EDICOM White Paper
Introduction
Electronic tax compliance: challenge and opportunity
In the era of the fourth industrial revolution,
globalization and digital transformation constitute
both an opportunity and a challenge. These two
factors are determined not only by the means of
production, but by the entire business culture.
One of the changes that best represents this duality
between obstacle and aspiration is
e-tax compliance. Little by little, paper and traditional
methods are being ousted by technology and
automation. The first it was electronic data interchange
(EDI) and e-billing, which began to spread throughout
Latin America at the turn of this decade. But now,
digitization is making headway and starting to include
other accounting management features such as VAT
returns.
Tax authorities worldwide have found this technology
to be their best ally to enhance fiscal control, simplify
formalities and automate costly supervision
EDICOM White Paper Global VAT Compliance | 2
processes such as audits. Therefore, increasing
numbers of governments are requiring electronic
compliance from their businesses, both in billing and
in VAT tax collection.

Meanwhile, businesses should face this

transformation as an opportunity to boost efficiency.
An aim that is more than necessary, as according to
the Paying Taxes report 2017, companies spend an
http://www.pwc.com/gx/en/paying-taxes/pdf/pwc-paying-taxes-2017.pdf

average of 251 hours on tax compliance.

Nevertheless, to lower the figure and achieve a
change in enterprise culture, it is necessary to
overcome the two obstacles mentioned at the
beginning:

Implementation of technology
solutions that allow us to undertake
and automate communications with
tax authorities electronically.

Adaptation, in a global business

ecosystem, to locally established
tax compliance, in other words with
different features in each region.
Companies devote an
average of 251 hours to
tax compliance

Throughout this White Paper, we shall help

organizations overcome these two challenges. In the
following pages, we shall examine the requirements
laid down by the tax authorities of each European
Union and Latin American country in tax compliance
and, more specifically, around electronic VAT returns.

Moreover, we shall explain how to adapt to these

technical legal requirements by means of a global
and centralized electronic solution, able to link up with
any international public entity.
 e-VAT
return
Before looking at the subject in depth, we need to know exactly
what VAT is, where it is used and what implications it has for
companies and the tax authorities.

The letters VAT stand for Value Added Tax. This is a fiscal charge applied to
the consumption of goods and services. The peculiar feature of VAT is that it
is an indirect tax, in other words, it is not paid directly to the Tax Authority.
When a company performs a business transaction, the consumers pay the
company an extra percentage (set by each government) corresponding to
this burden.

For consumers, VAT payment is mandatory and
non-reimbursable. Nevertheless, companies do have
the right to deduct the expense of this tax when
purchasing from other vendors preceding them in the
supply chain. So, it is necessary to submit a return to
the Tax Authority in which the amount paid (tax credit)
is deducted from the amount collected from the
customers (tax debit).
If the result of this transaction is positive, the company
in question must deposit the corresponding amount
with the tax agency. Otherwise, it will be the Treasury
which has to reimburse the difference to the
organization.
In 2015 -the most recent date- 162 economies around
the world were applying a VAT system. Each of them
applied a different rate, which could vary from 27% in
Hungary to 8% in Switzerland. This is compounded by
the fact that in some countries the tax is decided at
federal or even local level. In fact, in the USA there are
regions which do not charge VAT per se, whereas
others may apply a sales tax up to 11.7%.
The tax return is also regulated differently in each
zone. To date, the process was being carried out
manually and with a broad periodicity which facilitated
compliance. In Spain, for example, businesses must
declare their VAT monthly or quarterly, depending on
their features.
Currently, however, the trend is to simplify this
procedure and prevent tax fraud by using this
technology. Continuing with the Spanish example, the
country’s tax agency has rolled out an immediate
information sharing system for presenting tax returns
virtually in real-time.
We must bear in mind that, according to the Paying
Taxes report for 2017, companies in 2015 were
spending an average of 14 hours to the VAT return.
However, the most worrying figure is that they had to

EDICOM White Paper Global VAT Compliance | 4

wait for up to 21 weeks to receive the corresponding reimbursement, with the setback that this delay entails for
company liquidity.
Implementing electronic methods in VAT compliance will reduce the time spent on the return and, foreseeably,
the payment period. Moreover, it is expected to be a mechanism to combat fraud. In 2014, the VAT gap in the
European Union, i.e. the difference between what was expected to be collected and what was finally raised, was
almost 160 billion euros
http://europa.eu/rapid/press-release_IP-16-2936_es.htm

SUPPLIER ENTREPRENEUR CLIENT/CUSTOMER

VAT INPUT VAT OUTPUT VAT INPUT VAT

VAT payable
Input VAT- Output VAT

Treasury/Tax Authority

VAT is regulated and

declared differently
in each country

EDICOM White Paper Global VAT Compliance | 5

 VAT COMPLIANCE IN THE EUROPEAN UNION
Atomization problem

The EU aims to
modernize the VAT
system to harmonize
and simplify it

The European Union (EU) regulates the common VAT structure and the applicable minimum rates in Directive http://eur-lex.europa.eu/legal-content/ES/TXT/?uri=CELEX:02006L0112-20150101

2006/112/EC on the common system of value added tax. However, each country is free to apply its own
http://eur-lex.europa.eu/legal-content/ES/TXT/?uri=CELEX:02006L0112-20150101

regulations: from the amount to be paid to how this tax is obtained or declared.

This has given rise to fragmentation of requirements which hinders trade between EU businesses. The situation is
particularly problematic for multinationals, SMEs and companies engaging in e-commerce. So, in 2016 the
European commission rolled out a VAT Action Plan to modernize current regulations. https://ec.europa.eu/taxation_customs/sites/taxation/files/com_2016_148_en.pdf

The final proposal for this new VAT project will be presented during 2017 and rollout could start next year. The
EU sets its sights on four areas:

Setting out the principles to create a future single European VAT system.
Adopting measures in the short term to combat VAT fraud, which accounts
for millions in losses annually.
Providing greater flexibility for member states when it comes to setting
VAT rates, as the current rules establish minimum applicable rates.
Simplifying VAT compliance for e-commerce and SMEs.

These objectives will involve reformulation of community and domestic legislation on VAT issues, as well as a
significant technological leap. In fact, the EU action plan is included in the single digital market creation strategy. https://ec.europa.eu/taxation_customs/business/vat/digital-single-market-modernising-vat-cross-border-ecommerce_en

EDICOM White Paper Global VAT Compliance | 6

 Towards a paperless system

“E-government and digitization would simplify tax procedures for tax

authorities and lighten the burden on businesses, both in member
states and beyond our borders. Moreover, it could help boost
confidence and fight fraud.”

This is one of the ideas highlighted by the European commission in its memo on the VAT action plan to the
https://ec.europa.eu/taxation_customs/sites/taxation/files/com_2016_148_en.pdf

European Parliament, the Council and the Economic and Social Committee. The fact is that the spread of
digitization in the Union is unstoppable.

Electronic tax compliance policies are being extended throughout most EU member states. This progress is
reinforced at Community level by two regulations:

http://eur-lex.europa.eu/legal-content/ES/TXT/?uri=OJ:JOL_2014_133_R_0001
Directive 2014/55/EU of the European Parliament and the Council of 16 April 2014
on e-invoicing in public procurement.

This ruling requires the governments of all member countries to accept e-invoices in
their public procurement processes. It also involves the use of a common European
standard which ensures interoperability.

Anticipating this measure, many regions such as Spain, Portugal or France already
require the mandatory use of this technology in B2G business transactions. In
addition, others such as Italy are beginning to also promote its use in the B2B area.

EDICOM White Paper Global VAT Compliance | 7

 Regulation nº 910/2014 on electronic identification and trust services for
e-transactions in the domestic market, better known as eIDAS.

This regulation is enforced since 2016 and lays the ground for e-transactions
between citizens, businesses and the public sector to be more secure. To this end, it
regulates five trust services: e-signature, electronic seal, electronic time stamp,
e-delivery services and website authentication

Download the White Paper on eIDAS regulation

for further information

We are thus facing an increasingly mature digital ecosystem, both in legal and practical terms. This means that,
following the spread of e-invoicing, countries can continue to make headway towards other electronic tax
compliance procedures, such as VAT returns.

In fact, already over a dozen European states are applying the technology for this purpose. We have seen how the
tax authorities take advantage of digitization to improve fiscal control and automate audits. But there are also
benefits for businesses…

BENEFITS
Simplification of tax compliance.

Quicker VAT refund times.

Automation of procedures.

Higher internal data analysis capacity.

EDICOM White Paper Global VAT Compliance | 8

What does electronic tax compliance
in EU countries look like?

Although, as we pointed out at the beginning, the e-taxation requirements in each country of the Union are
different, some common features can be found in most of them. In particular, we highlight these three:

SAF-T file implementation

SAF-T stands for Standard Audit File for Tax. This is a standard XML
developed by the OCDE which is used internationally to exchange tax
information electronically.

In Europe, its use is widespread in VAT compliance, but also for other
e-accounting data. This is a secure file format which simplifies
procedures and makes tax audits by the pertinent authorities more
efficient and faster.

Two connectivity options with the Tax Authority

The Public Administrations usually have a web service that automates

corporate communications, through a direct link between the ERP and
the Tax Authority platform.

However, to facilitate implementation of these electronic systems in

SMEs or businesses that are not technically equipped, there is also
usually a private web portal. Through it, the data can be submitted
manually using forms.

Data validation

When the Tax Authority receives the relevant information, the most
common procedure consists of validating it and sending the issuer a
response notifying acceptance or rejection of the data.

EDICOM White Paper Global VAT Compliance | 9

Projects in European Union
member countries
 2011
The Luxembourg tax authority may require companies to
send the FAIA electronic file with all their accounting
information in the event of an audit. Although the
requirement was rolled out in 2011, the applications for this
file have increased since 2015.

2014
The Portuguese tax authority (Direcção Geral de
Contribuições e Impostos) launched mandatory
e-invoicing in April 2014. In this case, the model also
includes the VAT return.

2016
In January 2016, the Czech Republic’s tax authority
implemented compulsory electronic submission of VAT
books to detect and prevent tax fraud.

2016
The Polish Ministry of Finance rolled out electronic
submission of VAT records gradually. The requirement for
the mandatory JPK_VAT file came into force in July 2016 for
the biggest companies and is scheduled to end in July 2018
with micro businesses.

2016
In Lithuania, the i.SAF system for declaring bills and VAT
electronically came into force in October 2016. In addition,
in January 2017, use of the i.SAF-T standard audit file
became compulsory for some companies.

2017
As of January, Italian businesses are obliged to submit the
tax details of their invoices issued and received to the Tax
Authority, along with their customs declarations.

2017
The Immediate Information Sharing (SII) system, which
involves electronic VAT bookkeeping, is required for over
65,000 Spanish businesses as of July 1.

2018
The Hungarian tax authority HU TA, requires submission of
invoice details in real-time (including VAT) as of July 1, 2018.
To kick-start this process, the Hungarian government has
created a platform called KOBAK. In addition, the SAF-T file
may be needed in the event of an audit.
Last update 16/01/2018
 E-VAT Compliance in
Latin America
A different model

In Latin America, electronic tax compliance has very

different characteristics to the European. Most
countries require businesses to use e-invoicing and
e-reporting with the aim of combating tax fraud.
The VAT statement is
Among them, Brazil, Mexico and Chile are the most made immediately
advanced markets, with massive widespread use by when the e-invoices
practically 100% of taxpayers. are sent to the tax
agency
Latin American countries are also imposing their own
regulations and technical requirements for e-tax
compliance. This means that multinationals must
adapt to different scenarios in each state, just as in
the EU. However, all are based on the same model. As in Europe, the majority of tax organizations in Latin
America offer companies two avenues for tax
Taxpayers generate their e-invoices in the format reporting:
determined by the regulations (usually XML) and
submit them to the corresponding tax authority for Linkup via web services, which automates
validation prior to forwarding to the recipient. This submission of the invoices to the Tax Authority
involves a real-time statement of fiscal data included from the ERP.
in these documents, with VAT among them.
Private web portals to submit bills manually, an
option limited to taxpayers who issue a small
volume of documents.

e-Invoicing and
These are some of the common features of e-tax
e-reporting are
compliance in Latin America. However, each country
mandatory in most Latin has its own formats and requirements. In fact, some of
American countries them are including technology in other administrative
or tax processes such as payroll issuance or
accounting.

http://www.edicomgroup.com/en_ES/white-paper/EDICOM-EINVOICING-LATAM.html
Download the White Paper on e-invoicing in LATAM to
check the requirements for each country
http://www.edicomgroup.com/en_ES/white-paper/EDICOM-EINVOICING-LATAM.html

EDICOM White Paper Global VAT Compliance | 12

 EDICOM Platform
A solution for the global market

Managing tax compliance locally is an issue for global To avoid this situation, EDICOM has developed an
companies. Human and technological resources are integral solution designed especially for
multiplied in the different markets, giving rise to exces- multinationals. A B2B2G electronic communications
sive economic costs, which hampers taking advantage platform with EDI, Compliance e-Invoicing and VAT
of digitization. Compliance capabilities.

What are the EDICOM Platform features?

Automation. The solution integrates with

the company's ERP to automate the VAT
EDICOM Platform return and any other tax communication.
enables global e-tax
compliance from a
single solution
Centralization. The platform is suitable for
tax compliance in more than 60 countries
worldwide, so it is possible to centralize all
procedures in a single solution.

Globalization. EDICOM Platform is not

only ready for e-VAT statements, but also
for e-invoicing and any other commercial
or tax communications.

EDICOM White Paper Global VAT Compliance | 13

How does the EDICOM Platform work?

TAX INTERNACIONAL SUPPORT CENTER

AUTHORITIES ENGLISH PORTUGUESE
FRENCH DUTCH
COUNTRY 1 SPANISH GERMAN
ITALIAN
COUNTRY 1

VALIDATION MODULE

COMPLIANT INVOICES
COUNTRY 2
SII
COUNTRY 2 DATA MAPPING
DIGITAL SIGNATURE
INTEGRATION MODULE TIME STAMPING SAF-T
TAX DECLARATION DELIVERY OF INVOICES
CENTRALIZED SINGLE ETC.
ERP DATA FILE FAIA

LEGAL COMPLIANCE MODULE COMMUNICATIONS MODULE

COUNTRY 3
COUNTRY 3

24x7
COUNTRY N AVAILABILITY
COUNTRY N

TAX
AUTHORITIES

INTEGRATION MODULE | The solution VALIDATION MODULE | The data are then
integrates with the company's ERP, deploying syntactically and semantically validated to
its mapping systems to automatically verify that the file is correct according to the
“translate” the information generated in the specifications of the destination country.
system into the electronic format required by
each tax authority (XML, UBL, SAF-T, etc.).

LEGAL COMPLIANCE MODULE | Once the COMMUNICATIONS MODULE | Finally,

message (e-invoice, VAT statement, etc.) is
validated, mechanisms are applied to ensure
its legal value. For example, the electronic
signature, time stamp or other certificates.
The document is now ready for sending.
EDICOM Platform delivers the message to the
Tax Authority and the recipient, applying the
necessary protocols in each case (web service,
AS2, HTTPS, FTP…).

The entire process is automatic, performed in a matter of seconds and transparent to the user. This means that
accounting and admin departments can continue to work from their usual management systems.

EDICOM White Paper Global VAT Compliance | 14

Key benefits of the EDICOM Platform

COMPLIANCE AS A SERVICE
Compliance with the specific technical and legal requirements of each country when
sending information to the Tax Authority is the responsibility of the provider. The client
only needs to be able to extract the data from the ERP and then, from the global platform,
EDICOM applies the standards and structured information updates needed for forwarding
through secure and confidential channels. By outsourcing and automating this process in
a single platform, the client gains in flexibility and speed and can rest assured that the
information reaches the specific public agency correctly.

SINGLE GLOBAL PLATFORM

Companies no longer need to multiply their resources dedicated to tax compliance, but
can centralize all those tasks in a single solution and country.

COST SAVINGS
Automation and centralization boost corporate efficiency. As a result, it is possible to take
full advantage of the benefits of digitization, including significant economic cost savings.

COMPLIANCE GUARANTEE
EDICOM Platform is a platform certified to operate in more than 60 countries around the
world. Its use is a guarantee for companies, which avoid possible penalties for tax
non-compliance or incorrect actions.

SECURITY AND AVAILABILITY

The EDICOM platform holds different certificates such as ISO 27001, ISO20000, ISAE 3402
or TIER II DESIGN. The commitment acquired by EDICOM with all its customers through
these certifications is none other than to provide the maximum security guarantees and
uphold the SLA undertaken by the company, which establishes a minimum solution
availability of 99.9%.

CONSTANT UPDATING
The platform adapts to the legal modifications of the different countries and the new
requirements that may arise in other regions.

EDICOM White Paper Global VAT Compliance | 15

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