Saudi Arabia has declared its interest in implementing Continuous Transaction Controls (CTC)*, such as mandatory electronic invoicing. According to Hungarian news agency MTI, last week (July 15-17, 2019) a high-level delegation of executives from the Saudi Arabian tax authority visited the Hungarian tax administration in Budapest. The delegation were reportedly visiting to learn more about the Hungarian CTC model called RTIR.
Suhail Abanmi, head of the Saudi tax authority, said the goal is not only for economic actors to pay the State the VAT introduced in 2018, but equally for the Saudi tax authority to help taxpayers with digital services which make the fulfilment of tax payment obligations as easy and convenient as possible.
RTIR – A model for other nations?
According to the Hungarian RTIR model, the supplier is obliged to report an invoice data subset (i.e. not the full invoice, but only certain VAT relevant elements) immediately after invoice issuance to NAV (the platform controlled by the Hungarian tax administration) without any human intervention. Such approach is commonly known as real-time reporting.
The main differentiator between the Hungarian real-time reporting model and the so called “clearance” model present in many Latin American countries or in Italy in the EU is that the government does not interfere in the supply chain and exchange of the invoices between the trading partners. The tax administration is governing and controlling the indirect tax while letting companies to decide how they want to transact and operate with each other.
In Hungary, the National Tax and Customs Administration secures 95% of the budget’s state revenues through the collection of taxes. Saudi Arabia only introduced Value-Added Tax last year, and taxpayers are still in the process of implementing the requirements and learning how to correctly apply the new regulations. Currently, about 80% of budgetary revenues are derived from the export of crude oil.
In April 2019, the Greek Independent Authority for Public Revenue (IAPR) studied the RTIR, and it is possible that the Greek tax authorities may choose to implement a model similar to the Hungarian system.
*Continuous Transaction Controls or CTC is a generic term used to described digital tax control models and mechanisms aimed on control of the transactions happening between the individual taxpayers. Examples of CTC include, but are not limited to, hard-clearance (e.g. Italy), soft-clearance (e.g. Costa Rica), real-time reporting (e.g. Hungary), PEPPOL (e.g. Norway) and e-ordering models (e.g. Sweden). The common denominator for all CTC models is that invoice or invoice subset must be reported in real-time to centralised or accredited one or several infrastructures without any manual intervention from the taxpayer.
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