What is an electronic tax declaration?
The electronic tax declaration is the electronic processing of tax and fiscal compliance documents.
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:
Existing Tax Reporting models in Europe
In Europe, there are different tax reporting systems.
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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