What VAT compliance developments should we expect in the coming years? Will the speed and variety of change continue? What dominant trends will emerge?
Popularity of E-Invoicing
The popularity of e-invoicing is increasing around the world, and Europe is no exception. Following the successful implementation of mandatory e-invoicing in Italy in 2019, France announced its intention to introduce mandatory e-invoicing in B2B transactions starting in 2023. The French government plans to implement a system where VAT returns would be pre-filled with data gathered from invoices exchanged between companies. Tax authorities would be able to compare purchase and sales data automatically with pre-filled information. Article 135 of Law 2019-147 of December 2019 stipulates that "invoices in transactions between taxable persons shall be issued in the electronic format and the data contained therein shall be transmitted to the tax administration for the purpose of modernizing the collection and control of VAT." Poland also announced its intention to introduce mandatory e-invoicing, but no details or legislative proposals have been disclosed yet. Greece has already taken some steps to prepare for an invoice clearance model: last year, it adopted a bill that mandates the competent authorities to issue secondary legislation that would define the e-invoice format exchanged between the parties in B2B transactions and regulate a special scheme for accredited e-invoicing service providers. Since e-invoicing is more efficient than traditional tax reporting, more countries may follow suit.
Demand for Transactional Data
Another compliance trend that will undoubtedly continue is tax administrations’ demand to provide transactional data. Countries that choose not to introduce mandatory e-invoicing to gather invoice-level data will be asking taxpayers to provide transactional data in other formats. Some countries will rely on the standard audit file for tax (SAF-T), which will be submitted either periodically or on the tax authority's request. Norway has just implemented a SAF-T obligation: As of Jan. 1, 2020, businesses now need to prepare SAF-T files upon request in the case of tax audits.
SAF-T pilot programs are underway in Romania and Hungary. The Greek tax administration is planning to maintain taxpayers’ electronic books (recording a company’s transactions and other accounting information) on its digital platform myDATA beginning this year or next.
Looking at the long-term future and the increasing demand for granular transactional data, it is quite likely that VAT returns will ultimately be pre-filled or compiled by tax administrations. Tax administrations will receive transactional data automatically via the e-invoicing systems or directly from businesses' own ERP systems on a regular or real-time basis.
Pre-filled VAT returns will become reality in Italy this year. Beginning in July, the Italian tax administration will create VAT ledgers and draft quarterly VAT returns for Italian resident businesses. These will be based on transactions processed through the e-invoicing system (Esterometro) and daily online cash register data. Businesses will be able to review and amend the returns prepared by the tax administration. For transactions carried out as from Jan. 1, 2022, the annual VAT return will also be automatically populated by the tax authorities.
Similar developments are taking place in Spain. The Spanish tax authorities intend to implement a new tool that will enable them to create draft VAT returns that would be provided to taxpayers for confirmation.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
Aleksandra Bal is senior product manager, responsible for leading the further development of Vertex VAT reporting and compliance solutions. Aleksandra has extensive experience in international taxation and VAT, including managing and developing digital solutions and digital transformation initiatives. A published author and speaker, Aleksandra holds a Ph.D. in virtual currency and blockchain, as well as several other advanced degrees and designations of distinction.