Avalara Tax Changes 2022: Global Tax Trends


With global e-commerce on track to surpass $ 7 trillion by 2025, new markets and opportunities await entrepreneurial businesses. Yet the increase in cross-border shipments has strained a supply chain already strained by the COVID-19 pandemic. And as global sellers strive to meet customer demand, they also have to navigate a series of complex cross-border compliance requirements.

Some of the issues affecting global businesses and tax compliance in 2022 include e-invoicing mandates and the digitization of tax administration, updates to the Harmonized Product and Coding System, and COVID-relief efforts. 19 new or in progress. Read on for more details.

Electronic invoicing mandates become more prevalent and stricter

As part of an ongoing battle to narrow tax gaps and improve tax compliance, countries around the world are moving forward with a host of new digitization mandates in 2022. These include electronic invoicing requirements as well. a new mandatory reverse charge of VAT in France, mandatory QR codes on all invoices in Portugal and real-time B2B electronic invoicing requirements in Spain.

Other policy changes include:

Some of the above changes are adopted nationally from the start; others will be introduced gradually. For example, e-invoicing requirements in Vietnam will be implemented in six cities and provinces until March 2022, and in 57 other cities and provinces from April to July 2022. From July 1, 2022, e-invoicing will be mandatory for all B2B sales in Vietnam.

Alex Baulf, senior director of government and influencer relations at Avalara, encourages companies to “think strategically rather than tactically” when considering how to comply with new e-invoicing requirements. A key consideration should be whether an e-invoicing solution can be scaled to all countries and regions.

Digitization: VAT reform in EU and UK underway

As countries move forward with their own digitization requirements, the European Commission is developing a more comprehensive ‘VAT in the digital age’ initiative. A draft proposal is expected this month. Baulf says there will likely be three major areas of focus related to digitization, VAT, and changing business models and technologies:

  • A single EU-wide registration

  • Digital reporting requirements (DRR) and electronic invoicing

  • VAT treatment of the platform economy

Feedback obtained from around 160 advisers, business leaders, government officials and association representatives in October 2021 indicates that there is support for these measures. The fact that the current system is not working – each Member State implements its own digital reporting and invoicing requirements – is widely recognized. The same is true of the fact that the transition from separate registration requirements for each Member State to an EU-wide model will be difficult.

The EU recognizes that the VAT gap is largely due to ineffective enforcement measures. He also knows that digitization can help reduce compliance costs as well as the tax gap. Nevertheless, there will be growing pains.

New digitization policies, once adopted, could enter into force as early as 2023. In the meantime, tax administrators and businesses across the EU continue to adapt to One-Stop-Shop (OSS) and One-Stop-Shop regimes. import (IOSS), and the fact that marketplaces are now the deemed supplier liable for the tax.

HS 2022 deployment

Another challenge that many businesses face this year is the release on January 1, 2022 of the Seventh Edition of the Harmonized System (HS) of the World Customs Organization (WCO), which is updated every five years. . Over 200 countries use HS codes to identify and track cross-border sales.

HS codes are hard to come by no matter what you are selling or where you are selling it. Although six digits are the global standard, each country adds additional digits to distinguish each product. When the codes change, correcting them becomes more difficult – and many changed on January 1, 2022.

Some countries have already made the necessary changes. For one reason or another, others will wait. This will exacerbate compliance concerns for businesses in 2022 and beyond.

COVID-19 relief initiatives

While many emergency relief measures related to COVID-19 have either started to expire or will end soon, those that are still in effect can be helpful:

  • EU member states can apply reduced VAT rate to test kits and more until 2022

  • Austrian COVID-19 tax amendment law applies until December 2022

  • Estonia reduced excise duties until April 2022

  • Germany’s reduced VAT rate for test kits, as well as catering and catering services, extends until 2022

  • Iceland suspended overnight tax until February 2022

  • UK reduced some VAT rates and postponed some VAT payments until end of March 2022

With the advent of the omicron variant, businesses need to be on the lookout for new relief measures, including deposit and payment extensions and reduced rates.

Other issues affecting global taxation in 2022

The above only scratches the surface of global trade and international tax compliance. Other issues include the growth of the gig economy and a call for carbon-neutral delivery options. Additionally, supply chain issues are likely to persist, potentially forcing companies to develop new suppliers closer to home.

Learn more about issues affecting global tax compliance in the global taxation section of Avalara Tax Changes 2022.

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