VAT Digitization in Europe and the Role of Tax Technology

February 14, 20230

Type: Legislation

Governments are digitizing indirect tax collection across Europe, including value-added tax. Their objective is to improve public authorities’ visibility into transactions and collect more revenue by correcting persistent VAT gaps. They are motivated by the oncoming global recession and are burdened with debt accrued during the Covid-19 pandemic and energy crisis. 

Continuous transaction controls, also known as CTCs, and the Standard Audit File for Tax, often known as SAF-T, are not particularly innovative or exclusively European tools for tax digitization. For instance, CTCs first appeared in Latin America in the early 2000s; today, the most sophisticated CTC regimes are found in nations like Brazil and Chile. Due to the pre-existing infrastructure for tax enforcement and advancements in e-audit, the introduction of CTCs in Europe has been much more gradual. 

With Poland, Italy, Hungary, and most lately France investing extensively in e-invoicing mandates, tax digitalization on the continent does appear to have finally reached a turning point. The European Commission has announced a ground-breaking plan to standardize digital invoicing across the EU and make (almost) real-time reporting a requirement for intra-EU transactions as a result of these advancements. 

Effective date: 2023



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