Digital reporting for Value Added Tax in the EU explained

Digital Reporting Requirements (‘DRR’s), that is any obligation for VAT taxable persons to periodically or continuously submit data in a digital way on all (or most of) their transactions, including by means of mandatory eInvoicing, to the relevant tax authority.

DRR’s can be distinguished into:

• Periodic Transaction Controls (PTCs), in which transactional data are reported to tax authorities at regular intervals.
• Continuous Transaction Controls (CTCs), in which transactional data are submitted electronically to tax authorities just before, during or shortly after the actual exchange of such data between the parties of the transaction. CTCs include real-time reporting mechanisms such as in Hungary and Spain and mandatory e-invoicing – either with (Italy) or without clearance.

Examples of PTC’s

The so-called European Sales Listing, the control statements in Slovakia and Czech republic and the SAF-T declarations in Portugal, Poland and Romania.

Examples of CTC’s

• Real-time reporting is the obligation on taxpayers to transmit transactional data shortly after the issuance of the invoice. The data required can be extracted from the invoice, but the invoice itself does not need be transmitted to the tax authority. The taxpayers must comply with the requirement the same day (Hungary), or within a few days (Spain).
• eInvoicing is a compliance system requiring taxpayers to issue a structured e-invoice for VAT purposes. ‘Structured’ means that the e-invoice must conform to a machine-readable standard, so that it can be automatically processed. The e-invoice as a whole, or a set of data therefrom, must then be transmitted to the tax authority, prior to its issuance, as it takes place, or shortly thereafter. The taxpayer may be able to send the e-invoice directly to its customers while sharing it with the tax authority (no-clearance eInvoicing). Alternatively, the taxpayer may be required to go through the tax authority first, either to obtain a preliminary authorization, or by using a central IT platform, which, in turn, delivers the e-invoice to the customer (clearance eInvoicing), like the Italian model. There is an international standard for eInvoicing, called PEPPOL*. However countries can also introduce different standards.
  
  * PEPPOL (Pan-European Public Procurement) is an international standard used for electronic messages such as e-invoices. A lot of EU member states have moved to PEPPOL for B2G transactions, like for example the Netherlands, France and Belgium. But also outside the EU, like Japan and Australia. Every country that uses PEPPOL can add additional rules to the universal PEPPOL standard.

Be prepared for the future of digital reporting

As we have outlined in other articles, more and more EU Member States are moving towards DRR’s with as ultimate goal a pre-filled VAT Return. On an EU level, this is also recognized as the way to go for VAT reporting (reference is made to the European Commission’s “VAT in the Digital Age” report), but there are still quite some variants that can be introduced. In the meantime, EU Member States are drafting their own requirements. At Pincvision we monitor these introductions and adapt our systems to accommodate all these DRR’s. From experience it takes time to set up the system to accommodate for example e-invoicing so we recommend to start way before the mandatory introduction date.

Need help? We're here for you!

Pincvision can take all your digital reporting requirements off your hands. Both PTCs and CTCs. This way you have 1 partner and point of contact for all your reporting and declarations. In other words: no hassle and everything well arranged.

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Read more about our VAT services here:

• SAF-T declarations
• European Sales Listing (ESL)
• Real-time reporting
• eInvoicing
• VAT returns