South Korea has an up-and-running e-invoicing system that combines mandatory e-invoicing with a continuous transaction controls (CTC) reporting obligation. This mature and well-established system, launched over a decade ago, is seeing its first significant changes in years.

Presidential Decree No. 31445 (Decree) has recently amended certain provisions of the Enforcement Decree of the Value-Added Tax Act. Among other changes, the scope of e-invoicing has been expanded and a new timeline and threshold limits introduced. This means that more taxpayers in South Korea must comply with e-invoicing rules in accordance with the timelines.

What is the new timeline and threshold limits for e-invoicing?

In South Korea, e-invoicing has been mandatory for all corporate businesses since 2011. From 2012, individual businesses (entrepreneurs) have also been required to comply with e-invoicing obligations if they meet the threshold limits which have been updated a couple of times over the years. Currently, an individual business whose aggregate supply value (including transactions that are tax exempt) for the immediately preceding tax year is KRW 300,000,000 or more, is required to comply with the country’s e-invoicing rules.

After the recent amendments, the current threshold is now lowered to KRW 200,000,000 and the new threshold limit will be applicable from 1 July 2022. The tax authority has already communicated further adjustments, announcing that from 1 July 2023, the threshold will be reduced further to the limit of KRW 100,000,000. The Korean tax authority aims to enhance the transparency of tax sources by requiring more businesses to comply with the e-invoicing rules.

What´s next for e-invoicing requirements in South Korea?

The expansion of the scope of e-invoicing obligations does not come as a surprise. Like in many other CTC jurisdictions, transactional data collected from a larger number of taxpayers provides greater insight to the tax authority about VAT, market trends and more.

Due to its success and maturity, e-invoicing in South Korea continues to inspire other countries in the Asia Pacific region. The Philippines tax authority is in the process of launching an e-invoicing pilot for the country’s 100 largest taxpayers from 1 July 2022. When designing their e-invoicing system, the Philippines tax authority had several meetings with its South Korean counterparts to benefit from Korean expertise and experience. Therefore, the Philippines is introducing a relatively similar CTC system to the Korean one.

Take Action

Need to ensure compliance with the latest e-invoicing requirements in South Korea? Get in touch with our tax experts. Follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and updates.

Whilst the UK leaving the European Union (EU) on 31 December 2020 seems like a long time ago, UK businesses still have to deal with changes to the processes in place when importing goods from suppliers in the EU.

Customs Declarations

Throughout 2021, goods imported into Great Britain from the EU were subject to several easements from a customs perspective. This was to reduce the burden of completing full customs declarations and dealing with all of the consequences of importing goods that were previously not subject to import documentation and controls.

UK businesses were unprepared, partly due to impacts from the COVID-19 pandemic, so these simplifications were extended a few times during 2021. As of 1 January 2022, goods moving between the EU and Great Britain will be subject to full customs declarations and controls. Subsequently, there is no longer the ability to defer customs declarations as was previously the case.

Additionally, any customs duty due on goods will be due at the time of entry rather than when the customs declaration is submitted, as was the case in 2021. Businesses can achieve delayed payment of the customs duty by applying for a duty deferment account with HMRC. In some instances, it can be achieved without the need for a financial guarantee to be lodged, so it is worth considering.

Due to the negotiations between the UK government and the EU on the Northern Ireland Protocol, imports of non-controlled goods from Ireland and Northern Ireland will not be subject to these changes. The previous easements will still apply. This means that customs declarations can be delayed for up to 175 days. The UK government will make further announcements once the discussions on the Protocol have been completed. We will update further when that happens.

Import VAT

Regarding import VAT, Postponed Import VAT Accounting (PIVA) remains available and, whilst not compulsory, it is recommended, as it provides a valuable cashflow benefit.  It applies to imports from all countries and not just the EU. Unlike in some EU countries, it is not automatically applied and has to be claimed when the import declaration is submitted. Therefore, the importer must advise whoever submits the declaration to complete it accordingly. If it is not claimed, import VAT is payable at the time of entry and will have to be recovered on the VAT return – HMRC continues to issue the C79 certificate when VAT is paid at the border, and it is required evidence to recover VAT.

Businesses will also need to remember to download the monthly PIVA statement from HMRC’s website – this is required to determine the amount of import VAT payable on the VAT return. This needs to be done within six months as it is not available after that time.

Intrastat declarations

Another change is regarding Intrastat reporting for imports into Great Britain from the EU.  Arrivals declarations were required during 2021 to provide the UK government with trade statistics, given that importers could delay submitting full customs declarations. Intrastat arrivals are now only required for goods moving from the EU to Northern Ireland – this is because Northern Ireland is still considered part of the EU for goods.

The EU-UK Trade and Cooperation Agreement provisions have to be considered when importing goods from the EU especially regarding the origin of the goods and whether the import is tariff-free. This has been in place since 1 January 2021, but there are practical changes that are considered further in our article which discusses the origin of goods and claiming relief on trade between the EU and UK. These changes mean that imports from the EU are treated in the same way as imports from any other country, except for goods from Ireland and Northern Ireland, which are still subject to special arrangements.

Take Action

Keen to know how changes between the EU and UK will impact your VAT compliance obligations? Contact us to find out more.

The EU-UK Trade and Cooperation Agreement (TCA) provides for tariff-free trade between the United Kingdom (UK) and the European Union (EU) but does not work in the same way as when the UK was part of the EU.

Before Brexit, if the goods were in free circulation within the EU, they could be moved cross-border without incurring any additional customs duty. Therefore, the origin of the goods was not relevant for this intra-EU movement. If the goods originated from outside the EU, customs duty would have been paid as required when they first entered into free circulation but was not payable again.

This difference creates issues for UK businesses where they import finished goods into the UK first before being sold to the EU. As the goods are not being processed in the UK, they cannot be of UK origin and will be subject to double duty unless specific duty mitigations measures are taken.

The same tariff-free trade between the EU and the UK can be achieved under the TCA, but it depends on meeting the detailed rules within the agreement. The key is in the origin of the goods and whether they qualify under the terms of the TCA. This ensures that only eligible goods are tariff-free and removes the risk of goods entering from outside the Free Trade Area without paying customs duty.

The requirement for goods to be of relevant origin to benefit from zero tariffs on imports under the TCA has been in place since 1 January 2021.

Claiming and evidencing relief

If goods meet the appropriate rules of origin, preference can be claimed on the customs declaration when they are imported. Thus, the claim is made by the importer of the goods. However, it is not as simple as completing the appropriate box on the declaration; there is a requirement for the proper evidence to be held.

To claim tariff preference, the importer needs to have one of the following proofs of origin:

If they are relying on a statement of origin, the exporter will have to prove that the goods are of appropriate origin to qualify.

End of easement

In 2021, there was a light touch approach towards holding evidence when the customs declaration was made. The TCA allowed for a declaration to be made and the evidence to be obtained later to reduce the burden on business.  There is still a requirement to provide the appropriate evidence on request, so businesses must ensure that it will be available if necessary.

There may be checks that the goods are of appropriate origin to be free of duty under the TCA.  With effect from 1 January 2022, there is a need to have the appropriate evidence that the goods meet the origin requirements when the declaration is lodged. Therefore, businesses will need to ensure that the appropriate documents are immediately available should they be requested.

Post import claims for relief

Businesses should note that it is not obligatory to claim preference at the time of entry of the goods as claims can be made up to three years later, as long as there is valid proof of origin. It is beneficial to claim preference at the earliest possible time to benefit cash flow and provide certainty of the cost of the goods.

Therefore, businesses will need to ensure that they determine origin of goods correctly and have the appropriate evidence to support the goods being tariff-free.

It’s important to remember that the rules for trade between Northern Ireland and the EU are different because of the Northern Ireland Protocol.

Take Action

Get in touch with Sovos to discuss your company’s obligations for cross-border trade.

The introduction of the new Portuguese Stamp Duty system has arguably been one of the most extensive changes within IPT reporting in 2021 even though the latest reporting system wasn’t accompanied by any changes to the tax rate structure.

The new reporting requirements were initially scheduled to start with January 2020 returns. However this was postponed until April 2020 and once again until January 2021 due to the COVID-19 pandemic.

How does this affect reporting?

In addition to the information currently requested, mandatory information required for successful submission of the returns now includes:

Lessons learned and how Sovos helps you adapt

Our reporting systems have evolved to help customers meet these new requirements.

For example, our technical department have built a formula that confirms a valid ID to ease data validation and reporting. Consequently, a sense check was built within our systems to determine whether an ID is valid.

With the recent change in the treatment of negative Stamp Duty lines, we’ve also changed our calculations to account for two contrasting methods of treating negatives within our systems.

Previously, both the Portuguese Stamp Duty and parafiscal authorities held identical requirements for the submission of negative lines. However, the introduction of the more complex Stamp Duty reporting system called for amendments to the initial declaration of the policy.

Understandably, this new requirement is a more judicious approach towards tax reporting and will likely be introduced within more tax systems in the future.

Looking ahead

As with any new reporting system, changes within your monthly procedures are necessary. Our IPT compliance processes and software are updated as and when regulatory changes occur providing peace of mind for our customers.

And with each new reporting system, we learn more and more about how tax authorities around the world are trying to enter the digital age with more streamlined practices, knowledge and insight to increase efficiency and close the tax gap.

Take Action

Contact our experts for help with your Portugal Stamp Duty reporting requirements.