Navigating Global Digital Reporting Requirements as a Non-Resident Business
Introduction
Tax authorities worldwide are evolving and embracing digitization to monitor the economy and business activities more closely. This introduces new challenges for global businesses as they navigate the complex landscape of varying tax laws and compliance requirements across different countries.
One particular challenge that multinational businesses face is the varying e-invoicing requirements across different countries. An increasing number of countries have begun to adopt e-invoicing requirements, obliging businesses to transmit transactional data to tax authorities electronically, either in real or near-real-time. The specifics of these e-invoicing requirements vary significantly from one country to another, reflecting a diverse range of regulatory and technical standards.
For multinational businesses, grasping the nuances of these varied e-invoicing regulations is crucial to ensuring seamless compliance across different jurisdictions. However, one aspect is particularly important for correctly initiating this process: scoping the requirements.
Scoping the requirements: is local presence a prerequisite?
E-invoicing obligations have typically targeted companies with a local presence in a country, either through a business, fixed establishment, or habitual residence.
However, we are seeing more and more countries extend the e-invoicing requirements to non-resident businesses as well, driven by tax authorities’ desire to monitor these businesses more closely.
There is no formal, universally accepted definition for what is considered a non resident. However, this is normally viewed as a business not established in a particular country, either by being formally established through a business registration there, or via a fixed establishment for VAT purposes.
There are various scenarios where businesses can be categorized as non-residents:
- Businesses operating in different countries via local VAT registration.
- Businesses operating without a physical presence but required to appoint a local representative or agent.
- Businesses operating without a physical presence under the EU One Stop Shop mechanism.
It's important to note that the primary factor in defining a non-resident is the absence of a local presence in a country; therefore, the above examples should be seen as illustrative rather than definitive.
Let's now explore the countries that currently impose some form of e-invoicing requirement on non residents. Please note, this overview might not include every country, reflecting the dynamic state of e-invoicing regulations.
European Union (EU) Countries
Romania has recently become a notable example of this trend by introducing a form of e-invoicing obligation on non-residents. As of January 2024, businesses that are VAT-registered but not established in Romania are required to comply with near real-time e-reporting requirements. But Romania is not alone - it is part of a growing list of countries adopting similar rules. Foreign companies, though not necessarily subject to the same rules as local companies for e-invoicing, might still need to report transactional data to the tax authorities in real or near real-time.
For instance, under the new French e-invoicing mandate, foreign companies not established in France will be required to transmit to the tax authorities certain information relating to commercial transactions that do not fall within the scope of electronic invoicing.
Belgium serves as another recent example of increasing obligations for non-residents. According to Belgian e-invoicing law, while non resident businesses registered for VAT are exempt from the requirement to issue structured electronic invoices, they will be obligated to receive them.
It is crucial to understand how your business operates in each country, whether through local establishments, local VAT registration, the One Stop Shop mechanism in the EU, or via a local representative. This understanding is essential to determine whether your business falls within the scope of e-invoicing requirements. By doing so, businesses can ensure they have accurate information when analyzing the scope of requirements across various jurisdictions.
Non-European Union Countries
We have seen this trend extend beyond the EU as well. Taiwan has required non-resident businesses providing electronic services in B2C transactions to comply with the country's long-standing eGUI system since January 2019. These rules mandate foreign electronic service providers to issue electronic invoices in a prescribed format and report these transactions to the tax authorities.
Business Impact
Countries impose e-invoicing mandates in many forms and variations. It is essential to review each country’s mandate in detail to understand whether your business would fall under the scope of the requirements.
The countries indicated below have imposed some sort of e-invoicing requirement on non-resident business transacting in their country:
Spain
In Spain, the SII e-reporting obligations apply to taxpayers required to self-assess their VAT obligations on a monthly basis. This includes non-resident VAT-registered taxable persons, who have been required to comply with the SII requirements since July 2017.
Hungary
In Hungary, non resident businesses that are VAT registered are required to comply with e-reporting requirements starting from January 2021. The scope of these requirements includes both B2B and B2C transactions.
Businesses registered for OSS in Hungary enjoy an exemption from the obligation for the services they provide to consumers in other Member States.
Portugal
In Portugal, as of July 2021, certified billing software and invoicing requirements have been established for non-resident VAT-registered taxable persons. According to these requirements, non-resident VAT-registered businesses are required to use invoicing software that has been certified by the Tax Authority. This software is necessary for transmitting invoice data to the Tax Authority's portal and for generating supporting documents.
Romania
In Romania, the e-invoicing requirements mandate that non-resident VAT-registered taxable persons comply with e-reporting obligations starting from January 2024. These e-reporting requirements encompass domestic B2B transactions, which must be reported to the tax authorities within five working days of the invoice issuance.
Belgium
Under the recently introduced Belgian e-invoicing mandate, foreign businesses having a VAT registration in Belgium will be required to receive structured e-invoices for transactions in which they must provide their Belgian VAT number to the supplier. This requirement will be effective as of January 2026.
Serbia
In Serbia, according to the e-invoicing legislation, the obligation to issue e-invoices extends to the tax representative of a foreign person within the Republic of Serbia for both B2B and B2G transactions.
France
The e-reporting obligation can apply to companies not based in France or to their tax representatives, provided they have appointed one. This requirement is triggered when these companies conduct transactions where they must collect French VAT. Specifically, the e-reporting requirements would apply to B2C transactions as well as B2B transactions with customers that are not established in France, when these transactions are taxable in France.
It is important to note that B2C transactions which fall under the scope of the OSS registration of the foreign company are exempt from the e-reporting obligations.
Taiwan
The e-invoicing obligations in Taiwan apply to non-resident businesses that provide electronic services to end consumers. These requirements are solely applicable to B2C transactions and have been in force since January 2019.
Asking the Right Questions
As businesses expand their operations across international borders, asking the right questions and understanding each country's unique approach to e-invoicing becomes crucial. Key aspects to examine include:
- Do the requirements cover only resident businesses, or do they extend to non-resident service providers as well?
- Do the requirements cover only B2B transactions, or do they extend to B2C as well?
- Do the requirements cover AR (Accounts Receivable) or AP (Accounts Payable) related obligations?
- How does the OSS mechanism integrate into this multifaceted environment?
Addressing these questions is vital for multinational companies and requires a detailed, country-by-country analysis to ensure compliance with the diverse and evolving requirements.
How Fonoa Can Help
At Fonoa, we understand the complexities of global e-invoicing mandates and their challenges for multinational businesses.
Our comprehensive e-invoicing product simplifies compliance by automating the issuing and reporting of electronic invoices across jurisdictions, ensuring seamless adherence to local regulations.
Our solution streamlines the process no matter the country, saving you time and resources. Contact us today!
