The start of a new year always brings talk of new year’s resolutions—where individuals resolve to continue good practices, change an undesired trait or behavior or accomplish a goal. While for the last couple of years proposed value-added tax (VAT) and goods and services tax (GST) legislative changes have often been derailed, postponed, or simply re-focused on assisting taxpayers during the pandemic, 2022 appears to be a year where governments and tax authorities will stick to bold resolutions and look to roll out best indirect tax practices in their countries.
Continued Spread of E-Invoicing
E-invoicing continues to be the clear direction of travel for tax authorities looking to maximize VAT and GST collection, and it is therefore not surprising to see more countries in 2022 implement mandatory e-invoicing, or pilot programs on a voluntary basis before wider compulsory adoption.
The Slovak Republic is implementing a central national electronic-invoicing system to allow businesses to send e-invoices in a structured data format to the tax authority. Use of the system for business-to-government (B2G) transactions is compulsory from Jan. 1, 2022 but this will then be extended to full business-to-business (B2B) and business-to-consumer (B2C) transactions from January 2023.
There is a very similar story in Poland, as the country has just launched its new National System of e-Invoices (KSeF). From Jan. 1, 2022, use of KSeF will be voluntary and all taxpayers will be able to issue structured invoices. It is anticipated that use of KSeF and e-invoicing will become mandatory from Jan. 1, 2023.
It is also anticipated that the new German coalition government will release further details on a new mandatory e-invoicing platform, and we also await further details, legislation and technical specifications from France and Spain.
Of course, all these new e-invoicing mandates are contingent on the countries obtaining a derogation from the European Commission.
Portugal will require QR codes (two dimensional barcodes) to be added to e-invoices from Jan. 1, 2022, as well as introducing a requirement to obtain a unique single document code (ATCUD) from the tax authority.
The European Commission is also expected to launch a public consultation and then a draft legislative proposal in relation to its “VAT in the Digital Age” initiative. This is a response to the continued growth of the digital economy, new business models and the increased amount of tax and transactional data that tax authorities are now able to collect.
The proposal will consider the extension of the One-Stop Shop single VAT registration, digital reporting requirements and e-invoicing, and finally, the VAT treatment of the platform economy.
The spread of e-invoicing is not limited to Europe. With effect July 1, 2022, all businesses in Vietnam will need to issue compliant e-invoices. In the lead up to the mandatory date, the Vietnamese General Department of Taxation has developed a clear roadmap for implementing e-invoicing, with a nationwide pilot program across two phases which has already started. In the Middle East, Saudi Arabian businesses now need to raise compliant e-invoices to customers.
Changes to VAT Reporting—More Data and a Move to Digital
This year will also see new VAT returns and reporting requirements, as tax authorities look to digitalize or simplify compliance processes for taxpayers. While it is typical to see the occasional new field or box added to a VAT return, there are several significant changes across the globe relating to VAT reporting.
There are changes to Intrastat declarations resulting from the new Regulation on European business statistics which came into force on Jan. 1, 2022.
Intrastat dispatches declarations across the EU will now require two additional pieces of statistical information—the “Partner” VAT ID and the country of origin. Some EU member states had already requested this information, having opted to collect the information or having implemented the new requirements early.
Under the new regulation, businesses in the EU member states where these two data elements are not yet collected will have to start reporting them from January 2022 dispatch declarations. This export/dispatch data will be shared by Eurostat between EU member states.
It is hoped that this additional data collected on the export/dispatch side will make it possible to reduce the data collection burden on the import/acquisition side.
France—Import VAT Reverse Charge in VAT Return
France has introduced a major change on how import VAT is assessed. From Jan. 1, 2022, the use of the import VAT reverse charge has become compulsory. Going forward, the declaration and payment of import VAT will be made directly in the French VAT return declaration instead of the customs declaration, i.e., as a reverse charge self-assessed by the taxpayer. Any business importing goods into France will now require a French VAT registration number.
Norway is replacing its VAT return with a new digital eVAT return. The current return will disappear from periods starting Jan. 1, 2022, and instead taxpayers will tag their data from their ERP systems with specific SAF-T codes, before submitting the data to the tax authority in an XML format.
U.K.—“Making Tax Digital” Latest Phase
The U.K.’s final phase of its Making Tax Digital initiative will be introduced on April 1, 2022. From this date, all U.K. VAT registered businesses will need to be compliant with Making Tax Digital requirements, regardless of their turnover and whether they are registered for VAT on a voluntary basis or trading over the registration threshold.
This will mean that every U.K. VAT registered business, resident or non-resident, will need to keep specified digital records, submit their VAT returns via an API link from software, and ensure that the preparation of the VAT return from digital records to submission is digitally linked, without adjustments, copy and paste or data re-entry.
Italy—Abolishment of the Esterometro Scheme
Italy will abolish its Esterometro filing this year and instead expand its Sistema di Interscambio (SDI) digital reporting to cover cross-border invoices issued and received. This had been slated for introduction with effect on Jan. 1, 2022, but it has been postponed by six months to July 1, 2022.
Pakistan—Single Sales Tax Portal and Return
Pakistan is launching a single sales tax portal and return to simplify the process of filing of sales tax returns. Taxpayers will be able to file a single sales tax return instead of having to file separate returns to the tax authority and each of the different provincial sales tax authorities.
The system will automatically apportion input tax adjustments and tax payments across the sales tax authorities. The first return to be filed under this new portal and single sales tax return will be the December 2021 period, due to be filed in January 2022.
This year will also see Greek businesses needing to submit their accounting books and invoice data to an online platform called myDATA. This requirement came into force towards the end of 2021.
More Countries Look to Tax Nonresident Digital Service Providers
Another trend that will continue in 2022 is countries implementing VAT or GST on B2C digital services, looking to tax services supplied by foreign companies that would ordinarily typically escape corporate income tax, withholding taxes, or indeed VAT or GST. Not only does this raise crucial tax revenue, but it is also seen to level the playing field between local and nonresident suppliers. From Jan. 1, 2022, new countries that will tax nonresident supplies of digital services include Ukraine, Nigeria, Israel and Kazakhstan.
In addition to special rules relating to digital services, we expect more countries to introduce special rules on e-commerce, looking to replicate rules similar to the EU’s Import One-Stop Shop, and low-value import rules in the U.K., Switzerland, Norway, Australia and New Zealand. Businesses selling low-value goods to consumers in Singapore will need to prepare for changes which will be implemented with effect Jan. 1, 2023.
New VAT Regimes
It is possible that Kuwait could finally introduce VAT in the year ahead. While we are still awaiting draft legislation and regulations, many businesses with a footprint in the country are starting to prepare for the tax by carrying out impact assessments and a gap analysis.
Qatar is the only other member of the Gulf Cooperation Council that still has not introduced VAT, and again, it is possible that it may do so in 2022, or more likely, after this year’s football World Cup, with the tax going live in 2023.
VAT Rate Changes
This year will also see VAT and GST rate changes; some have been announced already, and others will of course be more of a surprise. VAT rate changes confirmed include Bahrain doubling its rate to 10% from 5% and the Bahamas reducing its rate to 10% from 12%, both from Jan. 1, 2022. We are also likely to see some countries start to unwind temporary emergency reduced rates introduced during the pandemic.
Businesses should be prepared for further changes across indirect tax this year, as well as new announcements, proposals and consultations for more reform and new mandates in the coming years.
What is certain is that the importance of indirect taxes to governments globally continues to increase and the pace of digitalization is gaining speed.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Alex Baulf is senior director of global indirect tax with Avalara.
The author may be contacted at: firstname.lastname@example.org