E-invoicing and CTC models in Eastern Europe

Eastern Europe has been no stranger to the introduction of continuous transaction controls. With the European Commission’s proposals and VAT in the digital age in attempts to harmonize CTC models across the Member States, unveiling different models is creating a truly interesting landscape in electronic invoicing.

The jurisdictions within Eastern Europe seem to highly favor the centralized model, establishing a mandatory infrastructure for issuing and receiving invoices. A few others are utilizing real-time invoice reporting (RTIR) and Peppol. Some also follow the fiscalization approach towards B2C transactions, where special hardware devices must be installed, storing and reporting the data to the government.

In 2018, Hungary introduced a voluntary real-time invoice reporting scheme, ultimately mandating invoice reporting for B2B and B2C transactions by April 2021. While not regulating e-invoices themselves, the model requires taxpayers to send a subset of their invoice data to the Hungarian Tax Authority (NAV) via the Online Szamla platform immediately after issuing the invoice.

Encompassing both Hungarian taxpayers and non-established entities with VAT registration in Hungary, the transactions that Online Szamla validates in real time include:

• B2B & B2C domestic transactions;
• B2B intra-community transactions;
• Tax-exempt domestic transactions;
• Export transactions; and
• B2C distance sale transactions.

The requirement to send invoice data is enforced by penalties up to HUF 500 000 (approx. EUR 1500,00) per invoice.

While the Online Szamla platform receives invoice data, it is important to note that this is for reporting purposes exclusively. Issuing and fetching invoices via the platform is not possible.

Poland has received a derogation from Directive 2014/55/EU to implement a mandatory countrywide CTC model centered around the KSeF platform beginning January 2024. Since January 2022, the platform has been available for use voluntarily, but its adoption is currently not widely practiced.

While the centralized model with KSeF as a mandatory platform is for B2G and B2B transactions, using PEF (the Polish Governmental E-Invoicing Platform) is still possible in the public sector. PEF, which operates on the Peppol network, will run in tandem with KSeF for the foreseeable future.

Using KSeF has many benefits for taxpayers issuing invoices in the infrastructure. Besides increased speeds for tax refunds and the convenience of end-to-end process automation, taxpayers now have fewer obligations when it comes to archiving, as invoices can be stored in KSeF for up to 10 years. Moreover, using this platform reduces administrative responsibilities such as generating and sending specific audit files. As data will already be transmitted via KSeF, tax authorities will already have access to this information.

Since 2019, Romania has been leading the EU in VAT gaps with a total gap of 34.9%. To curb this and follow the other European jurisdictions successfully combating tax evasion, the country is implementing e-invoicing and e-transportation mandates alongside a new SAF-T schema.

Since July 2022, it has been required for B2G invoices to be issued via the RO e-factura infrastructure. The Romanian government has also mandated to validate invoices concerning high-risk fiscal goods and services between private companies via the RO e-factura platform.

High-risk fiscal transactions allow for a higher risk of tax evasion when bought and sold. These can be anything, e.g., alcoholic beverages, clothing, construction materials, etc.

To further apply controls around these goods, the RO e-transport system has been introduced in parallel. It allows monitoring of high-risk fiscal goods transportation and requires documentation with a unique ITU code to accompany all such goods transported. While this has been mandatory since July, penalties for not complying with these requirements have been deferred until January 2023.

Serbia is another Eastern European country implementing a centralized exchange model for invoice issuance. Since May 2022, entities have been required to issue e-invoices to their public sector trading partners via the SEF (Sistem E-Faktura) platform.

It is planned to extend the mandate for issuing invoices via the SEF infrastructure to the private sector, beginning January 2023. This incorporates another distinctive measure regarding invoice responses in Serbia.

Another notable feature of the Serbian implementation is the mandatory issuance of electronic business responses by the buyers. The buyer is given a limited timeframe to issue such a response, which, if not observed, has the effect of the invoice being final and non-disputable for B2G transactions or rejected for B2B transactions.

As Serbia is not an EU member, there is a freer rein to implement continuous transaction controls in the jurisdiction without requiring a derogation.

Slovakia has been executing test runs on the prototype of its IS EFA infrastructure since June 2022. This is the stepping stone to adopting a public sector mandate, but the implementation dates, the exact CTC model, and document types are not yet known.

Furthermore, the Slovakian government has announced its intention to extend the mandate countrywide, encompassing the private sector, but further legislation is still to be published.

Allowing for the issuance and reception of e-invoices, Slovenia has adopted the centralized platform UJP eRačun and Peppol for B2G transactions. This provides suppliers with more flexibility when issuing their business documents. Entities can either use Peppol BIS, eSlog 2.0 or other EN compatible formats.

The discussions on the future outlines of the CTC model in Slovenia are about to restart. Previous news regarded the introduction of a CTC model involving centralized pre-clearance with exchange via interoperability. The extended scope of the taxpayers is expected to include business entities, budget users, or taxpayers having subscriber status in the jurisdiction.