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Get to know the basics of tax compliance and e-invoicing regulations and what they mean for the average business over the next few years.
What is tax compliance?
To explain tax compliance it’s best to start by understanding Value Added Tax (VAT). VAT is a form of consumption tax applied to goods or services, which is collected by governments.
For business invoices, VAT is applied by a supplier on their products or services and then sent to the buyer showing the VAT charged. The amount stated is then deducted by the buyer from their VAT liability.
Therefore, tax compliance is the guarantee that businesses and individuals are issuing invoices according to the rules and are paying the correct VAT on any transactions and not committing VAT fraud in any way.
What can complicate the matter is the fact that tax compliance varies in different countries, with legislation and specific rules revised on a regular basis. Take a look at our tax compliance guide and roadmap to discover the latest global regulations.
Ultimately, tax departments and governments seek transparency from businesses to avoid any fake claims for VAT refunds. Additionally, governments are also looking to tackle the VAT gap. The VAT gap is the difference between what a government expects in VAT revenue versus the total actually collected.
How does tax compliance and e-invoicing relate?
Governments and other organisations have benefited from the more recent adoption of (e-invoicing) not only because of the smoother process it brings but also because it helps improve tax compliance.
Tax compliance and e-invoicing relate because e-invoicing reduces human error and fraud. E-invoicing ensures more accurate and reliable data and provides traceable information on VAT declared and VAT refunded. Tax compliance becomes easier to follow as the correct rules are automatically applied at each step in the invoicing process.
In order to help close the VAT gap and improve tax compliance, governments around the world are introducing e-invoicing regulations. These regulations vary from country to country. Variations include invoice formats, the invoicing system and the required archive time.
Leading e-invoicing providers, such as Banqup Group, put businesses at ease by ensuring all the correct tax details, invoice formats and country requirements are met.
What does tax compliance mean for businesses?
Across the globe governments are using e-invoicing as an instrument to close the VAT gap and streamline processes in their tax departments. Companies must comply with their country’s mandatory e-invoicing and tax compliance regulations in order to avoid financial fines and exhausting VAT audits.
Differences in VAT regulations across various countries means that international companies must consider respective regulations to avoid fines too.
Quite crucially, e-invoicing and tax compliance are getting more dependent on one another. The regulations create challenges for many businesses no matter if they’re localised or expanding internationally.
To help ease this challenge for companies on a local and global level, companies must opt for an e-invoicing solution that ensures their compliance. Understand more about how to be compliant here.
Keeping up to date
Stay in the know of the latest tax compliance regulations around the world.
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Stanislava Filcheva
E-invoicing and E-reporting Compliance Officer
Stanislava has a vast background in accounting and finance, which transitioned her to a role in e-invoicing and tax compliance with Banqup Group in 2020. She studied Industrial Management, which provided her with a comprehensive understanding of financial, managerial, and engineering sciences and processes. Stanislava is fluent in four languages and has experience working with many international companies all over the globe.