An Introduction to our New Interactive Global e-Invoicing Compliance Map
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An Introduction to our New Interactive Global e-Invoicing Compliance Map
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An Introduction to our New Interactive Global e-Invoicing Compliance Map
- 1. An Introduction to our New Interactive Global e-Invoicing Compliance Map April 28th 2022 B A S W A R E B R E A K F A S T B R I E F I N G
- 2. THE EUROPEAN TAX GAP € 120.000.000.000* *Study and Reports on the VAT Gap in the EU-28 Member States Final Report, European Commission, September 2020.
- 3. 3 T H E D I F F E R E N C E I N E - I N V O I C E C O M P L I A N C E M O D E L S • Post-audit view to compliance • Freedom to choose e-invoicing method • Mandatory e-invoicing • Technical integration requirements NORTH AMERICA AUSTRALIA & NEW ZEALAND EU B2B EU B2G LATIN AMERICA ASIA, RUSSIA, TURKEY VARYING COMBINATION OF LEGAL, TECHNICAL AND PROCESS REQUIREMENTS POST AUDIT MODEL (evidence) CLEARANCE MODEL (control) ITALY
- 4. 4 1 2 3 5 POST AUDIT MODEL (EVIDENCE) CLEARANCE MODEL (CONTROL) 4 1 2 3 4 4 order goods invoice supplier buyer government tax declaration tax declaration order goods supplier buyer government invoice invoice HYBRID MODELS
- 5. T H A N K Y O U
Editor's Notes
- Thank you for joining today - follow-up series, on demand webinar is available and we can provide the link to registrants after this session
- But first, before we start to have a more detailed look at our new interactive compliance map, let’s have a look at the reasons, why the topic of e-Invoice compliance is getting more and more important. Has anyone heard of the ‘Tax Gap’?. It’s the difference between what a country should get from companies as tax revenue, and what a country actually gets. Of course, it’s an estimation, as the first number is based on guessing. But recently, in a paper that was issued by the European Commission and was published in September last year, they quantified it. The tax gap was estimated at 120 billion euro (click). That is massive. But what does it mean for you? It means countries in Europe will start changing the way they do control commerce. The EU and a lot of countries all over the world invested a significant amount of money to cover losses in the economy, caused by measures to fight the pandemic. Now, this spend needs to be financed and recovered. And where should the money come from, if you don’t want to raise taxes to make sure you’re not impacting economic recovery? It’s obvious, fighting the tax gap is a great approach for governments, making sure to get the money in. And the invoice plays a key role in that process, as it is the prime audit source for tax collection.
- And this is why a lot of governments started initiatives to get better control and transparency on invoices in real time. The trend we can see already started some years ago, mainly in the Latin American countries… an increasing shift from post audit models to more real-time mandatory controls. Post audit models (like what the US and Europe follows –at least for the moment - , where the view to compliance is after the fact and companies are allowed to choose their preferred way of (e-) invoicing and Clearance models (mainly used in Latin America, where the requirements are more upfront and stringent), for example specific e-invoice formats. These are two basic models for invoice compliance, although the “slightly” different ways of many countries approaching tax collection ends up in various and complex requirements in terms of invoicing on global scale. Italy is the forerunner within the EU, the B2B clearance model was introduced beginning of 2019, e-invoicing based on one standard format (SdI-XML) became mandatory, but we see that France, Poland and Slovakia are the countries next in line, already preparing e-Invoice based clearance models.
- Therefore, it’s important to understand the differences of those two models. On the left side, this is the situation today in most European countries, where the buyer starts ordering to the supplier.(click) Supplier delivers goods or services, and in parallel the delivery the invoice. (click) The buyer pays and at the end of the year or month, they both deliver the tax declaration to the government. The government verifies the tax declaration, requires an audit in some cases, performs some random checks and that’s it. This is the ‘Post-Audit-Tax-system’. It’s based on trust, and apparently, that’s how you end up with a tax gap of 120 billion EUR - just in the EU. Now, on the right, this is what a lot of governments are looking at as an alternative. The commerce flow starts the same. Buyer orders, supplier delivers goods of services. But then the supplier delivers the invoice to the government! The government clears it and makes the invoice available to the buyer. (click) But of course, it would be too easy if some countries would not come up with models that combine elements of those two models, so called hybrid models (click). In those ‘hybrid’ models, as an example, invoices are registered before they are issued by the supplier, but not routed through the government’s platform, they can still be sent through traditional channels or service providers. So why are countries doing it? Of course, they want to bridge the VAT gap with that. For example, in France that’s estimated to be somewhere around 10-15B€ /year, but it also helps the government to monitor the economic activity in the country in near real time, it helps to reduce invoice processing costs and payment delays for companies, and to automate part of the VAT reporting process. There is a lot of change going on these days and it’s hard to keep up – this is why we’ve introduced our interactive compliance map, to help you navigate these changes.