As information in taxpayers’ ERP systems and the tax administration’s database must match, taxpayers will need to rectify and reconcile any discrepancies should they discover errors in the submitted data.
3. Align teams to ensure coverage and consistency
It is imperative to align the various teams that deal with invoicing within an organization as they need to standardize the protocols for managing and maintaining the invoicing processes effectively.
A matrix that clearly defines departmental responsibility (i.e., who is responsible, accountable, consulted and/or informed) and a governance model that underpins it should be established. The key is to ensure nothing falls between the cracks.
Led by the tax function, the organization should develop guidelines for invoice generation, validation, recording, reconciliation and tax compliance. Team members will also need to organize, classify, secure and back up tax defense files so that these can be easily retrieved for compliance or auditing purposes should the need arise.
Training is often under-addressed. While the design and implementation of any e-invoicing system is indeed of importance, it is critical that the users of such a system on a day-to-day basis are confident in using it. Moreover, organizations should consider if there is long-term training in place that takes into account staff movements in business units.
Embarking on a digital transformation journey
As tax administrations orchestrate the pivot toward new methods of record-keeping and tax return preparation, taxpayers will need to embrace this changing landscape and adapt to the new digital era. With the push to modernize tax systems, it is clear that e-invoicing also aligns with the broader digital transformation trend unfolding across industries.
Ultimately, e-invoicing presents an opportunity for taxpayers to digitize, simplify and manage tax reporting processes. Even if e-invoicing is not yet mandatory in their jurisdiction, taxpayers can get a head start by laying the groundwork for systems integration.
Taxpayers that are part of a multinational enterprise will likely find that many of the tools and processes they need are already available to them. This is especially the case where an enterprise is active in the EU, where the European Commission’s VAT in the Digital Age (ViDA) proposal, published in December 2022, includes measures to modernize the VAT system to avoid fraudulent activities, primarily through digitalization.
ViDA’s series of far-reaching VAT measures, which aim to reduce the €93 billion VAT gap in the EU and make the VAT system more efficient for businesses, revolve around three pillars:
- E-invoicing and digital reporting
- A single VAT return for trading across the EU
- The platform economy
One of the key proposals is the move to real-time digital reporting based on e-invoicing for businesses that operate cross-border in the EU.
In that regard, businesses with operations in the EU may find that investments made in that part of the world might catalyze efforts in Southeast Asia. That extends not only to software and hardware but also to processes, methodologies and all other aspects that make up an e-invoicing strategy.
More tax administrations across Southeast Asia are mandating the adoption of e-invoicing to better address tax considerations and improve tax compliance. Therefore, it is crucial for taxpayers to understand the importance of reconciling transactional data with tax accounts, considering the tax administration database as the single source of truth and aligning teams to maintain a tax audit support file.
While there may be initial challenges associated with the implementation of automated systems to comply with e-invoicing, the long-term benefits far outweigh any early obstacles. Taxpayers that proactively prepare for e-invoicing can achieve cost savings, efficiency gains and greater accuracy in invoicing processes while meeting tax obligations. Before starting from the ground up, taxpayers should first look within their own organization to see whether existing capabilities can be leveraged. Indeed, as Albert Einstein once said: “The only source of knowledge is experience.”
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Summary
More tax administrations across Southeast Asia are mandating the adoption of e-invoicing to improve tax compliance effectiveness and efficiency. It is crucial for taxpayers to understand the need to reconcile transactional data with tax accounts, consider the tax administration database as the single source of truth as well as align teams to maintain a tax audit support file. Taxpayers that proactively prepare for e-invoicing can achieve cost savings, efficiency gains and greater accuracy in invoicing processes.