EU Digital Reporting Requirements: Essential Guide for Non-Resident Taxpayers

The reporting landscape in the EU has changed dramatically over the years. With the emergence of new technologies and business models and increased online and distance sales of goods and services, tax authorities have faced challenges in tracking and monitoring transactions subject to VAT and ensuring that revenue from those transactions is not lost.

The answer lies in the digitalization of reporting requirements and the overall digitalization of tax processes, including VAT. This article delves into the evolution, current frameworks, and future digital reporting requirements (DRR) developments, focusing on non-resident taxpayers operating within the EU.

From Paper to Digital: Historical Background of DRR in the EU

The EU's reporting requirements are still paper-dependent, meaning that paper-based systems established over the years are still in force. Several EU countries have established so-called hybrid models that allow taxable persons to report VAT on paper or electronic form.

The early beginnings of reporting requirements can be traced back to the 1980s when Italy introduced Fiscal Law requiring taxable persons to use cash registers to record transactions. Greece was the second European country to implement this solution to fight fraud and evasion and ensure more revenue from VAT. In the years that followed, more and more countries implemented similar reporting rules into their national legislation, now known as ficalization.

Under the rules from fiscal laws, taxable persons must issue an invoice to the consumer, which, among other data, includes data on VAT, and store all relevant data for a specified period. Additionally, the invoices and data state must be reported to Tax Authorities.

The primary sector or industry that was focused on was retail. However, tax authorities had to adapt reporting requirements to new circumstances due to changes in retail business operations, new payment methods, and the rise of digital goods and services.

Countries such as Croatia, Slovenia, and the Czech Republic implemented a real-time reporting system for transactions subject to fiscal laws.

In response to the rising issues, especially considering the VAT gap or unreported VAT that caused revenue loss for EU countries, the national government implemented more modern, efficient, and digitalized reporting requirements for monitoring tax compliance.

Since cross-border transactions are on the rise and more and more non-resident businesses supply goods and services to consumers in other countries, digital reporting requirements that are mandatory for local or resident taxpayers gradually became compulsory for those based in different countries.

Current DRR Framework for Non-Resident Taxpayers

The current DRR landscape in the EU consists of several different reporting mechanisms tailored to other countries' national needs. The Standard Audit File for Tax (SAF-T) and e-invoicing are the most common. However, it is essential to highlight that not all EU countries have implemented all reporting mechanisms and that, in some cases, not all taxpayers or transactions are covered by implemented digital reporting requirements.

Therefore, we need to break down these digital reporting requirements and indicate in which countries they are implemented and made mandatory for foreign taxpayers.

Standard Audit File for Tax (SAF-T)

The OECD developed the Standard Audit File for Tax (SAF-T) to standardize the reporting format for tax details and accounting data from the ERP, including VAT returns. The SAF-T format, such as XML or XBLR, is digital and designed for efficient and quick processing by tax authorities.

France, Portugal, Lithuania, Luxembourg, and Poland are among the EU countries that implemented mandatory SAF-T reporting for local and non-resident taxpayers.

France implemented SAF-T, or Fichier d’Ecritures Comptables (FEC), in 2014, mandating all taxpayers using computerized accounting systems to submit digital records when requested for a tax audit.

The Lithuanian I.MAS system includes the SAF-T  for electronic filing of monthly reports, including all transactions, such as B2B, B2G, and B2C, as well as domestic, intra-EU, and extra-EU transactions. All the stated data must be submitted to the State Tax Inspectorate during the tax audit. However, non-resident taxpayers registered for VAT in Lithuania only because of intra-EU acquisitions and did not carry out any other economic activity are not subject to this requirement.

In Portugal, non-resident businesses are subject to the exact SAF-T requirements as local businesses but are exempt from the obligation to submit SAF-T accounting.

E-Invoicing

Electronic invoicing, or e-invoicing, represents another cornerstone of DRR in the EU's evolution from paper invoices to digital forms. Austria, Romania, Lithuania, and Denmark are among the EU countries that implemented mandatory e-invoicing for non-resident taxpayers. However, there are some notable differences in requirements between these countries.

In Austria, non-resident taxable persons who enter into a contractual agreement with federal agencies must follow B2G e-invoicing rules, that is, issue and receive B2G e-invoices within their technical capabilities.

Non-resident taxable persons registered for VAT must send Romania all invoices relating to B2G or B2B transactions to the RO e-Factura system within five calendar days of the invoice date. 

In Litanian and Denmark, the same B2G e-invoicing rules for resident businesses apply to non-resident taxpayers.

Country-specific Types of DRR

Apart from the SAF-T and e-invoicing rules, which are spread across the EU with some modifications, some types of DRR are only defined in certain EU countries. For example, Hungary implemented mandatory real-time reporting for almost all transactions, such as cross-border and B2C sales, applicable to resident and non-resident taxpayers.

Bulgaria introduced Sale and Purchase Ledgers (SPL) as mandatory accompanying information submitted with VAT returns, including information on invoices issued by the supplier or on the supplier's behalf. 

The Czech Republic is another EU country that mandated submitting accompanying documents with VAT returns. However, in the Czech Republic, this DRR is called the VAT Control Statement, which summarizes the most important lines from the VAT returns.

Spanish national legislation introduced the Suministro Inmediato de Información (SII) as a mandatory VAT reporting system for resident and non-resident taxpayers registered for VAT in Spain if their annual turnover exceeds EUR 6 million.

Emerging Trends and Future Developments

The implementation of e-invoicing rules is an emerging trend among EU countries. In this and following years, France and Slovenia should implement mandatory e-invoicing systems, whereas Romania will extend its e-invoicing system to include B2C transactions.

However, when discussing DRR in the EU, we must consider EU VAT in the Digital Age (ViDA) legislative, which foresees e-invoicing as mandatory for intra-EU transactions starting July 2030. All EU countries will use a uniform reporting and tracking system for all relevant VAT data.

The trend of including new sectors, such as digital platforms and the gig economy, reflects the EU’s commitment to adapting its tax framework to modern business models.

Conclusion

Digital reporting requirements are one key aspect of the EU’s strategy to modernize tax administration and combat non-compliance. Thus, they reduce the space for VAT evasion and fraud. Moreover, with more modern and digitalized VAT monitoring and tracking systems, all EU countries should increase the revenue generated from VAT.

On the other hand, this may come as an additional obligation and responsibility for non-resident taxpayers. With the current rules in place and new ones in sight, all taxable persons, including non-residents, must prioritize adaptability and transparency to thrive in an increasingly digitized tax environment.

Source: Quaderno, European Commission - VAT in Digital Age, VATabout - Country Guide - VAT in France, VATabout - VAT in Luxembourg: Rates, Registration & Reporting Explained, VATabout - Country Guide - VAT in Portugal, VATabout - Comprehensive Guide to VAT in Austria: Rates, Registration, and Compliance, VATabout - Complete Guide to VAT in Hungary: Rates, Registration, and Reporting Explained