Technology and international tax compliance are driving each others evolution. A sound understanding of how and why can help ecommerce sellers prepare for compliance challenges in the year ahead.
Avalara Tax Changes 2024 is a report covering many of the key compliance issues around the world. Lets take a look at those affecting U.K. and European businesses selling overseas.
E-invoicing and the digitalisation of tax compliance
Global governments and tax authorities are ramping up their efforts to digitalise tax compliance and administration. Businesses selling across borders must keep up with these developments, particularly when it comes to
e-invoicing and live reporting.
E-invoicing ” the process of creating and providing an electronic invoice to exchange data between a supplier and a buyer ” is central to the future of tax compliance, and the rollout of mandates shows no signs of slowing down. Dozens of nations in all global regions already have e-invoicing mandates and live reporting requirements in place, with many more planning to implement further mandates and regulations.
E-invoicing and live reporting enable governments to gain greater visibility into transactional data, putting them in a better position to tackle tax fraud and reduce the VAT gap ” the estimated difference between expected VAT revenue and actual VAT revenue collected. Most recent figures from the European Commission show that EU countries lost around ‚¬61 billion in VAT in 2021.
Now that the EUs plan to modernise VAT ”
VAT in the Digital Age (ViDA) ” makes it easier for member states to mandate e-invoicing (by removing the requirement for permission from the European Commission), businesses must understand that making the switch to e-invoicing is a matter of when, not if.
Adapting to e-invoicing will almost certainly become necessary for a business to stay compliant and continue trading in markets and countries with e-invoicing mandates in place (as well as those they plan to enter in future).
Governments continue to announce their plans for e-invoicing mandates and live reporting requirements in advance. By planning ahead and using scalable e-invoicing as early as possible, businesses can reduce disruption to their operations when mandates emerge. A system thats also compatible with the Peppol network would also be preferable.
Peppol has become the most common delivery network and standard for trading partners to exchange compliant e-invoices. More than 30 countries have either implemented or are in the process of implementing the Peppol framework.
By making the switch from paper invoices to e-invoicing, businesses can also save on paper handling costs such as printing and postage. They can enjoy faster processing times with reduced errors, more accurate invoices, and benefit from an improved level of efficiency as a result of streamlining the invoicing process. This can free up resources that would otherwise be tied up by manual processes.
Changes to customs processes, and the benefits to sellers
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