Compliance Services

As 1 January 2024 nears in Switzerland, which heralds the introduction of new VAT rates, the country is also accelerating its material to aid taxpayers in a smooth transition to the new VAT rates.  

The Federal Council in Switzerland has produced some material which aids taxpayers in the usage of the new rates, specifically relating to the declaration of the VAT rates. 

Further information can be found via the Federal Tax Administration (FTA). 

You can also read about Kofax’s plans to accommodate the upcoming VAT rates on our dedicated country-specific page here.  

The VAT landscape is set to change quite dramatically as the EU has afforded countries greater latitude to determine their own tax rates. This, combined with a post-pandemic era where countries strive to restore economic stability, means we can expect VAT rate changes to be the norm rather than the exception in 2023 and beyond.  

Cyrus has approved the decision to implement a new 3% VAT rate which will apply to the following products: 

• books, magazines, and similar products, whether provided on a physical basis or in electronic form 
• stairs, lifts, and wheelchairs for persons with disabilities 
• orthopaedic devices 
• street cleaning and dog collection services 
• waste water disposal and treatment 
• entry to the debut of theatrical, musical, dance or classical performances. 

The Council has also enacted the re-categorisation of certain VAT products, including the introduction of a zero VAT rate for the following: 

• typewriters with braille characters and similar electronic devices 
• wheelchairs for persons with disabilities exclusively for their personal use. 

These VAT rate changes still need to be confirmed by the Cypriot Council of Ministers.  

Cyprus is a compliant territory for Kofax and we are following developments around the proposed VAT rate changes. 

We will support the new 3% rate if confirmed and incorporate all valid VAT rates as part of our e-invoicing solution in the country.  

Romania has had a busy 2022, with its implementation of a partial e-invoicing mandate for high-risk fiscal products. With concrete plans for a universal B2B e-invoicing mandate yet to be defined (and likely hindered somewhat by the VAT in the Digital Age (ViDA) proposal), the country is also turning its attention to VAT rates in the country.  

The Romanian Senate is pondering a new 9% reduced rate for food and beverages.  

The new proposed 9% VAT rate would exclude the following: 

• alcoholic beverages 
• specific non-alcoholic beverages falling under CN codes 2202 10 00 and 2202 99. 

The proposal for the new VAT rate was registered for debate at the Romanian Senate in June 2023.  

Romania is a complaint territory for Kofax and we will incorporate all valid VAT rates as part of our e-invoicing solution. We are closely monitoring developments around the new proposed rate and will support it if confirmed.  

Analogous to Germany this month, the publication of the draft proposal for a Council Implementation Decision which authorises Romania to apply for a derogation to mandate B2B e-invoicing represents a promising development towards B2B e-invoicing implementation in the country. Kofax currently supports Romania’s partial e-invoicing mandate implemented in July 2022 relating to high-risk fiscal products. The Romanian government has further publicly advocated a universal B2B e-invoicing mandate, although unlike Germany, initial indications regarding a mandate vision have not yet been specifically disclosed. It is however widely believed to follow the curvature of the high-risk fiscal product partial e-invoicing mandate, where transactions are cleared through the Romanian e-invoicing platform, the RO e-Factura. 

The dates for the temporary derogation come into effect sooner than Germany and are currently forecast for 1 January 2024 to 31 December 2026- (or conversely, until the ViDA proposal is adopted). 

With the B2B e-invoicing mandate plans currently nebulous, it is envisaged that the derogation may trigger Romania to unveil technical specifications in respect of their B2B e-invoicing model.  

Romania is a compliant territory for Kofax and we are closely monitoring e-invoicing developments considering this derogation, and any government announcements concerning the B2B mandate. 

Further information in respect of the derogation can be found here: 

https://ec.europa.eu/transparency/documents-register/detail?ref=COM(2023)329&lang=en 

The Spanish Government has published a draft Royal Decree incorporating details around its projected Business to Business (B2B) e-invoicing mandate.  

The exact e-invoicing model Spain had intended to facilitate was in many respects uncertain – the VAT in the Digital (ViDA) proposal had stalled Spain’s progress in confirming a precise e-invoicing model. Fortunately, the Spanish draft Royal Decree has answered many of the outstanding questions in respect of the mandate.  

Amongst other issues, the draft Royal Decree has confirmed the following: 

• E-invoicing model: a hybrid centralised and decentralised model, where a public platform, alongside private certified platforms, can be utilised for invoice data exchange 
• Invoice formats: Facturae, CII, UBL, EDIFACT- which private platforms must have the capability to support 
• Digital signature requirements: required for private platforms only 
• Requirements for private platform providers: these include, amongst others, the ability to interoperate free of charge and the capability to accommodate all invoice formats, as well the obligation to send a copy of the invoice to the public platform  
• Specific buyer obligations: including the requirement to inform suppliers of the invoice status via specific responses, namely invoice acceptance or rejection and the corresponding date, as well the payment of the invoice and the corresponding date for this. 

As with many other proposed European mandates, the mandate advocates phased implementation, in line with the following: 

• Large taxpayers: 12 months after the Royal Decree publication  
• Remaining taxpayers: 24 months after the Royal Decree publication 

It is presently uncertain precisely when the draft Royal Decree will be approved. Spain is hosting General Elections in July 2023, and, amidst a period of intense political activity, it is certainly not set in stone that the text will be approved before this, or even whether a new potential government would be prepared to continue Spain’s current e-invoicing trajectory. 

Crucially, it is also important to note that Spain has not yet requested EU derogation to mandate e-invoicing in the country. In line with the current VAT in the Digital Age (ViDA) timeline (still to be ratified), the derogation process is still active until 1 January 2024- signifying that Spain presently will still need to request derogation before it can implement B2B e-invoicing in the country. 

The draft Royal Decree has now triggered a public consultation, which is open until 10 July 2023.  

The draft regulation is available via the following link (in Spanish only):  

https://portal.mineco.gob.es/RecursosArticulo/mineco/ministerio/participacion_publica/audiencia/ficheros/ECO_Pol_AP_20230619_RD_factura_electronica.pdf 

While Germany’s discussion paper published in April 2023 provided a solid foundation regarding its e-invoicing plans, it was notable that the corresponding derogation required to mandate B2B e-invoicing in the country had not yet been granted. The European Commission has now, however, commenced the process to grant Germany permission to mandate B2B e-invoicing in the country, further to Germany’s initial derogation request in November 2022.  

The publication of the draft proposal for a Council Implementation Decision which authorises Germany to apply for a derogation to mandate B2B e-invoicing represents a constructive development for Germany in their e-invoicing drive, who have now begun to disclose further details around their mandate.  

The draft proposal envisages that Germany would receive a temporary derogation from 1 January 2025 until 31 December 2027 (or conversely, until the VAT in the Digital Age (ViDA) proposal is adopted). The derogation inception date is significant, as it aligns with Germany’s current proposed mandate start date, although we must be cognizant that this is currently in public consultation.  

Germany is a compliant territory for Kofax and we are closely monitoring the derogation progression, as well as further details around the e-invoicing mandate itself, which is expected in June / July 2023.  

Further information relating to Germany’s derogation can be located below: 

https://ec.europa.eu/transparency/documents-register/detail?ref=COM(2023)340&lang=en 

European Union (EU) Directives typically provide a basis for Member States to absorb EU legislation into their own national legislative frameworks. It is customary practice for Member States to adopt EU law into their own domestic legislation. However, major international incidences such as the pandemic will have exposed the varying needs of each Member State as they encountered unique and exclusive challenges. The EU will have been keenly aware that a single legislative order may not accommodate the fluctuating needs of every Member State.  

An EU Directive, published in the EU Official Journal in April 2022, afforded Member States with increased flexibility to set their own VAT rates, despite some broad restrictions still enduring. Consequently, we can expect VAT rate changes to be ubiquitous in 2023 and beyond. 

Following the path of Schweiz and the Tschechien, who are in the process of amending VAT rates as part of a major fiscal overhaul in their respective countries, Estonia is the latest country to announce a VAT rate change in the country.  

On 12 June 2023, the coalition government approved the following VAT rates: 

• 1 January 2024: Standard rate increase from 20% to 22%  
• 1 January 2025: Reduced accommodation VAT rate increase from 9% to 13%  
• 1 January 2025: VAT rate increase for press publications from 5% to 9% 

The bill incorporating the new VAT rates was approved on 19 June 2023.  

Estonia is a compliant territory for Kofax and we will support the VAT rate changes as part of our e-invoicing solution for both Web Form and Integrated Solution Suppliers.  

Our portal solution will include the new VAT rates in readiness for 1 January 2024 / 2025 as required. We will be in touch with impacted Integration Solution suppliers to manage accommodation of the new VAT rates. 

Following our previous release on Malaysia’s e-invoicing timeline, the Malaysian Inland Revenue Board (IRBM) has formally announced that 4,000 businesses will be included in the first phase of the implementation, where taxpayers with an annual revenue of RM100M are required to abide by the e-invoicing requirements.  The first phase is scheduled to commence in June 2024.  

As part of the Continuous Transaction Controls (CTC) Clearance model, invoice files must be submitted to IRB’s central platforms for real-time verification. IRB will assign a Certificate Serial Number to invoices and provide suppliers with an URL link containing a QR code as an output of verification. The QR code should be attached to the invoice before it is shared with the buyer. Small and medium businesses without an e-invoice system can use IRB’s free web-based solutions that require manual input of data.  

The IRB are expected to issue detailed guidelines regarding the Malaysian e-invoicing systems for businesses that will join the first phase. Over the next few weeks. 

Malaysia’s Inland Revenue Board (IRBM) has announced a Special Voluntary Disclosure Program 2.0 (SVDP 2.0) effective from June 6th, 2023, to May 31, 2024. SVDP 2.0 eliminates penalties/fines for certain voluntary disclosures, such as disclosing undeclared income and paying any tax due within the specified timeframe. The detailed FAQs published by IRBM can help taxpayers understand the categories of accepted disclosures and the assessment years covered by this program. 

 As a result of this initiative, the government encourages taxpayers to come forward voluntarily to declare their income without imposing any penalties or fines. Through this program, taxpayers will be able to increase their level of tax compliance through the AES (Awareness, Education, Services) concept practiced at the Inland Revenue Board of Malaysia (IRBM).  

The GSTN (Goods and Services Tax Network) has published an FAQ on the recently introduced Invoice Registration Portals (IRPs).  

The FAQ contains information on reporting e-Invoices, validating IRNs, as well as how to access the portals offline. You can access the full FAQ here for more details.