Compliance Services

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 Poland, 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.  

2023 is experiencing an exponential rise in Environmental, Social and Government (ESG) taxes. As the name suggests, these taxes have a marked agenda: to further wider ecological and conservation affairs.  This year has already seen both Poland and Germany establish their own vision for implementing ESG taxes. Predictably, this phenomenon is set to permeate neighboring countries on the continent.  

Netherlands is the latest country to announce its own initiative in this regard.  

From 1 July 2023, residents must pay an extra amount for single-use disposable containers that include plastic. This measure will be extended yet further from 1 January 2024, where disposable cups and containers that contain plastic will be prohibited.  

These measures hold the obvious benefit of increasing recycling and nurturing positive environmental behaviors.  

The growth of ESG taxes is set to become an integral part of Kofax’s compliance and development plans and feature alongside country e-invoicing mandates and VAT rate changes. Each ESG tax is unique and merits its own considerations. Kofax is acutely aware of the significance of ESG taxes and the associated obligations they place on suppliers and buyers. Kofax is committed to considering its responsibilities in respect of any ESG taxes, if applicable.  

Ongoing inflation is prompting countries to deploy new fiscal strategies- or extend current ones. Our recent posts have captured Spain’s fluctuating VAT rates targeting specific niche sectors as it endeavours to restore some stability to its wider economy.  

Much in the same way as Poland this month, Spain has opted to extend the zero VAT rate on certain food products until 31 December 2023, therefore extending the measures outlined in Royal Decree-Law 20/2022, which were initially expected to last until 30 June 2023. Specific other reductions on pasta and seed oils from 10% to 5% will also continue until the end of the year. However, unlike Poland, Spain has caveated that the extension will only apply if inflation is below 5.5%, indicating that fiscal policies are intrinsically linked to wider economic concerns- with inflation currently at the forefront of many EU Member States’ concerns.  

It is currently expected that Spain’s previous 4% VAT rate for specific food products will be reinstated on 1 January 2024, alongside subsiding inflation.  

Spain is a compliant territory for Kofax and we support all valid VAT rates in the country as part of our e-invoicing solution today. 

While Poland’s reduced VAT rate for food products was initially projected to last until the middle of 2023, the Polish government has yet further extended this feature. This was initially extended in November 2022, as stated on the Polish Government Website. 

The zero VAT rate for basic food products will now take effect until the end of 2023, once again re-affirming that EU Member States are compelled to extend fiscal policies to curb persistent inflation. In Poland specifically, inflation has reached an unwelcome high, reaching 18% in the first quarter of the year. Savings because of extending the reduced VAT rate are expected to be profound – amounting to c. PLN 5 billion, confirming that shifting VAT rates can have a sizeable and direct impact on consumer spending habits and savings.  

The Ordinance relating to the VAT extension can be located here. 

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.  

A new Revenue Memorandum Circular 72-2023 has been issued by the Bureau of Internal Revenue, which exempts several medicines from VAT. 

As of RMC 72-2023, 59 more medicines are now eligible for VAT exemption under the TRAIN Law and CREATE Act. These medicines include those for cancer, hypertension, high cholesterol, diabetes, mental illness, tuberculosis, and kidney disease.  The complete list of exempted medicines covered by this RMC can be found here. 

The Turkish Revenue Administration has amended VAT rates with a presidential decision issued on July 7th. 

In accordance with presidential decision No. 7346, the standard VAT rate will increase from 18% to 20%, while the reduced VAT rate will increase from 8% to 10%. No changes will be made to the reduced VAT rate of 1%.  The VAT rate changes will become effective on July 10, 2023. 

There have been discussions in Bahrain about mandating e-invoicing since 2022. In May 2023, the Bahrain Tender Board released an RFP (Request for Proposals) seeking a technology vendor that can assist in designing, implementing, operating, and maintaining Bahrain’s e-invoicing system. Bahrain is likely to implement a CTC model for the e-invoicing mandate, where B2B invoices must be cleared and approved by the tax authorities before being sent to customers. 

Applicants must have experience in leading large IT projects for tax authorities, as well as   the ability to deliver all functional and technical requirements as outlined in the tender documents. Applicants who wish to bid should follow the instructions on the tender page. 

The ZACTA (Zakat, Tax and Customs Authority) has defined the criteria for the sixth wave of phase 2 of the e-invoicing mandate. 

From January 1, 2024, taxpayers with VAT taxable revenue over SAR 70 million for the years 2021 and 2022 must integrate their e-invoicing systems with ZATCA (FATOORA).  

We recently commented on Uruguay’s reduced VAT rate for tourism, which was triggered by an adverse effect on Uruguay’s tourism industry generated by the pandemic. 

Further to the publication of Decree No. 122 in the Uruguayan Official Gazette, the reduced VAT rate of 9% on tourism services has now been extended to 30 September 2023.