VeriFactu System to Combat Tax Fraud in Spain
The State Tax Administration Agency (AEAT) is working on the Royal Decree Project that will approve regulations establishing the technical requirements for Digitalized Billing Systems or "VeriFactu" systems, as well as standardizing the formats of billing records.
The Anti-Fraud Law obliges companies and professionals in Spain to work with Digitalized Billing Systems (SIF) approved by the Tax Agency, supporting accounting, billing, or management processes to ensure the integrity, preservation, accessibility, legibility, traceability, and inalterability of invoice records.
Anti-Fraud Law in Spain
Law 11/2021 on measures for the prevention and fight against tax fraud aims to prevent the manipulation of accounting data for dual accounting or altering transaction records. The law intends to prohibit what is known as "dual-use software" or computer programs that allow users to perform "shadow accounting" on invoices without declaring them.
Additionally, this law establishes the requirements that Digitalized Billing Systems or VeriFactu systems must meet when issuing ordinary and simplified invoices according to the new regulations.
Individuals impacted by the requirement to implement this invoicing system include professionals with fiscal identification in Spain who issue invoices. This excludes those obligated to report the Immediate Supply of Information (SII) and individuals subject to taxation in the Basque Country, Canary Islands, Ceuta, and Melilla.
What is VeriFactu?
VeriFactu refers to a "Verifiable Invoice on of the State Tax Administration Agency’s database (AEAT)." This term is colloquially used to referred to as “Sistemas Informáticos de Facturación “, or, “Digitalized Billing Systems” (SIF) or market-approved software by AEAT that complies with the principles of integrity, preservation, accessibility, legibility, traceability, and inalterability of invoice records.
When Will the VeriFactu System Be Mandatory?
According to the Royal Decree Project, the following timelines are set for taxpayers and VeriFactu software providers:
- Entities obliged to issue invoices under the Regulation must have their SIF or VeriFactu systems operational, adapted to the characteristics and requirements established in their development regulations before July 1, 2024.
- Developers and vendors of SIF or VeriFactu software must offer adapted solutions within a maximum period of nine months from the effective date of the Ministerial Order developing the technical regulations.
Characteristics and Requirements of VeriFactu Systems
Pending the publication of the Ministerial Order that includes the Regulation of technical requirements, a VeriFactu system or Digitalized Billing System (SIF) will be considered as the combination of hardware and software used to issue invoices by performing the following actions:
- Allow the entry of billing information by any method.
- Preserve billing information, either by storing it in the system itself or by exporting it to an external medium of any type and nature or through telematic transmission to another computer system, whether related to billing or not.
- Process billing information through any method to generate other derived results, regardless of where this process takes place, whether within the system itself or in another system after the information is sent to it through any direct or indirect means.
Likewise, this system must save each electronic invoice issued by the company and meet other requirements, such as recording any incidents that occur in the system. It must also be capable of:
- Ensuring that its records are unalterable.
- Automatically send information to the AEAT (State Tax Administration Agency).
- Include a QR code that allows a specific reader to verify that the invoice complies with the criteria and standards of the VeriFactu system.
Event Logging and Transmission to AEAT
According to the Royal Decree, VeriFactu systems must implement an event logging system that records all interactions, operations, and events with the system. Furthermore, VeriFactu systems or SIFs must have the ability to continuously and automatically transmit system information to the Tax Agency, following specifications in the technical regulations.
Penalties for Dual-Use Software Providers and Users
Any company that fails to comply with Law 11/2021 against tax fraud in Spain may face sanctions. Non-compliance with the law entails two types of penalties, one directed at dual-use software providers and another for users of such solutions.
Companies engaged in the manufacturing, production, and marketing of dual-use software allowing accounting manipulation may be fined up to €150,000, while users of such software may face fines of up to €50,000.