A new digital VAT return will be introduced as of 2022. The VAT return will be based on SAF-T codes, and will be more detailed than the current VAT return, including bad debts reporting, VAT adjustments and reversal of input VAT and withdrawal VAT. The new return will demand more from companies in respect of correct registration of data in their accounting systems and there will be less room for manual corrections. We also expect that the new format will open up a whole new range of controls and analysis of the data, at a deeper level than what is currently possible. With less than a year until the new VAT return is introduced, we will in this blog give an overview of what we know - and don’t know - so far about the new VAT return.
A new VAT return from 2022: the Tax Authorities are modernising the VAT area
In December 2019, the Tax Authorities announced that a new digital VAT return is expected to be introduced as of 1st January 2022. This implies that VAT registered companies now have less than a year to prepare for a new VAT reporting routine.
The introduction of a new VAT return is part of the Tax Authorities initiative to modernize the Norwegian VAT area. As part of this initiative, a new VAT registration system will also be introduced in the first quarter 2021 and the new VAT return from 2022.
In addition to this, it has been proposed to introduce a new “sales and purchase list”. The proposal will require legislative amendments, and a discussion document is current being assessed by the Department of Finance.
What will change with a new VAT return?
A new digital VAT return is expected to be introduced as of January 2022. The reporting will be based on SAF-T codes and the SAF-T standard that became mandatory for all bookkeeping liable entities from January 2020. You can read more about the SAF-T requirements in our previous blogs here. You can also find more information on our website.
The SAF-T codes, which the reporting will be based on, consists of 31 VAT codes. In the new return, though all the codes will be available, the reporting will only cover accounts (codes) where there have been movements (transactions) in the relevant period. This implies that the return will be adapted to the individual company`s activity in the relevant VAT term.
In comparison, the current VAT return is manual and based on aggregated numbers that are filled out in 19 boxes in Altinn. The new return will require more detailed reporting, potentially at a transaction level. We expect that a larger amount of data and transaction information therefore will be transferred to the Tax Authorities.
The transfer of more detailed information will provide the tax authorities with the basis to perform several and more in-depth analysis of the VAT treatment of each single company. That the VAT reporting will be based on the SAF-T format also enables the Tax Authorities to run a series of automated controls on each, single VAT return.
This new digital and detailed reporting demands that companies have good control of the data registered in their accounting systems, as this will form the basis for the VAT reporting and there will be less room for manual corrections. We recommend all companies to set up good routines and control functions, in order to ensure that you have good control of the data, and in so VAT treatment for the company, that will be reported to the Tax Authorities - before the VAT return is submitted.
Reporting of bad debts, adjustments, VAT corrections and withdrawals
The Tax Authorities have also indicated that the new VAT return will include reporting on bad debts, adjustments, VAT corrections and withdrawals. This additional reporting, when compared to the current return, will further require that companies have good control and overview of the data registered in their accounting system.
Our experience is that many companies don’t have sufficient control and documentation on these subjects. A more detailed reporting also indicates that these will be focus areas for VAT-controls and audits with the introduction of the new VAT return.
The announcement from the Tax Authorities does not provide any further guidance on how the reporting of these areas will be set up. The current SAF-T VAT codes does not have individual codes for bad debts, adjustments, corrections or withdrawal VAT. We hope and expect that the Tax Authorities will provide more information about this as soon as possible, so that companies will have sufficient time to prepare for the new reporting and make necessary changes in their accounting systems.
Reporting directly from the company's accounting system
The Tax Authorities have also indicated that they hope that as many as possible will file their VAT returns directly from their accounting system. The purpose of direct reporting of the VAT return from the accounting system is to minimise the risk that companies will enter incorrect numbers, and that a direct reporting will be timesaving for the users.
On the other hand, a direct reporting from the accounting system will also leave less room for manual corrections or consolidations before submitting the return. This may require several changes in the current set-up of the accounting system, in order to ensure that the movements (transactions) in the given reporting period.
There are still several uncertainties about the new digital VAT return that has not been clarified by the Tax Authorities. This concerns amongst other:
- Reporting for companies that use VAT codes and handle VAT using dedicated accounts for individual VAT treatment
- Transition period
- Any limits to the size of the file (VAT return) for direct reporting from accounting system
- Exemptions or adjustments for certain business sector
- Information about term lengths and reporting deadlines
- Reporting for VAT groups
Our understanding is that the Tax Authorities will announce more information about the new VAT return and reporting at the start of 2021. We expect that more clarifications will be made available shortly.
Necessary preparations - are you ready for a new digital VAT return?
Testing of the first version of the new digital VAT return will start towards the end of third quarter 2021. This implies that companies will have a short period of time to test the solution and compatibility with their own accounting systems, before the new return is introduced as of 2022.
The new reporting will entail that a larger and more detailed amount of data will be transferred to the Tax Authorities. There will also be less room for manual corrections for the VAT-reporting.
We recommend companies to prepare for the new reporting as soon as possible. Preparations may cover mapping to SAF-T codes, assessment of own use of VAT-codes, how costs and income is accrued, review of bookkeeping routines and control actions, review of which data that is registered in the system and how.
In PwC we have a specialiced team assisting in all areas related to SAF-T reporting and VAT. Our team have persons with legal, economic, bookkeeping and IT/technical expertise and if you need any help or have any questions - our “SAF-T task force” is here to help you!
We hope you reach out for a chat if you have any questions regarding SAF-T or the new VAT return.
Mitt navn er Silje Guttormsen og siden 2016 har jeg jobbet med merverdiavgift i Advokatfirmaet PwC. Til daglig arbeider jeg med merverdiavgiftsrettslige forhold generelt, og bistår både nasjonale og internasjonale selskaper med salg av varer og tjenester i Norge og utlandet. Gjennom bloggen håper jeg å kunne bidra med gode og nyttige tips og råd, og å spre kunnskap om merverdiavgift. Ta gjerne kontakt om det er temaer du ønsker vi skal blogge om eller om du har spørsmål eller ønsker å slå av en prat.
My name is Silje Guttormsen and I work as an associate lawyer at PwC Tax and Legal Services. Through my work at PwC, I assist both Norwegian and international companies with VAT advice on Norwegian and international queries, supply of goods and services in Norway and abroad, merger and acquisition and efficiency improvement from a VAT compliance perspective. I hope to contribute with helpful tips and advice concerning VAT. Reach out if there are any topics you would like us to write about, or if you have any questions or just want to have a chat.