Compliance Services

Tungsten Network has closely been monitoring timeframes around the inception of the mandatory usage of CFDI 4.0 and associated documents in Mexico. Mandatory usage of the CFDI 4.0 and associated documents has been postponed several times.

Once again, mandatory usage of these documents has been delayed. The Mexican Tax Authorities, Servicio de Administracion Tributaria (SAT) have confirmed via a press release that the mandatory usage of the CFDI 4.0 has been extended to 1^st January 2023.

This means that taxpayers can invoice using CFDI 3.3 or 4.0 until 31^st December 2022. Note that Tungsten network is ready to process both CFDI 3.3 and 4.0 invoices as well as both versions of the payment receipt.

The press release published by the SAT can be found here.

The Mexican government has imposed some further requirements regarding the mandatory tax data required on the CFDI 4.0.

In addition to the introduction of the CFDI 4.0, which now becomes mandatory as of 1^st January 2023 (see update above), the following tax data of the CFDI’s recipient will also be mandatory. This data must also be updated and matched with the information on the Mexican Tax Authorities’ database:

• Mexican tax Id (RFC)
• Legal name
• Tax regime
• Zip code

Consequently, businesses will need to collect the form ‘Constancia de Situacion Fiscal’ (proof of tax situation) from the CFDI recipients.

There are several Mexican Tax Authority application forms from which taxpayers can validate this information, including:

• https://www.sat.gob.mx/aplicacion/login/53027/genera-tu-constancia-de-situacion-fiscal
• https://www.sat.gob.mx/aplicacion/login/28889/obten-tu-cedula-de-identificacion-fiscal
• https://www.sat.gob.mx/aplicacion/operacion/37819/consulta-publica-de-la-opinion-del-cumplimiento
• https://portalsat.plataforma.sat.gob.mx/RecuperacionDeCertificados/faces/consultaCertificados.xhtml

Tungsten Network is analysing the requirements for the new mandatory tax data in the CFDI 4.0 and is working on a solution to ensure these are integrated into our service offering to our customers.

The Group of the Future of VAT has discussed the “Working Paper on E-invoicing and the need for EU standards and interoperability” published by the European Commission. The study carried out on the Digital Reporting Requirements (DRR) part of the VAT in the Digital Age concludes that the policy options providing the most significant advantages are the partial and total harmonisation of DRRs across the EU.

More details around this can be found here.

Slovakia is involved in a draft consultation for the implementation of EU legislation on the VAT Act, with reference to Draft Bill No. 309/2022. This is due to come into effect on 1^st January 2023.

This as a recurring trend across Europe, where countries adopt EU legislation into their own Directives. This adoption offers advantages- offering greater standardisation and consistency with the EU VAT principles and regulations and aligning policies with other EU countries which have enacted similar legislation into their own domestic laws.

The public consultation covers the following:

• Change the VAT registration threshold to EUR 49,790.
• Regulate processes for VAT registration exemptions and cancellations
• Exempt VAT for EU-purchased or imported goods and services if made accessible free of charge
• Revise the VAT deduction requirement regulations for non-payment of VAT
• VAT requirements for refund
• Payment service providers’ recordkeeping duties for cross-border payments.

Feedback for the consultation is requested by 20 June 2022.

Inflation is rising sharply across Europe and governments are responding accordingly with a variety of fiscal measures.

Further to this, the Cypriot government has extended the reduction in VAT on domestic energy, from 17% to 9%, until 31 August 2022.

This was initially expected to end at the end of June 2022.

Despite momentum around e-invoicing being relatively quiet in Denmark in comparison to other countries, this month there have been some very significant developments concerning e-invoicing in the country.

The Bookkeeping Act is expected to come into force on 1^st July 2022, which envisages the digitisation of bookkeeping in Denmark. This means all transactions will need to be recorded in a digital system. All documents relating to these transactions must also be preserved in a digital format.

The requirements will apply to all enterprises subject to the obligation to present financial statements in accordance with the Danish Financial Statements Act.

Implementation of the requirements is expected to follow a phased approach- in line with the following:

• 1 July 2022: The Act is expected to come into force
• 1 January 2023: The Danish Business Authority lays down rules and requirements for bookkeeping systems
• 1 July 2023: Existing suppliers of digital bookkeeping systems must meet the new requirements for digital bookkeeping systems and be registered with the Danish Business Authority
• 1 January 2024: Enterprises covered by the Danish Financial Statements Act’s reporting classes B, C and D must meet the new requirements for digital bookkeeping systems for financial years commencing on or after 1 January 2024
• 1 July 2024: Enterprises covered by the Danish Financial Statements Act’s reporting classes B, C and D and which use their own bookkeeping system that has not been registered with the Danish Business Authority must meet the digital bookkeeping system requirements
• 1 January 2026: Enterprises covered by the Danish Financial Statements Act’s reporting class A and whose revenue exceeds DKK 300,000 must meet the new requirements for digital bookkeeping systems for financial years commencing on or after 1 January 2026
• 1 July 2026: Enterprises covered by the Danish Financial Statements Act’s reporting class A and whose annual revenue exceeds DKK 300,000 for two consecutive years, and which use their own bookkeeping system, must meet the digital bookkeeping system requirements.

This is a significant development in Denmark. Tungsten Network is analysing the requirements and monitoring further e-invoicing developments in the country and what this means for our service offering in the country.

Portugal’s 2022 budget has been approved in Parliament.

Amongst measures such as transposing certain VAT Directives for EU purposes and amending VAT compliance-related deadlines:

• The reduced rate of 6% (5% in Madeira and 4% in the Azores) has been extended for:
  • Certain dairy-free products;
  • Repair services for domestic appliances;
  • Delivery and installation of certain solar panels.

This extension is due to expire on 30 June 2025.

In the past few months, we have communicated that in Portugal, a PDF can, in certain instances, qualify as an electronic invoice.

The requirement to include a digital signature has yet again been delayed, further to Order 49/2022. Portugal has delayed this requirement several times.

This means that now from 1^st January 2023, PDFs will have to include a Qualified Electronic Signature (QES).

VAT grouping is often deployed in the UK when two or more eligible taxpayers are treated as one ‘person’ for VAT purposes. This can bring multiple advantages, including avoiding the need to pay VAT when transacting between members of the same group, and less cumbersome VAT-related administrative obligations.

UK VAT groups can currently contain members established in both Great Britain and Northern Ireland.

Supplies between members of a VAT group generally are disregarded for VAT purposes.

However, further to VAT notice 700/2, specifically section 7.3.2, when goods now move from Great Britain to Northern Ireland, VAT will now be due. This will be calculated in the same way as when a business moves its own goods.

Further to the consultation on the implementation of the Organisation for Economic Co-operation and Development (OECD’s) Model ‘Reporting rule for digital platforms’, the UK government has announced that new UK reporting requirements will be introduced.

These will take effect from 1^st January 2024, with first reports expected to be submitted by the end of January 2025.

There has been a substantial amount of feedback during the consultation. HMRC is collating this and striving to publish the government response to the consultation along with draft regulations providing details of the new regime.

To ensure implementation of the regulations is in a ‘proportionate and effective manner’, HMRC will engage with digital platforms and their providers before the regulations come into effect. It is hoped this prior interaction between the regulatory bodies and digital providers will engineer a smooth adoption of the regulations.