International tax compliance: How to prepare your business in 2024

E-invoicing mandates, which dominated tax compliance news in 2023, show no signs of slowing down this year. The high rate of adoption across the world and the mutual benefits to governments and businesses alike make e-invoicing central to the future of tax compliance. Through e-invoicing and live reporting, governments can become more efficient and gain visibility into a huge amount of transactional data. This makes them better able to tackle tax fraud and reduce the VAT gap — the estimated difference between expected VAT revenue and actual VAT revenue collected, which according to the latest figures from 2021 stands at around €61 billion. Businesses, meanwhile, can increase the efficiency of their finance teams, save on costs, and free up resources that would otherwise be tied up by manual processes. Businesses can also reduce their carbon footprint by moving away from paper usage.

A factor that will almost certainly drive the uptick of e-invoicing further is VAT in the Digital Age (ViDA) — the EU’s plan to modernise VAT. ViDA makes it easier for EU member states to mandate e-invoicing, as they’ll no longer require permission from the European Commission to do so. They will also no longer be required to seek permission from customers before replacing PDF invoices with e-invoicing.

As part of the European Commission’s planned customs reforms for 2024, technology will be used to revamp the handling of goods arriving in the EU. A new EU customs data hub will help to speed up the customs process by allowing businesses to submit data to a centralised system just once for multiple consignments, instead of having to submit data for each parcel. As with e-invoicing and live reporting, the hub gives authorities greater visibility into the movement of goods and their related data. This makes authorities better able to respond to potential security threats and channel resources accordingly. To further protect against potential threats, the third and final phase of the EU’s security initiative — Import Control System 2 (ICS2) — will begin in March.

Businesses sending goods to the EU by any routes and means will be required to submit additional safety and security information to the EU prior to their arrival. This follows previous ICS2 updates around the requirement for businesses to use much more specific item descriptions that appear on an EU list of acceptable terms.

If you’re selling and shipping into Europe, getting your item descriptions right is perhaps more important than ever. Avalara cross-border solutions can help you assign the correct HS codes to your goods by automating the process, making your item descriptions as accurate as possible. This can limit unnecessary holdups in customs and lessen the chances of surprise additional costs.

IOSS is the EU scheme that makes it easier for businesses to sell into the EU by allowing them to register in a single member state. Previously, businesses had to declare and pay EU import VAT on goods with a consignment value below €150 — this threshold has been removed, meaning businesses can benefit from lower compliance costs. Avalara’s IOSS service can help you take advantage of the scheme and make selling and growing in the EU easier.

Another way technology is being used to monitor goods moving across borders is to analyse the raw materials and production and transportation processes to calculate their carbon footprint. The EU uses software to monitor the effectiveness of its Carbon Border Adjustment Mechanism (CBAM) — a levy on industries with significant emissions that aims to ensure the carbon content of imported goods is equivalent to those produced within the EU. More and more countries are implementing similar systems, aided by technology. Australia, for example, looks set to move ahead with a similar system in an effort to hit national sustainability goals.

This overview of compliance updates is merely the tip of the iceberg. For more in-depth analysis and help to prepare your business, watch our on-demand webinar 2024: the year ahead in indirect tax and e-invoicing.

Avalara experts Alex Baulf, Vice President, Global Indirect Tax and E-Invoicing, and Kamila Ferhat, Director, E-Invoicing and Live Reporting, provide an overview of everything that’s new in indirect tax compliance and e-invoicing.

Businesses need to keep in mind that e-invoicing mandates and requirements are being rolled out all the time. Though dates and details can change, Avalara Tax Changes provides an overview of key upcoming mandates and rule changes across Europe and beyond.