Compliance Category: Länder-Updates

VAT Reverse Charge scheme for scrap metal industries 

The Revenue Department of Thailand intends to introduce a VAT reverse charge scheme in the scrap metal industry in 2024 as a means of combating VAT refund fraud. Lavaron Sangsnit, Director General, says more than half of the fake VAT invoices were issued by scrap metal businesses to get tax refunds.  

Businesses involved in the scrap trading ecosystem, including iron smelters businesses and the ultimate buyers, will be required to submit purchase or sale invoices to the department. An official decree will be issued by the RD in January 2024. 

Tax on foreign digital service provider

Last year we communicated on the proposal of imposing VAT obligation on digital services and goods from Foreign Digital Service Providers (DSPs).  

This proposal (House Bill No. 4122) has been approved by the House of Representatives and is now passed onto the Senate for the next step in the legislative process. 

Under the bill, Foreign DSPs that supply digital goods or services to Filipino consumers are required to collect, calculate, and remit 12% of VAT.  

 

Extension of the amnesty for fines and financial Penalties

ZACTA (Zakat, Tax and Customs Authority) first announced the Exemption of Penalties Initiative in June 2022 to mitigate the finance implication resulting from the global pandemic, this initiative was scheduled for six months but was extended till June 2023.  

ZATCA has recently confirmed another extension of the initiative, with an expiry date of December 31, 2023. As part of the initiatives, fines including late filings, late registrations, and VAT field control violations relating to e-invoicing are cancelled for all taxpayers. 

A simplified guideline explaining fine exemptions can be found here. 

Croatia – Fiscalisation 2.0

Despite 2022 being relatively muted with respect to e-invoicing developments in the country, Croatia has been significantly more vocal in its support for introducing Continuous Transaction Controls (CTCs) in 2023. CTCs serve as potent government measures which help to reduce VAT gaps, with the corollary of developing and automating wider fiscal procedures. 

Kofax has been monitoring developments in respect of the Croatian government’s ‘Fiscalisation 2.0’ project. Our recent post confirms the main goals associated with the project.  

To this effect, the government has recently issued an announcement regarding the initiative which can be accessed here (in Croatian only). Currently, the plan is very much in its infancy, but with significant developments expected over the coming months. 

With a tentative time period of 2024 confirmed for the roll-out, Kofax will keenly follow project developments and consider Kofax’s role within the wider project. 

Access to documents and applications with the APIs of the FOD Finance

The Belgian Federal Government (FOD Finance) wants to facilitate data exchange between taxpayers and the FOD Finance via the use of Application Programming Interfaces (APIs). API connections hold obvious advantages: they reduce the frequency of logins, clicks and actions when navigating file management. Specifically, with reference to the FOD Finance, the benefits extend to: 

  • Consulting documents from the FOD Finance directly from an accountancy software package  
  • Submitting periodic VAT returns.  

For enablement, software package developers must link the FOD Finance APIs to their own software packages. 

Further information on the APIs can be located via the following website: 

https://financien.belgium.be/nl/E-services/apis-fod-financien  

Proposed VAT registration threshold increase

VAT registration threshold increases are typically the result of careful strategic fiscal consideration by governments. They can be instigated because of external wider pressures, such as inflation, but can also offer benefits for smaller business, who will find themselves relieved from miscellaneous VAT administrative-related tasks. 

To manage their own fiscal agenda, the Slovak Ministry of Finance has proposed a change to the country’s VAT registration threshold, from 49,750 Euros to 50,000 Euros.  This proposed increase is currently subject to public consultation.  

You can read more about e-invoicing in Slovakia on our country-specific dedicated page here.  

Strategic agenda EU Council published

EU Member States take turns to host the EU presidency and oversee the smooth functioning and operations of the organisation.  

Spain, Belgium and Hungary, who will hold the EU Presidency consecutively for the next 18 months, have now published their joint programme of priorities.  

Unsurprisingly, one of the priorities will be to modernise and simplify the common VAT system by embracing digitalisation, and on work aimed at closing the VAT gap, for the benefit of both the national and EU budgets. 

The following link from the Council of the European Union outlines the main aims of these countries, and the strategies whereby the realisation of these goals can be fulfilled: 

https://data.consilium.europa.eu/doc/document/ST-10597-2023-INIT/en/pdf?mc_cid=b9c55a3f02&mc_eid=ceb0344f84 

Commission initiative to amend administrative cooperation

Combatting VAT fraud is a major concern for EU Member States, but also the European Commission who oversees and administers e-invoicing policy. 

To this effect, the Commission plans to amend existing EU rules on administrative cooperation and combating fraud in this field, with the aim to equip tax administrations with adequate tools to strengthen their capability in this department. It has requested feedback until 3 August 2023 via the following link: 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13685-VAT-amendments-to-legislation-on-administrative-cooperation_en 

Electric energy invoice update

Brazil’s e-invoicing system differs significantly from other countries, and arguably can be said to have one of the most challenging tax systems in the world. 

Brazil’s tax topography is complicated, typically hosting a different e-invoicing format for different services. For example, Brazil holds a different invoice format specifically for energy services, also referred to as NF3-e. 

This month, via an official publication in the Diario Oficial da Uniao), Brazil has delayed the mandatory implementation of the NF3-e in line with the following: 

  • 1 June 2023: Minas Gerais 
  • 1 October 2023: Espirito Santo 
  • 1 January 2024: Santa Catarina 
  • 1 June 2024: Sao Paulo  

These changes took effect on 17 May 2023, with the date of their publication present in the Diário Oficial da União (DOU). 

You can refer to further e-invoicing developments in Brazil on our dedicated country-specific page here. 

VAT in the Digital Age (ViDA) potential implementation delay

Last month, the ECOFIN conference exposed various concerns around the VAT in the Digital Age (ViDA) proposal.One of the enduring contentious points relates specifically to the timing of the proposal.  

The European Parliament has issued a proposal to the European Commission, outlining its intention to delay each pillar of ViDA by 2 years.  

This is supplemented by other concerns raised in response to the proposal. In total, the European Parliament has proposed 251 amendments in a draft report. 

More information on the proposed amendments are available on the EU website: 

https://www.europarl.europa.eu/doceo/document/ECON-AM-749001_EN.pdf 

The European Commission will, in turn, need to consider the proposed revision to its original schedule. 

The ViDA proposal will have radical implications for e-invoicing and e-reporting (BLOG LINK INSERT) over the next decade. Its significance cannot be underestimated. To this effect, Kofax is closely monitoring developments in respect of the ViDA proposal and will keep you informed of the same. 

Business Payment Coalition (BPC) update – Remittance Delivery Validation Report

If e-invoicing developments in the European Union are taking pace, equally significant developments in the US are also shaping the e-invoicing curvature in the country.  

The Business Payments Coalition (BPC) has announced that the Remittance Delivery Work Group recently completed a validation phase where the group successfully demonstrated the operational feasibility of an exchange framework to deliver electronic remittance (e-remittance) information. 

Given the success of the validation phase, the working group is now logically touting moving to a pilot phase, supporting all electronic B2B payment methods. Consequently, the BPC, with support from the Federal Reserve, will soon proceed with facilitating an E-remittance Exchange Pilot.  

The following article will provide greater insights into the operations of the validation phase and the overall aims associated with the proposed pilot:  

https://fedpaymentsimprovement.org/news/blog/exchange-framework-validated-for-e-remittance-information/?utm_source=bpc_internal_email&utm_medium=email&utm_campaign=exchange_framework_validated_for_eremittance_information 

The pilot represents an exciting development for the BPC, and more widely for the exchange of electronic B2B payments in the US. Kofax is closely following developments in respect of the pilot and will keep you informed of the same. 

Major fiscal reforms

Our recent post commented on the political changeover in Brazil. As is often the case, political shifts correspond with significant fiscal adjustments, as new governments seek to assert their own agendas on the wider economic framework. 

True to promise, the new government in Brazil appears to be preparing to implement major fiscal changes in the country that look set to permanently alter the fiscal circuit in the country.  

The reforms, expected to take place from 2026, will merge the current five levies in the country into a value-added tax (VAT) with separate federal and regional rates.  

In a long-term indication of Brazil’s ambitious plans, tax will be determined from where goods are consumed as opposed to where they are produced, stretching over a 50-year transition period commencing from 2029. 

The tax reforms are radical and will inevitably spawn debate in the Senate. Currently, the reform has been approved by the Lower Congress, and will now be sent to Senate for a definitive conclusion. 

Kofax will monitor further updates in respect of the same.  

South America is currently hosting some exciting e-invoicing  developments in the region- you can read more about these here. 

New government plans on transition to real-time economy

Finland’s response to e-invoicing and the wider digitisation of its fiscal procedures has been more muted when compared to its European counterparts. However, the Finnish government has strongly hinted at the expansion of its tax infrastructure via introducing a real-time platform economy.  

More specifically, this trajectory would relate to the transfer of company documents, including e-invoices, in a digital form in a secure manner.  

Currently, the plans are not so fully fledged as to suggest that B2B e-invoicing will be mandated in the country, nor have any concrete timeframes been confirmed in this regard. However, it confirms that the digital transfer of e-documents is a significant preoccupation for EU Member States which is likely to heavily influence country policy and legislation.  

Please refer to further information in respect of the same here: 

https://valtioneuvosto.fi/documents/10184/158702198/Neuvottelutulos+hallitusohjelmasta+16.6.2023.pdf/2febf7a7-d5a1-6f17-df2d-95561de7a6de/Neuvottelutulos+hallitusohjelmasta+16.6.2023.pdf/Neuvottelutulos+hallitusohjelmasta+16.6.2023.pdf?t=1686924779616 

Finland has also recently commented on its support for the VAT in the Digital Age proposal, indicating that the country is leaning towards further digitisation and automation of its wider fiscal infrastructure. 

Authorization for split payment mechanism

Our recent post commented on Italy’s pursuit for the continuation of the split payment mechanism. The post explains why the split payment mechanism is regarded as an effective measure to counter VAT fraud.  

The European Commission has now authorized Italy to continue with the use of the split payment mechanism until 30 June 2026. Notably, companies listed on the FTSE MIB Index will be excluded from the split payment mechanism from 1 July 2025. 

The split payment mechanism is strongly associated with Polen, who similarly received authorization to continue with the feature in April 2022. Our e-invoicing solution in Poland today accommodates the split payment mechanism, if relevant to our customers.  

Incentives for taxpayers to adopt e-invoicing

Thai Revenue Department (RD) introduced e-invoicing regulations in 2017.  While there is no obligation to adopt e-invoicing, taxpayers who opt to do so must comply with the regulations. 

Taxpayers are required to transmit their e-invoices to RD by the 15th of the following month under the e-invoicing regulation. Invoices transmitted to RD must carry digital signature and certificate, which can be obtained using a specific USB-like hardware from RD. 

A three-year deduction incentive was implemented by the Thai Revenue Department in 2019 to encourage the use of e-invoicing, which was further extended to 2025 by Royal Decree No. 766 released in June 2023.  In accordance with Decree 766, a company or juristic partnership is eligible to deduct up to 100% of the following expenses: 

  • Expense for investment in an electronic system including computer equipment and software for eInvoice and eReceipt; Equipment for storing electronic certificates or other equipment used together with a computer for preparing, delivering, receiving, or maintaining e- tax invoices or e- receipts. 
  • Fees paid to service provider of eInvoice and eReceipt systems.