Driven by globalisation and the digital transformation, governments worldwide are reconsidering ways to collect tax relevant data. The primary goal is the fight against tax evasion. Countries that have already implemented digital reporting requirements recognise a significant increase in tax honesty.
The rethinking has and will have a significant effect on the internal processes of VAT payers. Companies will need to digitalize their invoicing process. This requires new IT systems and well-trained staff in order to manage this transformation. On the other hand, transaction–based VAT reporting will lead to higher transparency and could – in future, release VAT payers from its obligation to file VAT reporting and go through long fiscal audits.
Currently multinational companies face the challenge of keeping track of all the different reporting systems worldwide.
Already known reporting mechanisms are the Real-Time Reporting, the Standard Audit File Tax filing (SAF-T) and the so called “E-Invoicing”. Real-Time Reporting is the obligation to file lists of all sales/purchases to the tax authority including additional information.
More accounting information needs to be filed in countries that implemented the SAF-T filing. The SAF-T filing also might include information on assets and inventory.
Talking about transaction-controlling, “E-Invoicing” will be the future for most VAT payers. E-Invoicing stands for the digital transmission of invoice data through a digital platform that is operated by tax authorities. A company will issue its invoice in a digital format (i.e. XML) and submit this to the digital platform. The tax authority then will clear the invoice and submit it to the recipient. Depending on the E-Invoicing model, there are “post” or “pre”-clearing systems implemented. Also, there are models that require the recipient confirmation.
Italy has already implemented an e-invoicing model since 2019 and could serve as example for other European Countries. South American countries like Mexico for example already have a longer history of E-Invoicing models.
Now, the European Commission announced that E-Invoicing regulations will be implemented in the EU-VAT directives by the end of 2022. The deadline for the implementation into local VAT law shall be 2024.
A uniform filing system in Europe could provide relief and reduce bureaucracy. Additional filings like Intrastat or EU-Sales list might not be necessary in the future.
A standardised, uniform process within the European Union is a promising approach to make the handling more efficient for VAT payers. Considering that countries already work on the implementation of, or already have implemented, E-invoicing systems, a uniform approach could become challenging.
The start of the e-invoice phase has been made, we will have to wait longer to see what the future holds. HLB’s global team of indirect tax experts can help you stay on top of your indirect tax obligations and comply with regulations across the jurisdiction you do business in. Contact us today!