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Continuous Transaction Controls CTC; digitisation of VAT invoice reporting

Real-time transaction-based reporting and pre-clearance of VAT invoices to tax authorities to improve tax collections and simplify compliance

Governments seize control of invoicing process

As governments around the world look to close the VAT Gap – missed VAT or GST tax collections – many are turning to mandated live invoice reporting and validation. .This is commonly termed Continuous Transaction Controls (CTC) or transaction-based reporting. It comes in a number of forms, including e-invoices or transaction list reporting. And most countries now impose validation checks and cross-checking to customer records (in real-time) before invoices are issued – meaning the issuer has surrendered CTC is offering opportunities to simplify compliance further along the reporting chain, including removal of VAT return obligations.

The trend started in South America, with pioneers such as Chile and Mexico, and now is spread to Europe and Asia. The EU is evaluating its own version of Digital Reporting Requirements, but faces challenges with a proliferation of standards already.

At VAT Calc, we are passionate about getting the most complex VAT or GST calculation right without expensive or lengthy implementations and heavy support. This means our customers remain agile to report their transactional data in any CTR format around the world.

CTC e-invoicing and real-time models

Invoice reporting model Examples Features
1. Real time invoice reporting Spain, Hungary, South Korea Invoice listing submitted immediately after invoice issued
No acceptance or regulation of invoice by tax authorities
2. Central platform exchange Italy, Turkey Platform responsible for invoice forwarding to customer
Customer or receiver may review and reject invoice
3. Central clearance Govt platform accepts invoices, validates, and buyer acknowledges invoice
Brazil, Colombia Pre-clearance variation - clearance before invoice exchange
Chile, Costa Rica Post-clearance - clearance short time after exchange
Document types not regulated and therefore inconsistent and may resort to email and similar
4. Decentralised clearance Mexico, Guatemala, Peru, France Certified e-invoice agent (PAC) submitts inoices
Document types not regulated and therefore inconsistent and may resort to email and similar

Common features of Continuous Transaction Controls (CTC)

  • Reporting of invoices to the tax authorities:
    • Secure electronic or e-invoices format (e.g. Italy SdI); or
    • As invoice transaction listing in XML or similar format (e.g. SAF-T or Control Statements)
  • Invoice data is transmitted to the authorities interface or portal:
    • Automatically via API or similar from invoice issuer’s ERP, accounting, invoice, e-commerce platform, point-of-sale or similar system;
    • Manual upload of listings
    • Manual invoice-by-invoice creation in portal; or
    • Via approved invoice agent
  • Typically, in real-time or within a few days of the creation of the invoice
  • Most tax authorities impose basic invoice validation checks, in real time, and will return a approve, errors or reject message to the issuer
  • Increasingly, the country platforms will also transmit the validated invoice to the customer of the invoice issuer, and only at this point will the invoice be considered legally issued from a VAT perspective. Many countries are becoming increasing sophisticated at enabling customer to review, reject or approve the invoices online in full invoice exchange platforms. This can also include cross-checking of sellers and purchasers invoices and book-keeping.
  • The standardisation of these platforms has been variable. The European Commission is pursuing some harmonisation (see below) following on from its work on the core invoice standarisation. But many countries have already launched their own systems which will present challenges for interoperability.
  • Data from such centralised systems are now being used to prepare pre-filled draft VAT returns which taxpayers can then review, adjust and approve. Thus simplifying the VAT compliance process for both the taxpayer and tax authorities.

EU Digital Reporting Requirements

As part of the EU VAT in the Digital Age reforms currently in publica consultation,  there is a channel for a harmonised Digital Reporting Requirements (DRR) which includes a Continuous Transaction Control (CTC) evaluation. This grew from the 2020 EU Tax Action Plan proposals for a fairer and more efficient EU tax regime.

Tax Engine and VAT reporting with CTC

VAT Calc’s tax engine, ‘VAT Calculator’, has been developed with the EU’s VAT in the Digital Age reforms in full focus, including Continuous Transactions Controls agility to live calculate and report invoice data. And since VAT Calculator is built on the same single platform are our VAT Filer product, there is full reconciliation on VAT return reporting.

Europe e-invoicing and live reporting

Country Date Comments (click for details)
EU e-invoice proposals 2028 Digital reporting and e-invoicing harmonisation
Albania Jan 2021 Authorised e-invoice software and pre-clearance
Belgium 2024-25 Phased introduction of B2B e-invoices
Bulgaria 2023 Public consultation on pre-clearance model e-invoice
Denmark 2024 Digital record keeping obligations
Finland Apr 2020 Customer option to require B2B e-invoices
France Jul 2024 E-invoicing and e-reporting for B2B and B2C
Germany 2024 (?) New government e-invoice 'as soon as possible' to fight fraud
Greece Oct 2021 myData summary invoice and ledger reporting
Hungary Jul 2018 RTIR live invoice reporting. No govt pre-clearance required
Italy Jan 2019 Pre-clearance SdI e-invoicing
Ireland TBC Public consultation underway
Latvia Jan 2025 B2B e-invoices based on PEPPOL
Lithuania ? E-invoicing platform being scoped
Poland Jul 2024 B2B mandated e-invoicing
Portugal Jan 2024 Certified invoicing software for non-residents
Jan 2024 ATCUD digital invoice signature for non-residents
Romania Jul 2022 RO e-invoicing implementation
Russia TBC Extension of Traceability Model to B2B on hold
Serbia Jan 2023 B2B e-invoicing
Slovakia 2024 B2B and B2C e-invoice rollout
Slovenia 2023 ? e-SLOG B2B proposal stalled
Spain 1 Jul 2017 SII live invoice and book reporting
Spain 2 2024 Pre-clearance B2B e-invoices; supplement to SII
Sweden 2024? PEPPOL based mandatory e-invoicing
Turkey Jan 2014 e-invoice e-Fatura and e-Arşiv
UK Apr 2022 MTD for VAT extended to 1.1million taxpayers

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