International Tax Compliance

14 Nov, 2022

International Tax Compliance

The loss of VAT revenues and the need to support businesses, particularly SMEs in the wake of the pandemic, has prompted the European Union to take legislative action to strengthen cooperation between tax authorities and to further harmonize procedural rules across the internal market.

The EU Parliament’s “Recommendation C1” regarding a resolution passed on 10 February 2022 poses new challenges for companies’ management of regulatory and tax compliance.

The European Parliament called on the European Commission to:

  • Establish a harmonized common standard for e-invoicing across the EU (taking into account each country’s specific elements
  • Classify a role for e-Invoicing in real-time reporting.
  • Assess the feasibility of phasing-in mandatory e-invoicing by 2023.
  • Examine the possibility of the system providing taxpayers with part of the tax compliance by 2023, making it responsible for declaration compliance.

Many European countries have already introduced e-Invoicing systems which has created a set of heterogeneous standards that will have to be reconsidered in light of the upcoming regulatory intervention.

Note that you will require a sufficiently flexible solution to keep SAP and non-SAP systems connected in order to avoid causing knock-on delays at company level.

In addition, depending on the country and the procedures it has established, it may also be necessary to communicate with intermediary governmental organizations, making the process even more complex and costly.

Dealing with the growing regulatory complexity of e-invoicing, which is country-specific and imposed by different governments around the world, can be frustrating and confusing. Let’s help you clarify a few points.

European Compliance

With regard to B2B e-invoicing, Italy distinguished itself by becoming the first country to make e-invoicing obligatory in this area from 1 January 2019, thus becoming an example for international e-invoicing.

Given the positive results achieved by Italy, which moved before all other EU countries, governments are beginning to realize the multiple advantages of adopting an e-invoicing system similar to Italy’s.

In France and Spain for example, where the automotive, retail and pharmaceutical sectors are highly developed, a mixed scheme was preferred over a centralized model like the Italian one. In these countries, it will therefore be sufficient to communicate VAT data to the government.

In France, this model is identified as a ‘y-scheme’ and will require companies to use a dematerialization platform (“Plateforme de Dématérialisation Partenaire” or PDP) to validate e-invoices before communicating the VAT data to the government.

Similarly, in Spain’s hybrid model, only VAT data needs to be communicated to the state revenue department via the FACeB2B platform.

In Germany, EDI has always been widely used by the leading companies in the automotive, retail, and pharmaceutical sectors comprising the strong industrial fabric of the country.

The recently introduced ZUGFeRD initiative aims to extend the dissemination of e-invoicing to SMEs in Germany, too. The ZUGFeRD format is also compatible and interchangeable with the French FacturX standard.

SAF-T Reporting in Europe

In other European countries such as Lithuania, Norway, Poland, Portugal, Romania and Hungary, e-reporting is done via SAF-T (Standard Audit File for Tax).

SAF-T is one of the standard formats for exchanging accounting data and facilitates the compilation of VAT registers.

More specifically, SAF-T is based on the XML standard and facilitates reporting by organizations to national tax authorities and external auditors.

This file standard is:

  • Used internationally for the electronic exchange of tax information.
  • Generated in a common, readable format, regardless of the software used.
  • Easily exportable.
  • Allows the rapid detection of anomalies in a company’s accounts.

In Europe, the SAF-T system is widely used for VAT compliance, but also for other electronic accounting data.

The laws governing the exchange of data at both European and global levels are constantly evolving. Choosing the Comply digital accounting platform means you no longer have to worry about staying up-to-date with the revisions and changes – it will be done for you by the platform.


Follow us on LinekdIn