Navigating the European Union VAT’s Road to E-Compliance

In this article, Vertex VAT Director, Peter Boerhof, examines the use of electronic invoicing and compliance measures for EU VAT, reviewing the common e-compliance models and examining the challenges and benefits of moving to electronic systems, especially in response to the economic impact of the COVID-19 pandemic.

Even as recently as 2008, businesses in the EU were filing paper returns to satisfy VAT compliance requirements. At that time, only a few countries had begun to use electronic invoicing. Brazil was one of those countries, and its electronic compliance approach was widely considered an anomaly in VAT reporting. Fastforward to 2020, and e-compliance requirements for VAT — including continuous transaction control (CTC) — seem likely to become the new normal both in and outside the EU. While this dramatic shift was underway before the onset of COVID-19, the economic distress caused by the global pandemic is likely to accelerate the implementation of e-compliance requirements in most, if not all, EU member states. Thus, it is critical that business and tax leaders understand the various forms of e-compliance requirements, the key factors driving the adoption trend, and the challenges that can complicate compliance with these new rules.