What is an electronic tax declaration?

The electronic tax declaration is the electronic processing of tax and fiscal compliance documents.

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What is an electronic tax declaration?

Electronic tax declaration involves implementing technological solutions to automate and establish communications and information exchange with tax agencies. 

Thanks to solutions integrated in the company's ERP, different files or any type of declaration according to the format and the technical and legal requirements of the tax administration are generated from the system.  It allows automated processing of electronic VAT returns, which are increasingly in demand by governments, especially in Europe and Latin America.

The main objectives of electronic tax declarations are:

  • Improve fiscal control.

  • Simplify compliance with fiscal and tax obligations.

  • Reduce costs through automation.

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Existing Tax Reporting models in Europe

In Europe, there are different tax reporting systems. 

SII AEAT. The SII AEAT is a system that was developed by the Tax Agency for the electronic management of VAT record books. This system requires the issuance and declaration to the AEAT of the details of invoices issued and received within a maximum period of four calendar days.

myData. My Digital Accounting & Tax Application is the platform created by the Greek tax authority to digitize the reporting of tax and accounting information of companies. Income documents, expense documents and accounting entries must be sent through this platform.

RTIR. Real Time Invoice Reporting is the submission system established by the Hungarian government for VAT returns of issued invoices. They must be submitted electronically to the NAV (National Administration of Taxes and Customs).

i.MAS. The iMAS system is composed of several subsystems, the most important of which are: i.SAF, for reporting electronic invoices; i.VAF, for reporting the movement of good/products; and I.SAF-T, for recording, sending and analyzing tax and accounting information returns in the SAF-T format.

SAF-T. From January 2020 all companies operating in Norway are required to report their accounting information through the SAF-T system when required to do so by the Norwegian tax authority.

SAF-T. In Poland, VAT records are filed electronically using the JPK_VAT file, based on the SAF-T model. The Polish Ministry of Finance may also require the delivery of other electronic accounting documents in SAF-T format, if requested by the tax authority.

SAF-T. In Portugal the Directorate General of Taxes (DGCI) requires the electronic submission of three types of documents: electronic accounting, VAT returns and transport documents that are sent in XML format, called SAF-T.

MTD. In the UK, businesses with a VATable turnover more than £85,000 must use the Making TaxDigital system. MTD involves filing their VAT books in digital format and sending them to the HMRC via API. 

SAF-T. The National Tax Administration Agency (ANAF) requires the submission of tax and accounting information through the SAF-T D406 Standard Tax Control File system embedded in a PDF. ANAF distinguishes three different files to be declared: D406 Declaration for tax and accounting information; D406 Assets Declaration, annual report with asset information; and D406 Inventories, on-demand inventory declaration. 

Continous Transactions Controls (CTCs)

Continuous Transaction Controls (CTC) are digital management models applied by tax administrations to improve fiscal control over taxpayers. It involves collecting real-time or near real-time data on taxable business transactions. For this purpose, management systems based on cloud-based interoperability solutions are enabled. Taxpayers are required to implement electronic solutions to conform to the technical and legal requirements of the system for tax compliance.

With CTCs the tax authorities promote a dynamic approach where the flow of information comes directly from the management systems of taxpaying companies instead of a static approach that obtains information from ledgers sometime after transactions are completed. 

Electronic invoicing is the basis on which tax administrations build Continuous Transaction Controls. There are different CTC models depending on the level of reporting and authorization imposed by the tax authority. 

1. Clearance systems

More widespread in Latin America. It implies that the taxpayer sends, in real time, the electronic tax document in the required standard format to the tax authority through the CTC platform. The tax authority must in turn issue a response of conformity of the invoice as a precondition for its validity. 

The clearance model is one of the most chosen by governments that decide to make the declaration of electronic invoices mandatory, as it allows a much more direct control over transactions. 

2. Electronic reporting system (e-reporting)

Electronic reporting system (e-reporting) is the most widespread model in Europe. As examples, we have systems such as the RTIR in Hungary or the Immediate Supply of Information (SII) system in Spain. In these cases, the report is sent to the tax authority within a certain time, not immediately, and no immediate response is expected from the CTC platform that conditions the further processing of the document as a valid invoice.

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