This spring sees more movement in the ongoing international progression toward automated VAT compliance. Three trends are currently of note:
1. SAF-T: Standardised Digital Record Keeping and Audit.
SAF-T stands for “Standard Audit File – Tax”. It is a standard set of data file requirements published by the OECD, allowing tax authorities to access data in a standard format for the purpose of digital auditing. Several countries already require that VAT taxpayers submit SAF-T files in addition to VAT returns. These are:
They will be joined by Norway on 1 January 2018. We can expect the list to lengthen further. The requirement to submit standardised files has systems and process implications for taxpayers as audits will increasingly focus on this data so it must be right. You can read more about the SAF-T concept here:
And about the technicalities of SAF-T files here:
2. Real-Time Reporting
Since 2017, Spain has required “real-time reporting” of sales and purchase invoices and intra-community transactions from businesses with turnover above EUR 6 million. The system is called SII (“Suministro Inmediato de Información”) and requires reporting data to be submitted within 4 days of transactions that are made. More details about SII can be found here:
From 1 July, Hungary will also implement a new real-time reporting regime for invoices above HUF 100k (about EUR 320/USD 395/GBP 280).
Standard data sets are required for each reporting regime and we expect that more countries will follow suit.
3. Digital Interaction with Tax Authorities
The UK has published guidance on how its initiative for 2019, “Making Tax Digital” will work. VAT registered businesses will be obliged to keep digital records and will need to submit their VAT returns via software compatible with HMRC requirements. This means that businesses will have to review their processes and if necessary update their software in advance of the go-live date of 1 April next year. For more detail on Making Tax Digital see here:
Taken together, one can see that these trends will eventually converge at some point in the future in a world where indirect tax is reported real time rather than via periodic returns, is reported in an automated manner, is recorded in standard data formats, and is audited digitally rather than manually. That road will take some years to travel, and in the meantime businesses can expect a string of incremental changes as each trend advances.