E-businesses have recently been dealing with the change of rules within the EU with the introduction of the E-Commerce VAT Package but it’s also important to ensure compliance requirements are being met globally. In this blog we look at some of the low value goods regimes that have been introduced over the last few years together with those on the horizon.

Switzerland

Switzerland was one of the first countries outside the EU to introduce a low value goods regime when it revised the Swiss VAT law with effect from 1 January 2018. Previously, import of goods below CHF 62.50 were exempt from Swiss customs duty and import VAT. However, from 1 January 2018 any overseas sellers importing low value goods below CHF62.50 (standard-rated goods) or CHF 200 (reduced rated goods) that breach the CHF 100,000 threshold are required to register for and charge Swiss VAT on the sales of those goods.

Norway

On 1 April 2020, Norway introduced the VAT on E-Commerce (VOEC) scheme for foreign sellers and online marketplaces selling low value goods. These low value goods include those with a value below NOK 3,000 exclusive of shipping and insurance costs. The threshold applies per item and not per invoice, although doesn’t include sales of foodstuffs, alcohol and tobacco as these goods continue to be subject to border collection of VAT, excise duties and customs duties. Any foreign seller that exceeds the threshold of NOK 50,000 has an obligation to register for Norwegian VAT and apply this at the point of sale if they’re registered under the VOEC scheme.

Australia and New Zealand

Australia and New Zealand introduced very similar schemes to collect GST on low value goods being sold by overseas sellers. Australia introduced its scheme on 1 July 2018 for all goods with a customs value of less than AUD 1,000 and a turnover threshold of AUD 75,000 which once breached means the overseas seller must register for Australian GST and charge this at the point of sale.

New Zealand introduced a low value goods scheme on 1 October 2019 and applied this to low value goods valued at less than NZD 1,000. The turnover threshold in New Zealand is NZD 60,000 which once breached requires the overseas seller to register and charge New Zealand GST.

United Kingdom

Following Brexit, the UK abolished the low value goods consignment relief of GBP 15 and introduced a new regime on 1 January 2021 covering imports of goods from outside the UK in consignments not exceeding GBP 135 in value (which aligns with the threshold for customs duty liability). Under these new rules, the point at which VAT is collected moves from the point of importation to the point of sale. This has meant that UK supply VAT, rather than import VAT, will be due on these consignments. Making these supplies requires registration for VAT in the UK from the first sale.

Singapore

Singapore is the latest country to announce it will introduce new rules for low value goods. Effective 1 January 2023, private consumers in Singapore will be required to pay 7% GST on goods valued at SGD 400 or below that are imported into Singapore via air or post (the GST rate will rise to 9% sometime between 2022 to 2025).

• The Inland Revenue of Singapore released some guidance on the new rules which defined low value goods as follows:
• Not dutiable goods, or are dutiable goods but payment of customs duty or excise duty on the goods is waived under section 11 of the Customs Act
• Not exempt from GST
• Located outside Singapore and are to be delivered to Singapore via air or post
• Have a value not exceeding the import relief threshold of SGD 400.

An overseas vendor (i.e., supplier, electronic marketplace operator or re-deliverer) will be liable for GST registration where their global turnover and value of B2C supplies of low value goods made to non-GST-registered customers in Singapore exceeds SGD 1 million at the end of any calendar year. It may also be possible to register voluntarily if required.

E-Invoicing Thailand: New Approach

New regulations for Thailand's e-tax invoicing solutions and receipts expected soon

Thailand’s current e-invoicing legal framework has been in effect since 2012 and follows a post-audit approach.

The Thai Revenue Department and Electronic Transactions Development Agency (ETDA) are working together to improve and further develop the e-tax invoicing system. As a result, new regulations on e-tax invoicing and receipts are expected in the future.

Get in touch with a Sovos Thailand electronic invoicing expert.

Thailand's E-tax invoicing solutions

From 2017, the Thai Revenue Department issued regulations on electronic tax invoices and receipts. Subject to approval, taxpayers can prepare, deliver and keep their e-tax invoices and receipts in electronic format. Read more about e-tax in Thailand here.

Thailand electronic invoicing: facts

• E-invoices must be digitally signed using a certificate issued by a certification authority and approved by the Thai Revenue Department.
• E-invoices must be submitted in XML format to the Revenue Department monthly.
• Outsourcing of e-invoice issuance is allowed provided the third-party service provider is certified by the Thai Revenue Department.

E-tax invoicing rollout dates

• 2012 – E-invoicing permitted
• 2017 – New regulations issued on electronic e-tax and receipts.
• 2020 – EDTA began a certification process for service providers to assess whether applicants’ solutions are secure and compliant.

How can Sovos help with invoicing solutions?

Need help to ensure your business stays compliant with emerging e-invoicing obligations?

Our experts continually monitor, interpret and codify legal changes and requirements into our software solutions, taking care of your indirect tax compliance so you can focus on your core business.

Learn how Sovos’ solutions for continuous transaction controls and VAT compliance obligations can help companies stay compliant.

Contact Us Today

On 5 April 2022, the EU Council formally adopted changes to the current rules governing reduced VAT rates for goods and services. These amendments to the VAT Directive were published in the Official Journal of the EU on 6 April 2022 through Council (EU) Directive 2022/542 of 5 April 2022 and are effective immediately.

The EU Council approval follows the EU Parliament’s official review of the amendments in March 2022.

New reduced rates

The Council Directive grants Member States more rate options they can apply and ensures equal treatment between Member States. Article 98 of the VAT Directive is amended to provide the application of a maximum of two reduced rates of at least 5% that may be applied to up to 24 supplies listed in the revised Annex III.

Member States may apply a reduced rate of less than 5% and an exemption with the right to deduct VAT (zero-rate) to a maximum of seven supplies from Annex III. The reduced and zero-rates application is limited to goods and services considered to cover basic needs, such as water, foodstuffs, medicines, pharmaceutical products, health and hygiene products, transport of persons and cultural items like books, newspapers and periodicals. It’s the first time Member States can exempt such necessities.

All Member States now have equal access to existing derogations to apply reduced rates for specific products previously granted on a country-specific basis. Taxpayers must exercise the option to apply the derogations by 6 October 2023.

Annex III contains notable new supplies and revisions to support green and digital transitions: supply and installation of solar panels, supply of electricity and district heating and cooling, bicycles and electric bicycles, admission to live-streaming events (from 1 January 2025), live plants and floricultural products, and others. Environmentally harmful goods such as fossil fuels and chemical fertilizers/pesticides have also been added but will be excluded from 1 January 2030 and 2032.

Member States must adopt and publish, by 31 December 2024, the requisite laws and compliance measures to comply with the new rules scheduled to apply from 1 January 2025.

Legislative activity

Member States have begun enacting legislation in response to the new reduced rate Directive since its approval in December 2021. Poland and Croatia reduced the VAT rate on basic foodstuffs to the zero-rate and Bulgaria and Romania are considering the same. Belgium, Croatia, Cyprus, Ireland, Italy, Netherlands, Poland, Romania and Spain have announced VAT reductions on energy supplies (e.g., electricity, heating/cooling, natural gas) and Greece is considering the reduction.

These rate changes have already been proposed or enacted before the 6 April 2022 effective date of the Council Directive. While world events and energy price spikes also contribute to these changes, the long-anticipated reduced rate amendments now allow Member States to do so within the bounds of the VAT Directive.

It‘s expected that more Member States will review their VAT rate structure in response to these new reduced rate opportunities.

For more on these amendments, please refer to our previous blog.

Update: 31 January 2023 by Lorenza Barone

Norway extends VAT obligation to Cross-Border Non-Digital Services

Norway’s Ministry of Finance has updated legislation involving remotely deliverable services by foreign suppliers. This is effective from 1 January 2023.

In 2022, the Ministry proposed to amend the Norwegian VAT Act regarding cross-border business-to-consumer (B2C) sales of non-digital services.

Norwegian VAT Act Proposal

The proposal concerns purchases of remotely deliverable services from non-resident suppliers to Norwegian consumers.

Foreign providers of traditional services would need to register for VAT in Norway and account for Norwegian VAT for the following services for resident consumers:

• Consulting services
• Accounting services
• Other cross-border services

VAT would still be charged and collected when the customer is a business or a public authority or when the transaction is considered a B2B sale. The customer would do this in Norway via the reverse charge mechanism. Suppliers not established in Norway could still use the existing VAT On E-Commerce (VOEC) scheme.

The motivation behind the proposal was to eliminate a competitive advantage for non-resident suppliers.

In fact, until the recent change, no VAT was charged when a business provided such services to Norwegian consumers.

What’s changed after 1 January 2023?

Effective 1 January 2023, non-resident suppliers of remote non-digital services who make supplies to consumers in Norway are required to collect and remit Norwegian VAT.

In light of this, the VOEC scheme – the simplified scheme for online sales of goods and services to Norwegian consumers – has been expanded. Previously it only applied to low value goods and electronic services, but now it also includes all services capable of delivery from a remote location.

Subsequently, all foreign companies that sell such services to Norwegian consumers must register through the VOEC scheme – or register ordinarily for Norwegian VAT when they reach the NOK 50,000 threshold in sales over 12 months.

The VAT treatment for providing such services to a business in Norway remains unchanged, with the local company collecting and remitting the VAT under the reverse charge mechanism.

Still have questions about VAT in Norway? Speak to one of our experts.

Update: 25 April 2022 by Sam Wichman

The Norwegian Ministry of Finance has proposed to amend the Norwegian Value Added Tax (VAT) Act regarding cross-border business to consumer sales of non-digital services. The proposal would require purchases of remotely deliverable services from suppliers established outside of Norway to consumers located in Norway to be subject to VAT.

Current requirements in Norway

Since 2011, Norway has operated a simplified VAT compliance regime for foreign suppliers of digital services to consumers. Non-resident suppliers who sell e-books, streaming media, software, or other digital services to Norwegian consumers and meet the NOK 50,000 VAT registration threshold must register and collect VAT on these sales, the same as resident businesses.

Non-resident suppliers not established in Norway may use the simplified VAT On E-Commerce (VOEC) scheme for registration and reporting. Additionally, suppliers in Norway must pay VAT on all purchases of remotely deliverable services from businesses located abroad. Currently, however, foreign suppliers of remotely deliverable services, which are not digital, are not required to register and pay VAT on their sales of such services.

Proposal

The Norwegian tax authority is concerned about the competitive advantage of non-resident suppliers over resident suppliers when providing deliverable services to Norwegian consumers. The Norwegian Ministry of Finance has presented a proposal to amend the Norwegian VAT Act to require non-resident suppliers to collect and report VAT on remotely deliverable services to consumers.

Under the proposal, foreign providers of traditional services would have to charge VAT for consulting services, accounting services, and other cross-border services provided to consumers located in Norway. When the customer is a business or a public authority, or when the transaction is considered a B2B sale, the VAT would still be charged and collected by the customer via the reverse charge mechanism. Suppliers that are not established in Norway would be able to use the existing VOEC scheme.

Status and timeline

The Norwegian Ministry of Finance has submitted the proposal for amendments to the Norwegian VAT Act regarding selling remotely deliverable services from abroad to recipients in Norway for consultation. The deadline for submitting comments on the proposal is 8 July 2022. Please stay tuned for updates on if the proposed amendments are adopted in Norway and when the amendments will take effect should they be adopted.

The Italian government has taken important steps to broaden the scope of its e-invoicing mandate, more specifically by widening the scope of taxpayers subject to electronic invoice issuance and clearance obligations, starting 1 July 2022.

On 13 April 2022, the draft Law-Decree, known as the second part of the National Recovery and Resilience Plan (Decreto Legge PNRR 2 – Piano Nazionale di Ripresa e Resilienza), was approved by the Italian Council of Ministers (Consiglio dei ministri).

The Italian government-approved National Recovery Plan is part of the European Union’s Recovery and Resilience Facility (RRF), an instrument created to assist Member States financially in recovering from the economic and social challenges raised by the Covid-19 pandemic.

The expansion of Italy’s e-invoicing mandate is one element of the government’s anti-tax evasion package and addresses, in particular, the advancement of digital transformation, one of the six pillars of the RRF.

New taxpayers in scope

The draft Law-Decree PNRR 2 expands the obligation to issue and clear electronic invoices through the Italian clearance platform Sistema di Intercambio (SDI) to certain VAT taxpayers exempt from the mandate thus far. This means that from 1 July 2022, the following additional taxpayers are obliged to comply with the Italian e-invoicing mandate:

• Taxpayers who benefit from the flat-rate tax regime (regime forfettario)
• Amateur sports associations and third sector entities with revenue up to EUR 65,000

The regime forfettario is available to taxpayers who fulfil specific requirements, allowing them to adopt a reduced flat-rate VAT regime of 15%, decreased to 5% for new businesses during the first five years. These taxpayers have, up until now, been exempt from the obligation to issue e-invoices and clear them through the SDI, according to Legislative Decree 127 of 5 August 2015.

Additionally, amateur sports associations and third sector entities with revenue up to EUR 65,000 who have also been exempt from the e-invoicing mandate, are included as new subjects. Starting 1 July 2022, e-invoicing will also become mandatory for them.

The mandate still excludes microenterprises with revenues or fees up to EUR 25,000 per year, which instead will be required to issue and clear e-invoices with the SDI starting in 2024.

Short grace period introduced

The draft decree also established a short transitional grace period from 1 July 2022 until 30 September 2022. During this time taxpayers subject to the new mandate are allowed to issue e-invoices within the following month when the transaction was carried out, without being subject to any penalties. This gives the new subjects time to conform to the general rule stating electronic invoices must be issued within 12 days from the transaction date.

What’s next?

The definitive text of the decree has not yet been published in the Italian Official Gazette; only once this final step is taken will the decree formally become law, and the extended scope become binding. The start of the second semester of this year brings additional significant changes in Italy concerning the mandatory reporting of cross-border invoices through FatturaPA, also set to begin on 1 July 2022.

It’s been just over nine months since the introduction of one of the biggest changes in EU VAT rules for e-commerce retailers, the E-Commerce VAT Package extending the One Stop Shop (OSS) and introducing the Import One Stop Shop (IOSS).

The goal of the EU E-commerce VAT Package is to simplify cross-border B2C trade in the EU, easing the burden on businesses, reducing the administrative costs of VAT compliance and ensuring that VAT is correctly charged on such sales.

Under the new rules, the country specific distance selling thresholds for goods were removed and replaced with an EU wide threshold of €10,000 for EU established businesses and non-EU established businesses now have no threshold. For many businesses this means VAT is due in all countries they sell to, requiring them to be VAT registered in many more countries than pre-July 2021. However, the introduction of the Union OSS allowed them to simplify their VAT obligations by allowing them to report VAT on all EU sales under the one OSS return.

How the EU E-commerce VAT Package has affected businesses

Whilst for many businesses the thought of having to charge VAT in all countries they sell to may have been overwhelming to begin with, they are now seeing the many benefits that the introduction of OSS was meant to achieve. The biggest benefit for businesses is the simplification of VAT compliance requirements with one quarterly VAT return as opposed to meeting many filing and payment deadlines in different EU Member States.

Businesses who outsource their VAT compliance have been able to reduce their costs significantly by deregistering from the VAT regime in many Member States where they were previously VAT registered. Although some additional registrations may be required depending on specific supply chains and location of stock around the EU. Businesses also receive a cash flow benefit under the OSS regime as VAT is due on a quarterly basis as opposed to a monthly or bi-monthly basis as was the case previously in many Member States. As part of the implementation of the EU E-Commerce VAT Package we also saw the removal of low value consignment relief, which meant import VAT was due on all goods coming into the EU. This has brought many non-EU suppliers into the EU’s VAT regime with the European Commission (EC) announcing that there are currently over 8,000 registered traders.

We have seen some early hiccups with EU Member States not recognizing IOSS numbers upon import, leading to double taxation for some sellers. But for the majority of businesses IOSS has enabled them to streamline the sale of goods to EU customers for orders below €150. The EC has also recently hailed the initial success of this scheme by releasing preliminary figures which show that €1.9 billion in VAT revenues has been collected to date.

The future of OSS and IOSS

The EC is currently undergoing a consultation, gathering feedback from stakeholders on how the new schemes have performed with a view to making potential changes. Some of the changes being discussed include making the IOSS scheme mandatory for all businesses, which would significantly widen its use as it brings significantly more traders into scope. There has also been talk of increasing the current €150 threshold which would allow more consignments to be eligible for IOSS, although with the current customs duties threshold also being €150 it would be interesting to see how they align these rules. The EC will also be publishing proposals later in the year on the possible extension of the OSS to include B2B goods transactions, with a view to implementing this by 2024.

E-commerce continues to grow, and tax authorities globally have struggled to keep pace. Tax authorities developed many VAT systems before the advent of e-commerce in its current format and the evolution of the internet. Around the world this has resulted in changes to ensure that taxation occurs in the way that the government wants, removing distortions of competition between local and non-resident businesses.

The European Commission made changes on 1 July 2021 with the E-commerce VAT Package, which modernised how VAT applies to e-commerce sales and also how the VAT is collected. As the previous system had been in place since 1 July 1993, change was well overdue.

Taxation at Place of Consumption

The principle of the taxation of e-commerce in the European Union (EU) is that it should occur in the place of consumption – this normally means where the final consumer makes use of the goods and services. For goods, this means where the goods are delivered to and for services, where the consumer is resident – although there are some exceptions.

Where the VAT is due in a different Member State than where the supplier is established, this requires the supplier to account for VAT in a different country. Micro-businesses are relieved of the requirement to account for VAT in the place of consumption. Though, most e-commerce businesses selling across the EU will have to account for VAT in many other Member States which would be administratively burdensome.

Expansion of the One Stop Shop (OSS)

To overcome this problem, the European Commission decided to significantly expand the Mini One Stop Shop (MOSS), which was previously in place for B2C supplies of telecoms, broadcasting and electronically supplied services. Three new schemes allow businesses to register for VAT in a single Member State and use that OSS registration to account for VAT in all other Member States where VAT is due.

Union OSS allows both EU and non-EU businesses to account for VAT on intra-EU distance sales of goods. It also allows EU businesses to account for VAT on intra-EU supplies of B2C services.

Non-Union OSS allows non-EU businesses to account for VAT on all supplies of B2C services where EU VAT is due.

Import OSS allows both EU and non-EU businesses to account for VAT on imports of goods in packages with an intrinsic value of less than €150.

Currently, none of the OSS schemes are compulsory, and businesses can choose to be registered for VAT in the Member State where the VAT is due. The European Commission is currently consulting on the success of the OSS schemes, and one of the proposals is that the use of Import OSS would become compulsory. There are also questions about whether the threshold should be increased, although that would require consideration of how to deal with customs duty as the €150 threshold is the point at which customs duty can become chargeable.

Benefits of OSS

The use of the Union and non-Union OSS schemes can provide a valuable alternative to registering for VAT in multiple Member States. However, there can be other reasons why a business will need to maintain VAT registrations in other countries. Businesses should carry out a full supply chain review to identify the VAT obligations.

There are also many benefits to using the Import OSS, including the ability to recover VAT on returned goods and a simplified delivery process for both the supplier and customer.

Any businesses using any OSS schemes should fully understand the scheme’s requirements.  Non-compliance can result in exclusion with the requirement to register for VAT in those countries where it is due. This will remove the benefit of the OSS schemes, increasing costs and administrative burden for the business.

Take Action

Get in touch with our team to find out how we can help your business understand the new OSS requirements.

Want to know more about the EU E-Commerce VAT Package and One Stop Shop and how it can impact your business? Download our e-book.

The Philippines continues in constant advance towards implementing its continuous transaction controls (CTC) system, which consists of near real-time reporting of electronically issued invoices and receipts. On 4 April, testing began in the Electronic Invoicing System (EIS), the government’s platform, with six companies selected as pilots for this project.

The initial move toward a CTC system in the Philippines started in 2018 with the introduction of the Tax Reform for Acceleration and Inclusion Act, known as TRAIN law, which has the primary objective of simplifying the country’s tax system by making it more progressive, fair, and efficient. The project for implementing a mandatory nationwide electronic invoicing and reporting system has been developed in close collaboration with the South Korean government, considered a successful model with its comprehensive and seasoned CTC system.

Electronic invoicing and reporting are among many components set forth by the TRAIN law as part of the country’s DX Vision 2030 Digital Transformation Program. With this, the Philippines is making headway toward modernising its tax system.

Introduction of mandatory e-reporting in the Philippines

The Philippines CTC system requires the issuance of invoices (B2B) and receipts (B2C) in electronic form and their near real-time reporting to the Bureau of Internal Revenue (BIR), the national tax authority. The EIS offers different possibilities in terms of submission, meaning that transmission can be done in real-time or near real-time. Documents that must be electronically issued and reported include sales invoices, receipts, and credit/debit notes.

According to the Philippines Tax Code, the following taxpayers are covered by the upcoming mandate:

• Taxpayers engaged in the export of goods and/or services
• Taxpayers engaged in e-commerce
• Taxpayers under the jurisdiction of the Large Taxpayers Service (LTS).

However, taxpayers not covered by the obligation may opt to enroll with the EIS for e-invoice/e-receipt reporting purposes

E-invoices must be issued in JSON (JavaScript Object Notation) format and contain an electronic signature. After issuance, taxpayers can present their invoices and receipts to their customers. The tax authority´s approval is not needed to proceed. However, electronic documents must be transmitted to the EIS platform in real-time or near real-time.

E-archiving requirements

The Philippines introduced somewhat unusual requirements in this period of digitization, when it comes to e-invoice archiving. The preservation period is ten years and consists of a system in which taxpayers are obliged to retain hard copies for the first five years. After this first period, hard copies are no longer required, and exclusive storage of electronic copies in an e-archive is permitted for the remaining five years.

What’s next for taxpayers?

With tests officially underway, the next phase should begin on 1 July 2022, with the go-live for 100 pilot taxpayers selected by the government, including the six initial ones. After that, the government plans to advance a phased roll-out in 2023 for all taxpayers under the system’s scope. Meanwhile, taxpayers can take advantage of this interim period to conform with the Philippines CTC reporting requirements.

Take Action

Need to ensure compliance with the latest e-invoice requirements in the Philippines? Speak to our team.

Sovos SAF-T Extraction

Save Time and Reduce Data Extraction Cost Required for SAF-T Report Preparation

Automate tax data extraction from SAP

Remove the pain of getting data into diverse country SAF-Ts with changing schemas.

The data needed to complete a SAF-T report is diverse. It ranges from accounts receivable and accounts payable data, such as billing and purchasing documents, to accounting data found in general ledger entries. It can also include information about fixed assets and inventory, more often associated with the annual financial statement than with VAT returns and other VAT-related periodic declarations. Getting such large quantities of varied data (depending on the country, this can be as extensive as 1,000 fields) from across different modules in SAP or from multiple SAP instances, using traditional extraction methods is both time-consuming and labor-intensive. 

Sovos automates extraction of your data from SAP as a first step to preparing a compliant SAF-T report. This frees up SAP experts to focus on more strategic IT initiatives that affect your business. We continually track changes to different jurisdictional SAF-T requirements and ensure these are codified in the Sovos SAP Framework that extracts data for mapping to the approved legal structure.

If you opt to extract your own data for SAF-T generation in SAP or have other ERP/source systems, we have complementary modules in our triple play SAF-T solution to help you achieve accurate and robust SAF-T output.

You can also present your data to us in various electronic formats (e.g., CSV, TXT) then use both SAF-T analysis and SAF-T generation to ensure the SAF-T file you plan to submit meets the expectations of the relevant tax authority. 

Alternatively, if your data is prepared in the legal SAF-T XML structure for the specific jurisdiction, it will be ready to be validated using our SAF-T Analysis module.

Automatically extracted data pushed to the Sovos APR cloud for mapping to the relevant country-specific SAF-T file

Eliminate need for a bespoke solution designed, built and maintained by SAP experts

Update extraction requirements as SAF-T expands to more jurisdictions

Align to APR SAF-T common data model, which covers the full requirements of the OECD’s revised standard SAF-T schema from 2010

Ensure the data extracted is always aligned with country-specific schema requirements as existing SAF-T obligations evolve

Build up the required data gradually, by extracting the required data on an ongoing basis, rather than waiting for the end of a reporting period or a request from the tax authority

Use Sovos’ complementary SAF-T analysis and SAF-T generate modules to review the data integrity and make any necessary adjustments well ahead of SAF-T reporting deadlines

Reduce costs of data extraction and consolidation

Learn more about how Sovos alleviates the data extraction burden from SAP.

We streamline the end-to-end process of producing accurate, submission-ready SAF-T files required by different tax authorities.

Talk with an expert today

Sovos SAF-T Analysis

Assess Accuracy, Integrity and Data Quality to Ensure Compliance with Country-Specific SAF-T Obligations

Full visibility, user-friendly interface

Automate the process of preparing robust and accurate data structures required for tax and compliance purposes, including SAF-T

A VAT return, like an annual financial statement, consolidates and summarizes lots of information in a format that can be easily read and interpreted. By contrast, a SAF-T report compiles large quantities of diverse data in an XML format. A company’s SAF-T report can be used for auditing purposes, with the tax authority referring to it as a primary source against which all historical tax returns are queried. Ideally, SAF-T data determines whether fraudulent practices or transactions have taken place. However, the format, origins and volume of SAF-T data makes it very challenging for companies to evaluate and interpret what is sent to tax authorities. This unknown creates a major risk for companies, their accountants and advisors.

As part of Sovos’ SAF-T triple play, integral analysis provides a human-readable view of otherwise indecipherable SAF-T data. A summary of findings is presented in a user-friendly interface, pinpointing information inconsistencies and tax anomalies that may expose business problems. Through this deep SAF-T analysis of structured data, Sovos powers internal due diligence to ensure organizations achieve compliance peace of mind. 

 

Sovos uses a broad set of rules and tests for the accuracy, integrity and quality of data that’s intended for any SAF-T report. It searches for errors in syntax and calculations and to ensure statistical and logical consistency. After the SAF-T report is generated, Sovos analyzes the structured file, giving organizations confidence the XML will be accepted by the tax authority without further scrutiny.

Maximize operational efficiency by revealing information inconsistencies and tax anomalies that may hinder business progress

Decodes SAF-T data and presents results in a standard, logical way that’s readily interpreted and understood prior to submission.

Advances preparedness for inevitable inspections and audits by improving data quality and accuracy as a result of data checks on an ongoing basis.

Pinpoints the source of errors through root-cause analysis, enabling ongoing, seamless navigation through all data. This includes immediate on-screen access to information, such as invoice issued, product sold and account balance when consulting a specific customer account.

Allows audit notes (e.g., explanations, justifications, actions required) to be added to a specific document, error or finding (e.g., billing later than shipment). This guides internal teams on any necessary operational changes and increases transparency by recording contextual information that can be readily accessed during subsequent audit or tax inspection.

Ensures alignment between SAF-T data, financial statements and other interim KPIs that are reported to executive-level stakeholders.

Enables navigation through reports and transactions referenced in the SAF-T data, automating previously manual tasks with live updates.

Mitigates risks of tax exposure/possible disputes, automated checks that mimic automated analysis run by tax administrations on the same data set and allows any data outliers to be addressed prior to submission.

The Sovos SAF-T Analysis module can be used to check and validate the contents of a SAF-T report, whether the Sovos SAF-T Generate module has been used to compile the file or if it’s been generated in another way. 

Accurately evaluate and interpret your SAF-T data

Sovos gives peace of mind through audit readiness and tax compliance.

Talk with an expert today

Sovos SAF-T Generation

Produce Full Range of SAF-T Reports Compliant with Different Jurisdictional Requirements

Keep pace with evolving SAF-T schemas

Generate SAF-T reports, ready for timely submission

The Organization for Economic Co-operation and Development (OECD) first introduced the Standard Audit File for Tax (SAF-T) in May 2005. Since then, a growing number of tax authorities have embraced it as a way to get a broad view of companies’ tax affairs. Many of the countries that have introduced SAF-T so far have also applied their own individual interpretation of the original, or subsequent 2010 version, of the SAF-T structure. However, the quantity of diverse data required by these unfamiliar, jurisdiction-specific SAF-T schemas makes it challenging for companies to meet their obligations. A tax authority’s request also leaves a relatively short window for companies to collate the data and present it in the prescribed format, especially if they need to do this across jurisdictions and in different formats.

Sovos SAF-T generation maps data into the correct schema, ensuring that format requirements are met. There is also the value of our complementary SAF-T analytics to ensure the final SAF-T generated comprises robust data and is truly submission-ready. This powerful combination of modules in the Sovos SAF-T solution provides peace of mind that the SAF-T reporting sent to the tax authority will satisfy its requirements for more detailed information, without need for additional scrutiny.

Consolidate and present data in country-specific, legal XML structures

Deliver the outputs required by each individual tax authority that has introduced SAF-T

Expand coverage as new jurisdictions introduce a SAF-T requirement

Ensure data is fully consolidated from all relevant sources to generate create the SAF-T report in the correct legal structure

Produce valid, submission-ready content when used in conjunction with APR SAF-T analytics.

Provide a repository of the SAF-T files reporting generated, so they the reports can be accessed at a later date.

Used together with Sovos’ SAF-T Analysis module, with its application of data accuracy and fraud inference rules, this ensures appropriate action can be taken to address any anomalies and correct or explain errors. It also provides greater assurance that SAF-T submission will not result in further tax authority scrutiny.

Learn more about how Sovos alleviates the burden associated with SAF-T generation.

Our SAF-T Triple Play solution streamlines the end-to-end process of preparing SAF-T reports.

Talk with one of our experts

Luxembourg VAT Requirements

VAT in Luxembourg

Luxembourg is one of many European countries to implement SAF-T and e-invoicing to provide greater visibility into a wide range of business, accounting and tax data.

Luxembourg introduced SAF-T requirements in 2011. In 2019 the country introduced an e-invoicing legislation.

Luxembourg is part of the EU single market economy and falls under the EU VAT regime. The EU issues VAT Directives laying out the principles of how the VAT regime should be adopted by Member States. These Directives take precedent over any local legislation.

VAT law within the country is administered by the Administration de l’Enregistrement et des Domaines and is contained within the General Tax Code.

Get the information you need

Quick facts

• Just like in any other EU Member State, e-invoicing is permitted in Luxembourg, subject to the buyer accepting the exchange of electronic invoices.

• Businesses must ensure integrity of invoice content and authenticity of origin for their invoices.  Integrity and authenticity can be proved using Advanced Electronic Signatures, ‘proper EDI’ with an interchange agreement based on the EC 1994 recommendation, and Business Controls-based Audit Trail.

• In May 2019, Luxembourg adopted legislation about e-invoicing in public procurement following the EU Directive 2014/55/EU. The Directive states that e-invoices will continue to be exchanged voluntarily by suppliers to the government and the centralised PEPPOL access point will continue to be used.

• Prior authorisation is required before outsourcing to a service provider – written authorisation is recommended.

• Invoices stored in electronic form must have evidence of their integrity and authenticity stored electronically as well.

• E-invoices may only be stored in EU Member States (or other countries) of which Luxembourg has signed a mutual tax assistance treaty – prior to notification and access.

• VAT returns may be filed monthly, quarterly or annually electronically through Luxembourg’s online platform (eCDF) via PDF or XML format. Alternatively, annual filings can be made either in electronic format through the portal or via sending a paper copy of the VAT return to the requisite tax office.

• To submit tax returns electronically, taxpayers must ensure the service provider they use is certified within eCDF.

SAF-T reforms

Officially implemented in 2011, Luxembourg’s Standard Audit File for Tax (SAF-T) is locally known as Fichier Audit Informatisé AED (FAIA).

Businesses must, if requested, submit their financial data electronically in a format that is compliant with AED electronic audit file specifications (i.e., in the specified FAIA format). Only resident businesses subject to the Luxembourg Standard Chart of Accounts must file the FAIA.

Mandate rollout dates

2011 – Introduction of SAF-T, known as Fichier Audit Informatisé AED (FAIA)

2019 – Adoption of e-invoicing legislation in public procurement with 2014/55/EU Directive

How Sovos can help

Need help to ensure your business stays compliant with evolving e-invoicing, reporting and SAF-T obligations in Luxembourg?

Keeping up with VAT compliance obligations has become more difficult as Luxembourg continues to take steps to reduce its VAT gap and modernise the system.

Our experts continually monitor, interpret and codify changes into our software, reducing the compliance burden on your tax and IT teams.

Learn how Sovos’ solutions for changing SAF-T and VAT obligations can help companies stay compliant.

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Transition from voluntary to mandatory e-invoicing expected from 1 April 2023

From 1 January 2022, taxpayers have been able to issue structured invoices (e-invoices) using Poland’s National e-Invoicing System (KSeF) on a voluntary basis, meaning electronic and paper forms are still acceptable in parallel. Introduction of the KSeF system is part of the digital transformation happening in Poland following the establishment of continuous transaction control (CTC) mandates all around Europe, supporting faster and more effective identification of tax fraud.

The KSeF system enables taxpayers to issue and receive invoices electronically. It is one of the most technologically advanced tools in Europe for exchanging information on economic events. Structured invoices issued via the system are prepared in accordance with the invoice template developed by the Ministry of Finance. After issuance, the invoices are sent from the financial and accounting system via an interface (API) to the central database (KSeF). Afterwards they are available in the system and can be downloaded by the recipient.

For more information see this overview about e-invoicing in Poland or VAT Compliance in Poland.

Poland’s derogation requests

On 5 August 2021, the Republic of Poland requested authorisation to derogate from Articles 218, 226 and 232 of the VAT Directive to be able to implement an obligation to issue electronic invoices, processed through the National e-Invoicing System (KSeF), for all transactions that require the issuance of an invoice according to Polish VAT legislation.

Subsequently, on 9 February 2022, Poland modified its request, asking for the authorisation to derogate only from Articles 218 and 232 of the VAT Directive and specified that mandatory electronic invoicing would only apply to taxable persons established in the territory of Poland.

Poland considers the introduction of a generalised obligation to issue electronic invoices would bring significant benefits in terms of combating VAT fraud and evasion while simplifying tax collection. Moreover, the implementation of the measure will accelerate the digitalization of the public sector.

 The European Commission derogatory decision

As derived from Article 218 of the VAT Directive, Member States are obliged to accept all documents or messages in paper or electronic form as invoices. Poland strived to obtain a derogation from the above-mentioned Article of the VAT Directive so that only documents in electronic form could be considered as invoices by the Polish tax administration.

Additionally, based on Article 232 of the VAT Directive the use of an electronic invoice is subject to acceptance by the recipient. Therefore, the introduction of an electronic invoicing obligation in Poland requires a derogation from this Article, so that the issuer no longer has to obtain the consent of the recipient to send an invoice in a paperless format. Currently, under Article 106n of the Polish VAT law, the use of electronic invoices requires the approval of the invoice recipient, which hinders the possibility to impose mandatory electronic invoicing.

As announced by the European Commission on 30 March 2022, Poland has been granted the derogatory decision both from the Article 218 and Article 232 of Directive 2006/112/EC. The decision will apply from 1 April 2023 until 31 March 2026, after receiving the last approval from the EU Council. The mandatory phase of the mandate is expected to begin on 1 April 2023.

The KSeF taxpayer application – on the horizon

To allow taxpayers to issue and make electronic invoices available using KSeF, the Polish Ministry of Finance will offer several tools free of charge:

• e-Mikrofirma, an online app accessible via smartphone and a web form to any taxpayer logged on to e-Urząd (e-Office).
• e-Urząd, will provide taxpayers with online tools that will make it easier to meet tax obligations, including paying taxes, through an online electronic payment service.

On 31 March 2022 the Ministry of Finance announced that the test version of the KSeF Taxpayer application will be made available on 7 April 2022. It will enable management of authorisations, issuing and receiving invoices from the KSeF.

Next steps

With the published decision of the European Commission Poland has entered into the next implementing stage of mandatory e-invoicing. The next steps will follow after receiving the approval from the EU Council (which is now a formality and should take place within a few weeks). Subsequently, the Ministry of Finance will implement universal electronic invoicing in Poland giving adequate time for the businesses to adapt to new solutions.

Update: 12 September 2023 by Robson Satiro de Almeida

Tax Reform in Brazil: Simplification Statute Published

Recent developments in Brazil indicate changes on the horizon, as the country continues to move towards a tax reform for simplification of e-invoicing obligations.

A significant reform of ancillary tax obligations is underway aiming to create a unified system for issuing tax documents. The government has long anticipated and discussed this project, but it now shows promise of becoming a reality.

The Brazilian government published Complementary Law no. 199 (Lei Complementar no. 199) in August 2023, establishing the National Statute for the Simplification of Additional Tax Obligations (the Statute). The Statute derives from Draft Law Proposal no. 178/2021 and seeks to streamline ancillary tax obligations, including filing tax returns, keeping accounting records and issuing electronic invoices.

What will change in e-invoicing?

The Statute’s primary change provides the unification of rules for issuing electronic invoices and fulfilling other ancillary obligations. There are currently more than a thousand different electronic invoice formats throughout the country, driving up business maintenance costs and resulting in adversities in company budgets.

Specifically, the Statute establishes integrated action at the Federal, State and Municipal levels to reach the following:

1. Unified issuance of electronic tax documents
2. Use of e-invoicing data to calculate taxes and provide pre-filled tax returns
3. Simplification of tax and contribution payments by consolidating collection documents
4. Centralisation of tax records and their sharing in accordance with legal mandates

How will changes occur?

To achieve unified e-invoice issuance and integration of other ancillary obligations, the government will assess existing systems, legislation, special regimes, exemptions and electronic tax platforms. The next step is to standardise legislation and the respective systems used to fulfil such obligations.

As per the Statute, this integration effort aims to provide benefits such as:

• Cost savings for taxpayers
• Encouraging taxpayer adherence at all federative levels
• Modernising systems and digitalising operations

The Statute also creates the National Committee for the Simplification of Ancillary Tax Obligations (CNSOA) to establish and improve the processes for simplifying tax obligations in line with a definition of a national standard process. However, the Union, States, Federal District and Municipalities may establish additional tax responsibilities related to their respective taxes, if they are aligned with the CNSOA provisions.

What’s next?

After formal composition of the National Committee, the Federal Executive Branch must adopt the necessary measures to allow it to carry out its activities as defined in the Statute. This is essential to start the official move towards national unification of e-invoicing processes and other ancillary obligations.

Additionally, the National Congress will still analyse and vote on certain points of the Statute that the President vetoed, which could result in further alignment or changes within the National Statute for the Simplification of Additional Tax Obligations.

Starting to prepare for eventual changes with e-invoicing in Brazil? Sovos can help.

Update: 21 March 2022 by Kelly Muniz

Brazil is, without doubt, one of the most challenging jurisdictions in the world when it comes to tax legislation. The intricate fiscal system that encompasses rules fromhttps://sovos.com/vat/tax-rules/brazil-e-invoicing/ 27 states and over 5000 municipalities has created a burden on companies, especially for cross-state and cross-municipality transactions.

Furthermore, taxpayers must carefully examine the numerous e-invoicing formats and requirements (and, sometimes, the lack of such). Therefore, hopes for tax reform in Brazil have existed for quite some time.

Simplifying e-invoicing compliance

In recent years, several legislative initiatives towards integrating indirect taxation mandates across the country have not met successful outcomes. Meanwhile, a feasible step into bringing forth such changes may be through the unification of rules on digital compliance with tax obligations, such as VAT e-invoicing and e-reporting.

In late 2021 a draft law proposal (Projeto de Lei Complementar n. 178/2021) was initiated by the private sector. Named the National Statute for the Simplification of Ancillary Fiscal Obligations, it has been welcomed this year by the House of Representatives. Its primary purpose is to introduce a significant reform within digital tax reporting obligations by creating a unified e-invoicing system.

By establishing national fiscal cooperation, the proposal intends to reduce costs with compliance, allow information sharing among tax authorities, and create an incentive for taxpayers’ conformity across all federal, state and municipal levels.

The principal agenda of the draft law proposal is to introduce:

• A unified national standard for e-invoicing
• A unified e-bookkeeping format, the Digital Fiscal Declaration (DFD)
• A pre-filled tax return using e-invoice data
• A unified fiscal registry file and information sharing system (RCU)

What this means for businesses

The most significant change is the introduction of the NFB-e (Nota Fiscal Brasil Eletronica), a national standard for e-invoicing. It entails the unification of the NF-e (Nota Fiscal Eletronica), NFS-e (Nota Fiscal de Servicos Eletronica) and NF-C (Nota Fiscal do Consumidor Eletronica) in one single document. This will cover Brazil’s VAT-like taxes, in this case, ICMS (VAT on products and certain services) and ISS (services VAT).

In practice, this means that instead of complying with numerous e-invoicing formats and mandates, according to the state and municipality of the transaction, one national digital standard will provide uniform country-wide compliance for e-invoicing. The NFB-e will cover invoicing of goods and services on state and municipal levels for B2G, B2B and B2C transactions.

The reform will drastically reduce the burden on taxpayers and expand the scope of e-invoicing to municipalities where such a mandate hasn’t been adopted yet.

It’s essential to add clearance requirements for e-invoicing in Brazil will be maintained, meaning that businesses will still need to comply with rules for real-time clearance of invoices with the tax authority.

What’s next?

The draft law proposal is still in early discussions and will follow to the Justice and Citizenship Constitutional Commission (CCJC) for approval and possible amendments before voting by Congress. Until then, compliance with e-invoicing rules across Brazil remains at its current challenging status.

Slovakia VAT Requirements

Slovakia expands continuous transaction controls (CTCs)

The modernization of tax and tax controls remains a high priority for Slovakia’s tax authority. The Slovakian Ministry of Finance plans to introduce a continuous transaction control (CTC) scheme, with the aim to lower Slovakia’s VAT gap to the EU average and obtain real-time information about underlying business transactions.   

The Slovakian tax authorities have begun to introduce mandatory business to government (B2G) and government to government (G2G) e-invoicing via the IS EFA platform. Regarding business to business (B2B) and business to consumer (B2C) e-invoicing, there is currently no indication when the mandate will be rolled out, yet the IS EFA platform is planned to also be used for B2B e-invoicing.

Have questions? Get in touch with a Sovos Slovakia CTC expert.

Quick facts on Slovakia e-invoicing and VAT reporting

e-Invoicing

• Just like in any other EU Member State, e-invoicing is permitted in Slovakia, subject to the buyer accepting the exchange of electronic invoices.
• While Slovakia today is considered a post audit jurisdiction, a CTC reform is currently underway.
• The implementation of the mandatory B2G and G2G schedule for the involvement of government and public administration institutions as well as for their suppliers, is expected to happen progressively throughout 2023 and 2024.
• E-invoices can be stored in another Member State without notification, provided they are made available in Slovakia should they be requested by the tax authority.

VAT Reporting

• Filed either monthly or quarterly and must be submitted through a downloadable form issued by the Slovakian tax authority.
• Additionally, Slovakia requires the submission of the Slovak Control Statement.
• Data submitted to the tax authority must be in XML format.

Infographic

Slovakia CTC Requirements

Understand more about Slovakia’s CTC requirements including when businesses need to comply and how Sovos can help.

Learn more

Slovakia's upcoming CTC reform 2023-2024

The Slovakian tax authorities have begun to slowly introduce mandatory B2G and G2G e-invoicing via the IS EFA platform, but there is currently no indication if/when a business to business (B2B) and business to consumer (B2C) mandatory e-invoicing mandate will be rolled out. The previous government decided to freeze the B2B and B2C element of the CTC mandate, with no clear date when it will be implemented, or if the information outlined in the original draft legislation will be maintained in the future.

According to the unpublished CTC draft law, which has been put on hold by the current government, suppliers would have to report invoice data to the tax authority’s e-invoicing platform, IS EFA, before issuing them to their customer. Similarly, buyers would have to report data from the received invoice.

Mandated e-invoicing rollout dates

B2G and G2G throughout 2023 and 2024

• B2B and B2C TBD

How can Sovos help with VAT compliance?

Sovos software already addresses the periodic reporting requirements facing companies with VAT compliance obligations domestically in Slovakia, as well as those with obligations due to trade with counterparties in other EU Member States and third countries.

Building on our existing commitment to Slovakia and pending the release of official information and detailed specifications, we’re planning further development to our core CTC platform to ensure our customers remain continually compliant with Slovakian CTC regulations, in line with the emerging digitization of tax controls in Slovakia.

Learn how Sovos’ solution for VAT compliance changes can help companies stay compliant.

Contact Us Today

Meet the Expert is our series of blogs where we share more about the team behind our innovative software and managed services.

As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about new regulatory changes and the latest developments on tax regimes across the world, to support you in your tax compliance.

We spoke to Russell Brown, senior IPT consulting manager, about Sovos’ IPT consultancy, supporting tax teams and his thoughts about the future of IPT.

Can you tell me about your role and what it involves?

I head up the Insurance Premium Tax (IPT) consultancy practice within Sovos. We’re responsible for providing advice, mostly to compliance clients on tax issues of different types of insurance that they write in EU and non-EU countries. We provide clarity on applicable tax rates and their compliance requirements in various countries, as well as location of risk queries.

One of my main responsibilities is to review and approve the reports written by consultants in the team. I also assist our sales team with clients interested in registering for IPT in different countries. This involves discussing the insurance the client provides and the countries involved and helping to onboard new customers. I also participate in writing regular IPT blogs and articles on a variety of subjects, and in webinars and other client events where we discuss a wide range of IPT issues around the world.

We also assist the compliance managed services team with any questions from their clients that they need help with. This can include legislative references or just confirmation of tax rates.

Can you tell us about Sovos’ IPT consultancy and typical projects you help with?

The short answer is we help insurers with their IPT compliance queries but that can vary from project to project.

A typical project for the consultancy team would be for a client to approach us and say, “We’re thinking of writing this type of insurance policy in 10 countries. Could you please tell us all the taxes and tax rates that apply, who bears the cost of those taxes and how they’re calculated. Could you also provide us with guidance on the compliance requirements in each country?”. This could be for EU and non-EU countries.

Another common project is to look at insurance policies and confirm the type of insurance to ensure its taxed correctly or looking at location of risk for an insurance type. This will involve analysing a sample policy from the client to confirm what the insurable risk is so that the correct rules are applied on taxing it in the relevant countries.

Sovos’ IPT customers tend to deal in non-life insurance; we’re often asked to look at property policies or liability risks. Spain, France, Portugal and Belgium are the countries we’re asked most about due to their complicated IPT and parafiscal charges regimes and different rates.

We are also asked questions about non-admitted insurance. For example, if a company is writing insurance but isn’t licensed in that country, they might have questions about how the taxes are calculated, who is liable for the taxes, who should settle taxes etc. These questions tend to be from non-EEA insurers writing policies in EEA countries.

Brokers are another type of client we deal with, or as part of discussions with insurers when there are queries around who is responsible for settling taxes on premiums. We’re able to offer advice to both the insurer and the broker in these cases.

Where do tax teams need support and how does Sovos help?

Tax teams want certainty that they’re charging the correct taxes, and that they’re compliant in settling those taxes with the relevant countries’ authorities. That’s where we come in, providing guidance as well as reporting. We’ve received feedback from clients saying the reports have been especially useful to show senior stakeholders that tax compliance is being maintained. The reports are also an important document to have on file that demonstrates that there was an issue identified and they received external advice. Having this activity on record for senior managers and both internal and external auditors is important. If a tax team is asked any questions by tax authorities, they can provide evidence.

We tend to work with tax teams in the planning stages, when an organisation wants to identify any potential tax issues ahead of time to ensure systems are updated and compliant from day one.

What are your thoughts about the IPT landscape the future of IPT?

I have a few thoughts.

The first is about Germany’s IPT laws. When the country changed its IPT law at the end of 2020, the authority extended the scope of who could potentially be taxed for German IPT. There was some thought that other countries in Europe might try to do the same, the Dutch being a good example where current legislation does potentially allow this under certain circumstances. But because the application of Germany’s law wasn’t the most successful, there’s a feeling that other countries are unlikely to follow this path for the moment.

There is also the question whether or not IPT will be abolished in the UK and replaced with VAT. The government is in the process of starting a VAT consultation on financial services, and it’s likely that this proposal will be included in the discussions between HMT, HMRC and the insurance market including both insurers and brokers. This consultation will likely run for a couple of years, so we won’t know the results for some time, and it is possible that any decisions on this point may be delayed by the timing of the next general election.

There is also always the discussion of the digitization of IPT. There hasn’t been much movement on this recently. Ireland is in the process of digitization and France was due to follow suit but has postponed until next year. We are already helping our customers to possess the ability to file IPT online when this does become a requirement.