is implementing a model where third-party service providers are authorised to transmit invoices between the transacting parties. With the mandatory use of the PPF or PDPs for exchanging e-invoices, trading parties cannot exchange invoices between them directly. Therefore, PDPs must be able to receive and send invoices in structured formats, whether the ones supported by the PPF (CII, UBL, or FACTUR-X) or any other required by their clients. Also, to ensure interoperability, PDPs are expected to connect with at least one other PDP. Besides this requirement, it’s stated by the new decree that PDPs must be able to send e-invoices to PDPs chosen by their recipients which implies a complete interoperability between PDPs.
It was previously announced that taxpayers could submit PDF invoices for a transitional period. The new legislation outlines the transitional period as until the end of 2027. During this period PDPs and PPF must be able to convert the PDF into one of the structured formats.
The new legislation also provides information about the content of e-invoices, which has new mandatory fields, and the content of transaction and payment data to be transmitted to the tax authority.
It also announced frequencies and dates of data transmission. Deadlines for transaction and payment data transmission are based on the tax regimes of taxpayers. For example, taxpayers subject to the normal monthly regime should transmit payment data within ten days after the end of the month.
With the aim of having traceability over documents, the lifecycle statuses of the domestic B2B e-invoices are exchanged between the parties and transmitted to the PPF. Lifecycle statuses that are mandatory (“Deposited”, “Rejected”, “Refused” and “Payment Received”) are listed in the new legislation.
Further details regarding the Central Directory, which consists of data to properly identify the recipient of the e-invoice and its platform, are provided within the Order.
PDP operator candidates can apply for registration as of Spring 2023 (precise date still to be confirmed), instead of September 2023 as previously set. From January 2024, a six-month test run is expected to be conducted for enterprises and PDPs before the implementation in July 2024.
Still have questions about France’s upcoming continuous transaction control mandate? Get in touch with our tax experts.
Update: 2 March 2023 by Kelly Muniz
Postponement of EFD-REINF Deadline for Events Referring to Withholding IRPF, CSLL, PIS and COFINS
The publishing of Normative Instruction RFB n. 2.133, of 27 February 2023 postpones the deadline of the obligation to submit EFD-REINF (Digital Fiscal Record of Withholdings and Other Fiscal Information) events related to withholding:
This postponement refers to taxpayers who are currently obliged to submit the DIRF (Withholding Income Tax Return) and were required to comply with the EFD-REINF obligation from March 2023.
The obligation to submit the EFD-REINF for these taxpayers will now begin from 8:00 am on 21 September 2023, in relation to taxable events that occur from 1 September 2023.
The postponement is to allow time for taxpayers to carry out adjustments to their computerised systems and for the Brazilian Federal Revenue Agency to finalise the necessary tests to guarantee the consistency of the rules for validating the information captured in the record.
Need to discuss how Brazil’s EFD-REINF changes affect your business? Speak to our tax experts.
Update: 25 October 2022 by Kelly Muniz
Since 2007, the Brazilian government has imprinted high efforts in digitizing the relations between revenue offices and taxpayers, by introducing electronic instruments to ensure taxpayers provide accurate and timely information on the collection of the various existent taxes, duties, charges, and contributions.
One result of such efforts was the creation of the Public Digital Bookkeeping System (Sistema Público de Escrituração Digital) or SPED. This platform is where taxpayers submit fiscal and accounting information using different electronic instruments referred to as SPED modules.
There are significant upcoming changes to one of the modules, the Digital Fiscal Record of Withholdings and Other Fiscal Information (Escrituração Fiscal Digital de Retenções e Outras Informações Fiscais), known as EFD-REINF.
The latest regulatory updates within this module concern steps towards the substitution of other records by the EFD-REINF, with important changes taking place in 2023.
In August 2022 version 2.1.1 of the EFD-REINF layout was introduced, expanding the reach of events covered by the record. The current 1.5.1 version is valid until February 2023 and from March 2023 layout version 2.1.1 must be used.
The main change is the inclusion of the ‘R-4000’ series events. These events cover the registration of withholdings on income tax (IR), Social Contribution on Net Income (CSLL), Social Integration Program (PIS), and Contribution to the Financing of Social Security (COFINS), among other fiscal contributions.
Another relevant change is the removal of the requirement to submit the EFD-REINF ‘without movement’. Previously, only a certain group was permitted for this exemption if they didn’t generate any records to be reported in the respective declaration period but this has now been expanded to all taxpayers in scope of the EFD-REINF.
Earlier this year, RFB Normative Instruction n. 2.096 of 2022 postponed mandatory submission of the EFD-REINF for the fourth and last group of taxpayers: entities that are part of the ‘Public Administration’ and entities classified as ‘International Organisations and Other Extraterritorial Institutions’. Since August 2022 this group is now obliged to comply.
However, the same regulation established that from 1 March 2023 taxpayers currently obliged to submit the DIRF (Withholding Income Tax Return) will be required to comply with the EFD-REINF obligation. This is an extensive list found in article 2 of RFB Normative Instruction n. 1.990 of 2020, which includes individuals and legal entities that have paid or credited income for which Withholding Income Tax (IRRF) has been withheld and certain entities of the Federal Public Administration, among others.
Finally, the annual submission of the DIRF will be abolished regarding events that occur from 1 January 2024, meaning that taxpayers won’t be required to submit it in 2025. Until then, the information declared in the DIRF and EFD-REINF will coexist.
Keeping up with the mosaic of fiscal requirements within the federal, state, and municipal levels in Brazil normally requires engaging the services of an expert or risk incurring high penalties. Modifications to fiscal obligations are implemented regularly in the country, which means companies must ensure readiness to comply.
Still have questions about Brazil’s EFD-REINF? Speak to our tax experts.
Update: 9 July 2018 by Ramón Frias
A complement to eSocial (which covers tax withholdings on wages), EFD-REINF reports withholdings made to individuals and corporations resulting from the application of the income tax and social security taxes (CSLL, INSS COFINS, PIS/PASEP). It also applies to payments received by sport associations and revenues generated by sport events.
EFD-REINF replaces reporting obligations that the Brazilian taxpayers have to comply with under the EFD-Contribucoes.
There are three groups of reports, or “events,” that must be submitted to the tax administration:
The EFD- REINF is being rolled out in three stages.
Events that are incomplete, or reported with errors, will a face fines totaling 3% of the amount involved, with a minimum of $100 Real in the case of legal entities, and half of the above amounts when the taxpayer is an individual. Fines for late reports will range between from $500 Real to $1,500 Real per month or fraction of month.
To learn more about other changes impacting companies operating in Brazil and throughout Latin America, download the Definitive Guide to Error-Free Compliance in Latin America.
On 30 August 2022, the Ministry of Finance published draft legislation amending the Regulation on the use of the National e-Invoice System (KSeF). The purpose of the draft amendment is to adapt KSeF’s terms of use to the specific conditions that apply to the local government units and the VAT groups that will operate as a new type of VAT taxpayer from 1 January 2023.
The concept of VAT groups was introduced in Poland in October 2021. VAT groups are a legal form of cooperation, a type of taxable entity that exists solely for VAT purposes. On joining a VAT group, a group member becomes part of a new separate VAT taxpayer possessing one Polish tax identification number (NIP).
The regulation on the use of KSeF didn’t take into consideration the uniqueness of the legal nature of the VAT group, as well as the VAT settlements in the local government units. Based on current regulation, the governmental units are treated as a single VAT taxpayer, using one NIP number.
Similarly, in the case of VAT groups, separate VAT taxpayers who create one new taxpayer (a VAT group) use one NIP number. The proposed changes resulted from the ongoing public consultations that took place in December 2021. Additionally, the change was also requested in May 2022 by the Union of Polish Metropolises.
The draft law provides the possibility to grant additional limited rights for the local government units and members of VAT groups. Moreover, local government units and VAT groups will be able to grant administrative rights, to manage permissions in KSeF, to a natural person who is their representative.
Thanks to such delegated rights, there will be an option to manage authorisations for the local government unit and for the entity that is a member of a VAT group. Moreover, it is significant that a person with such authorisation will not have simultaneous access to invoices in other units within the local government or within other members of a VAT group.
For local government units and VAT groups, granting or withdrawing authorisation to the natural person must be performed electronically. It’s not possible to submit a paper form to notify the competent tax authority.
As mentioned, the proposed amendments are in response to concerns that were raised by the impacted entities. However, they don’t meet all the needs of local government units and VAT groups. For instance, the question of how to assign an inbound electronic invoice to a particular internal unit or member of a VAT group remains open. This is because invoices contain only the data of the taxpayer, which in this case is the local government unit or a VAT group, and not data of the internal unit or member of a VAT group.
The regulation will enter into force 14 days after the date of publication. However, provisions that apply to VAT group members will be effective from 1 January 2023.
Want to ensure compliance with the latest e-invoicing requirements in Poland? Get in touch with our tax experts. For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.
It seems such a short time since HMRC sent a reminder letter in March 2022 recalling the upcoming changes to the UK’s customs systems and explaining what to do to prepare for these changes.
With the deadline rapidly approaching, here’s a brief recap.
The Customs Handling of Import and Export Freight (CHIEF) system, which is now nearly 30 years old (it was introduced in 1994), will close in two phases:
The Customs Declaration Service will serve as the UK’s single customs platform, with all businesses needing to declare all imported and exported goods through the Customs Declaration Service (CDS) after 31 March 2023.
As mentioned on the HMRC website, the Customs Declaration Service toolkit gives traders access to the many benefits of the upcoming changes. In summary:
To be able to use CDS and import goods into the UK from 1 October 2022 and to export from 1 April 2023, businesses are required to have the following:
Want to know more about how changes to the UK’s customs systems will impact your business and its compliance? Contact us to find out more.