Pre-Filled VAT Returns: The Current Landscape

Charles Riordan
August 30, 2021

The widespread adoption of electronic invoicing regimes has given tax authorities access to enormous quantities of taxpayer data.

In many jurisdictions, this data enables tax authorities to summarise a taxpayer’s transactional information for a given filing period. It also enables them to present the taxpayer with a draft VAT Return, filled in ahead of time by the authorities themselves.

This is known as a ‘pre-filled’ VAT Return. This module has now been adopted by several countries, with others planning to implement soon.

Countries introducing pre-filled VAT returns is rising, with variations in models

Chile was the first country to introduce a pre-filled VAT Return, in 2017. Soon after its introduction, more than 92% of taxpayers used the model prepared by the authorities to declare their VAT.

Chile was able to achieve this in part due to the high quality of its IT infrastructure, by which the tax administration was able to process a large volume of purchase and sales records. In addition, Chile provided taxpayers with ‘calculation assistants’ that facilitated compliance.

European countries already using e-invoicing or e-reporting regimes have been quick to follow.

Here are some key processes and implementation dates for different countries:

  • Italy has introduced pre-filled Communication of Periodic VAT Payment forms – the contents of which can be accepted or amended by taxpayers – and is now following up with a pre-filled Annual VAT Return. Data for these returns is taken from electronic invoices that taxpayers submit to Italy’s SDI system.
  • Spain has introduced pre-filled returns for Modelo 303, the country’s periodic VAT Return. Data for the ‘pre303’ is taken from Spain’s e-reporting system, SII, to which invoices must be submitted within four days of issue or receipt (by sellers and purchasers respectively). As in Italy, the pre-filled returns are presented as drafts that facilitate filing; substantive figures in the returns can be amended by taxpayers.
  • Hungary is planning to introduce pre-filled VAT Returns in October 2021 (delayed from July 2021 due to COVID-19).
  • Portugal will potentially combine pre-filled VAT Returns with a new SAF-T structure, the so-called ‘Accounting SAF-T,’ which will come into force in January 2022. The Accounting SAF-T supplements the country’s optional e-invoicing regime.

It’s likely that other countries with e-invoicing or e-reporting regimes, such as Greece (MyData regime, under development) and France (proposed e-invoicing regime for 2023) will follow suit.

Limited scope due to derogation from the EU VAT Directive and technological infrastructure

It’s worth noting that European Union countries cannot mandate electronic invoicing for business-to-business transactions without applying for a derogation from the EU VAT Directive.

Italy has been granted such a derogation, but other countries may be reluctant to enter such an uncertain process. This could potentially limit the scope of pre-filled VAT Return offerings. In Spain, for example, the pre303 was initially available only for certain taxpayers making use of SII and submitting relevant data (though this has since been expanded).

Technical infrastructure can also be a limiting factor in countries’ ability to offer pre-filled VAT Returns.

The benefits of pre-filled VAT returns, and why they’re still being rapidly adopted

Nevertheless, the rapid adoption of pre-filled VAT Returns in the past five years indicates the concept’s staying power.

Tax authorities clearly see efficiency benefits in having a pre-filled VAT Return that are fileable with a simple approval from the taxpayer.

From the taxpayer standpoint, it’s imperative to maintain accurate and complete electronic records that can be reconciled with pre-filled VAT Returns, and accounting software can be a useful tool to achieve this. 

This is just the start of VAT trends and changes across the world

Pre-filled VAT returns are just another example of the complex regulatory tax landscape that organisations must navigate to remain compliant.

As the world moves forward with initiatives like digital transformation and real-time reporting, and new or updated regulations can vary widely across countries, Sovos is on a mission to help you Solve Tax for Good. To find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls.

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Author

Charles Riordan

Charles Riordan is a member of the Regulatory Analysis team at Sovos specializing in international taxation, with a focus on Value Added Tax systems in the European Union. Charles received his J.D. from Boston College Law School in 2013 and is an active member of the Massachusetts Bar.
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