Compliance Services

We predicted in our last post that Columbia’s new government would initiate a number of fiscal-related reforms in the country. It is now evident that the new government is acting decisively in respect of e-invoicing practices in the country.

In March 2023, the government issued Decree 442, which introduced some changes to the country’s e-invoicing regulations.

These updates can be summarised below:

• A requirement that e-commerce platforms provide services allowing users to issue and deliver e-invoices
• Extending the scope of the e-invoicing system to include all electronic tax-related documents
• The introduction of a new definition of electronic equivalent document
• Specific modifications to the electronic supporting document with respect to transactions with taxpayers not required to issue invoices

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

The mandatory implementation of the NF3-e has been postponed to 1 June 2023 for the state of Espírito Santo. The NF3-e refers to a specific type of invoice in Brazil- the Electric Energy Electronic invoice. The postponement has been captured in the Ajuste Sinief 2/2023.

The updated timeline in respect of the NF3-e implementation looks set for the following trajectory:

• 1 June 2022: Mato Grosso
• 1 October 2022: Alagoas, Amapá, Amazonas, Bahia, Maranhão, Mato Grosso do Sul, Pará, Paraíba, Pernambuco, Piauí, Rio de Janeiro, Rio Grande do Norte, Rondônia and Sergipe
• 1 December 2022: Acre
• 1 February 2023: Roraima
• 1 April 2023: Tocantins
• 1 June 2023: Espírito Santo, Santa Catarina, São Paulo and Minas Gerais

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

Our previous post in respect of e-invoicing in Guatemala commented that small taxpayers were required to adhere to e-invoicing obligations by 31 March 2023. This has now been extended to 1 July 2023, as per resolution SAT-DSI-400-2023, dated 31 March 2023.

Our post in December 2022 commented on the Carbon Border Adjustment Mechanism (otherwise referred to as CBAM), which expresses a markedly environmental agenda by taxing carbon emissions of specific goods. The CBAM implementation timeline is now taking pace, with the European Parliament adopting legislative rules in respect of the CBAM in April 2023. A transitional phase is expected to begin from 1 October 2023.

The transition phase will impose some specific obligations on EU importers- specifically, EU importers of goods covered in the scope of the CBAM regulations will be required to submit quarterly reports of any emission to the European Commission.

Currently, carbon-intensive sectors such as aluminium, cement, iron and steel, fertilizers, hydrogen and electricity are covered by CBAM. It is however forecast that CBAM will be extended in the coming years to all products covered by the EU Emissions Trading System (ETS), vastly extending its scope.

The effects of CBAM have the potential to be profound. It will be intriguing to see whether increased costs associated with carbon usage will dictate more conventional fuel usage in an era where environment and conservation awareness continues to expand.

Cyprus, following recent VAT changes in the country, is proposing yet further changes as part of its fiscal overhaul- including a reduction in the standard rate and reduced rate for specific goods. The move endeavours to target basic everyday goods such as milk and eggs and is expected to last until 31 October 2023.

Cyprus is a compliant territory for Tungsten Network and our solution supports all valid VAT rates in the country.

If tax rate changes are also becoming more visible today, tax rate changes pertaining to a distinctly environmental agenda are also becoming a more integral feature in the regulatory framework across Europe.

Poland is the latest country to mark a Single-use Plastic directive (SUP) as part of its wider fiscal infrastructure- which, as the name suggests, is motivated to prevent the use of single-use plastic. The rules are expected to have wide-reaching effects, with the Act effectively banning specific types of plastic on the market. In effect, a ‘plastic tax’ will be introduced for entities who sell single-use products to consumers. Fees for contravening these rules are expected. The Act is expected to take effect from 1 July 2024.

Tungsten Network will review is obligations in respect of the tax. The Act has been passed in Parliament, and the president signed the law implementing the EU directive on single-use plastic in April 2023.

While the discernible trend to reverse VAT rates is appearing to be more commonplace, there is an element of predictability associated with the practice, as countries attempt to regain a sense of economic stability which was only really apparent prior to the pandemic. Tax rates have a direct correlation with wider economic and societal agendas. As a result, we can expect multiple countries to adjust their VAT rates in the coming months.

As part of its spring Memorandum, Netherlands will re-visit its 9% reduced VAT rate and its zero-rated category, with a means to simplify their application. The Memorandum makes some stark admissions, including an analysis of whether the reduced rate actively achieves its desired aim of encouraging spending and general support for specific sectors. The Memorandum also candidly concedes that wealthiest households benefit almost twice as much as other households from reduced rates. Such conclusions indicate that the application of reduced rates must be re-considered, considering a more equitable tax distribution.

Netherlands is a compliant territory for Tungsten Network. Our portal solution incorporates all valid VAT rates in the country and we will continue to monitor any tax rate changes in the country.

Romania is the latest EU member State to comment on the VAT in the Digital Age (ViDA) proposal, following in the path of Italy last month who actively engaged with the proposal and launched a public consultation in response.

In respect of the e-invoicing and e-reporting components of the proposal, the Romanian Senate is largely supportive of the proposal. Specifically, however, they have noted that domestic transactions can be aligned with local requirements, rather than those set out in the intra-community reporting obligations.

The ViDA proposal has significant ramifications for e-invoicing and e-reporting over the coming years. You can read more about the proposal here.

VAT rates associated with power and gas supplies have sharply come into focus- in an era where energy prices are rising, and especially during the winter months when reliance on these elements increases. Several countries across the content have adjusted VAT rates to accommodate rising inflation.

As inflation subsides, it is inevitable that countries will turn their attention to restoring previous VAT rates- which is unsurprising, as the summer months lead to less energy reliance. This also mirrors the discernible trend of countries effecting pre-covid tax rates.

Finland will now restore the standard rate of 24% on electricity from 1 May 2023. This will reverse the temporary 10% rate applied to electricity from 1 December 2023. This rate was temporarily introduced in December 2022.

Finland is a compliant territory for Tungsten Network and our e-invoicing solution supports all valid VAT rates in the country.

VAT rate changes are significant tax measures, and, while once rare, are now becoming more ubiquitous in an era of economic uncertainty.

Estonia is now following in the footsteps of its European counterparts Switzerland and Czechoslovakia by proposing a rise in its standard VAT rate, as well as an alteration to the VAT rate for services in the county.

The proposed changes are as follows:

• Standard VAT rise from 20% to 22% – forecast presently for 1 January 2024
• The VAT rate applied to services would rise from 9% to the standard rate of 22% from 1 January 2025.

Estonia is a compliant territory for Tungsten Network and we will support the VAT rate change if confirmed.