Global expansion of e-invoicing and digital reporting obligations for nonresidents

Editor: Mary Van Leuven, J.D., LL.M.

In an increasingly interconnected world, jurisdictions are continually adapting their tax and regulatory frameworks to ensure compliance and improve efficiency. One significant trend in recent years is the expansion of e–invoicing and digital reporting obligations to nonresidents that have value–added tax (VAT) obligations in the jurisdiction. A primary driver of this movement is the ability of retailers and resellers of goods and services in the digital economy to access local markets throughout the world without a physical presence in a country. Tax authorities have identified an increasing number of online retailers selling into countries without adhering to the same tax obligations as local stores as a significant reason for the VAT compliance gap.

VAT systems rely heavily on invoices to evidence the VAT charged by vendors; they are also necessary for business customers to recover VAT incurred on expenditures, thus creating a self–enforcement mechanism. By implementing electronic invoicing (e–invoicing) and digital reporting mandates, jurisdictions build on the linchpin of the invoice to enhance transparency and combat tax evasion.

E-invoicing and digital reporting: From domestic to global

Through e–invoicing, a public authority (generally the tax authority) mandates all or certain taxpayers to issue, receive, and store invoices electronically in a structured manner based on technical specifications established by the authority. While these mandates may be limited to exchanges between taxpayers, they increasingly include a requirement for authorities to prevalidate invoices, thus allowing authorities real–time access to key data. Digital reporting mandates require taxpayers to periodically submit their invoice data to the tax authorities, using the format and channels established by the authorities.

The scope of e–invoicing and digital reporting mandates varies by jurisdiction. Countries often introduce the mandates with a somewhat limited scope, such as focusing on revenue thresholds (e.g., Saudi Arabia, Germany, France, etc.); parties involved (e.g., suppliers in public procurement in the European Union (EU)); or, more commonly, to domestic business–to–business transactions between resident taxpayers. Once the mandates are in place, authorities generally expand the scope to capture more transactions. The expansions can include previously excluded VAT transactions, such as business–to–consumer transactions, but often go beyond the scope of VAT to include electronic waybills, payroll receipts, transfer pricing receipts, etc.

Expansion to cross-border transactions

E–invoicing and digital reporting obligations have expanded in recent years to cover cross–border import and export transactions originally excluded from the requirements. For example, many countries in Latin America and some in Europe (e.g., Italy) require taxpayers to issue electronic invoices (e–invoices) for export transactions. While no VAT is due on these transactions, mandating the issuance of e–invoices on exports allows the tax authorities to obtain a more complete picture of the taxpayers’ transactions and the tax credits they have the right to recover.

The Philippines recently enacted a regulation requiring any seller of goods shipped into the country to issue e–invoices to the local client before the goods arrive, thus allowing the authorities to identify goods entering the jurisdiction and improve customs procedures. This new mandate is particularly noteworthy, as it requires foreign exporters with no physical presence in the Philippines to issue e–invoices through the Bureau of Customs portal when shipping goods to the country. Although the responsibility for paying the applicable import taxes rests with the local importer of record, the e–invoice provided by the foreign exporter will serve as the basis for determining these taxes before the goods are released from customs.

In the EU, e–invoicing and digital reporting have long been the purview of each member state as part of their right to establish VAT compliance requirements. The VAT in the Digital Age (ViDA) package introduces mandatory e–invoicing and digital reporting requirements for intra–EU transactions, effective July 1, 2030. E–invoices relating to intra–EU transactions will be required to meet the EU e–invoicing standards so that they can be easily exchanged between taxpayers in different EU member states. In addition, the data on cross–border sales and sales subject to the VAT self–assessment requirements, as well as the mirroring purchases, will be subject to a five–day digital reporting requirement. This new requirement will replace the current European Community Sales List through which VAT–registered businesses communicate their intra–EU sales of goods and services every filing period. Once in place, the EU mandate will be the first–of–its–kind interoperable system between jurisdictions.

Expansion to nonresident taxpayers

Historically, e–invoicing and digital reporting mandates have applied to resident taxpayers. However, as the VAT nexus rules have adapted over time to address the digital economy, tax authorities may now be tempted to expand their e–invoicing and digital reporting mandates to nonresident businesses selling digital services and/or low–value goods (i.e., shipment of goods with a value lower than the normal customs duty threshold) to local customers. So far, most jurisdictions with VAT rules aimed at the digital economy are excluding nonresident providers, as, for example, in Kenya and Malaysia. In both jurisdictions, the tax authorities made clear that nonresident digital services providers are not subject to the local e–invoicing mandate.

Some jurisdictions, however, have applied e–invoicing rules to nonresident digital services providers, perhaps providing a model for other jurisdictions. For instance, Taiwan requires foreign suppliers of digital services selling to Taiwanese consumers to issue electronic government uniform invoices (eGUIs) using the Ministry of Finance platform within 48 working hours of the transaction. Interestingly, Taiwan does not have a domestic e–invoicing mandate for local taxpayers, meaning that mandatory e–invoicing is limited only to foreign suppliers of digital services.

The application of e–invoicing and digital reporting mandates to nonresidents may be more complicated when the laws are broadly written so that nonresidents are caught by the mandate even if they are not in the digital economy. For example, since Jan. 1, 2025, Romania requires foreign businesses registered for VAT to submit monthly Standard Audit File for Tax (SAF–T) reports, known in Romania as Declarației Informative, in XML format. In Albania and Serbia, nonresident suppliers of goods and services must comply with the e–invoicing mandate and appoint a fiscal representative for tax matters. Similarly, the Filipino and EU examples above will apply to nonresidents even though they are aimed specifically at the digital economy.

In recent years, some jurisdictions have rolled out VAT rules aimed at the digital economy and announced the implementation of e–invoicing mandates without addressing the interaction between the two obligations. For instance, Niger’s last finance bill requires nonresident digital services providers to register for VAT; it also imposed a new e–invoicing mandate that is left to the tax authorities to implement and administer. In the absence of clear exclusions, nonresident digital service providers should likely assume that once they are registered for VAT, they will also need to issue government–compliant e–invoices. E–invoicing is becoming the tool of choice for tax authorities to ensure tax compliance, and cross–border transactions are the last frontier. Imposing these mandates is thus the logical next step.

Compliance challenges and opportunities

The global shift toward mandatory e–invoicing and digital reporting for nonresidents reflects the broader trend of digital transformation in tax administration. While this presents challenges, it also offers opportunities for businesses to streamline operations and improve compliance. As more countries adopt these measures, nonresident entities must stay informed and adapt to thrive in this evolving regulatory environment.

Nonresident businesses face two key challenges: compliance costs and navigating diverse regulations. Compliance costs include system upgrades to meet local e–invoicing requirements, software investments, and potentially hiring local tax experts. Navigating diverse regulations involves understanding and adhering to each country’s unique set of rules and standards and can be time–consuming, costly, and challenging.

Successfully navigating the complexities of e–invoicing and digital reporting requires robust technical and legal support. A strong technical support team can assist in integrating new software solutions and adapting existing systems to meet local requirements, ensuring seamless operations and data accuracy. Meanwhile, a knowledgeable legal support team can provide insights into the regulatory landscape, helping businesses interpret and comply with local laws. By investing in the right technology and expertise, companies can ensure compliance, minimize risks, and capitalize on the opportunities presented by the global digital transformation in tax administration.

Editor Notes

Mary Van Leuven, J.D., LL.M., is a director, Washington National Tax, at KPMG LLP in Washington, D.C.

For additional information about these items, contact Van Leuven at mvanleuven@kpmg.com.

Contributors are members of or associated with KPMG LLP.

The information in these articles is not intended to be “written advice concerning one or more federal tax matters” subject to the requirements of Section 10.37(a)(2) of Treasury Department Circular 230. The information contained in these articles is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. The articles represent the views of the authors only and do not necessarily represent the views or professional advice of KPMG LLP.