What is eVAT M2M and What are Its Advantages?
The eÁFA (or eVAT) M2M system offers a solution for taxpayers by leveraging the advantages of digital technology, simplifying the VAT declaration process, reducing administrative burdens, and clearly aiming to reduce VAT fraud while making the tax office's work more efficient.
The system allows, among other things:
- Querying relevant tax authority data – such as online invoice data submissions, online cash register reports, import customs procedures,
- Validation of VAT analytics,
- And approval of VAT declarations.
How to Access NAV's Electronic VAT System?
The two main access modes to eVAT will be the online web interface and the XML-based machine-to-machine (M2M) connection, which can be tested from the beginning of December 2023 - according to the official communication of the tax authority.
The web interface assists taxpayers in handling less complex declarations, while the M2M connection allows for more complex data management integrated with business systems.
Additionally, the M2M system ensures preliminary validation, aiding in the submission of correct declarations.
Steps Necessary for the Introduction of eVAT M2M
The eVAT system significantly impacts the tax declaration process, improving its accuracy and immediate verifiability by NAV. However, businesses and developers must prepare for the new system, which includes implementing standard NAV tax codes and optimizing business management systems and databases.
1. Switching Corporate Tax Codes to Standard NAV Tax Codes
The fundamental building blocks of the new eVAT system are the standard tax codes published by NAV, which clearly determine the lines of VAT declarations, i.e., which line or lines a piece of information on a given document should appear and what tax rate applies to it.
Practically, this requires adapting to the tax code system, i.e., matching the tax codes in the corporate management system to NAV's standard tax codes.
This is one of the biggest challenges before the introduction, as incorrect classification can result in erroneous declarations. Companies may also face the need to further break down their own tax codes or introduce new codes to ensure proper pairing.
For example, standard NAV tax codes require distinguishing between normal and advance items, as advances also appear on detailed lines. If a company does not keep advance items on a separate tax code, it must resolve the correct classification and differentiation of items, possibly by introducing new tax codes. The eVAT M2M system compiles the tax and tax base associated with the given tax codes and reflects this in the final VAT declaration, making accurate classification essential for successful declaration.
2. API Communication, M2M XML Generation
As a developer, the task is to establish API communication, which operates on similar principles to the online invoice data submission system. Creating eVAT analytics XML is a greater challenge, as it requires mapping VAT analytics instead of invoice data. A combination of tax and IT knowledge is necessary since these XML files must be flawless as they form the basis of the declaration. Moreover, the declaration data are cross-checked with the online invoice system, cash register, and customs data.
3. Review of ERP, Accounting Software
It is crucial not to forget about reviewing the ERP system and its online invoice data submission solution. This includes checking partner master data, verifying the validity of partner tax numbers, and conducting a business partner verification procedure to minimize tax risks. Unlike the current ÁNYK VAT declaration, partner data and tax numbers are also part of the eVAT XML in the M2M system.
The data uploaded in the M2M system are cross-checked with the online invoice system data, hence the importance of ensuring that our data are in harmony with the data reported by our partners.
4. Interpreting NAV Messages
Interpreting NAV communications is also part of the preparation. Before February 20, 2024, it is advisable to familiarize ourselves with the interpretation of messages generated by NAV – similar to those in the online invoice system. The system runs numerous validations, whether mathematical or logical. The new system checks whether the eVAT M2M XML file is formally and content-wise correct.
Content checks include messages familiar from ÁNYK and checks that previously occurred in NAV's system after the submission of the declaration and prompted the taxpayer to correct errors; in the eVAT system, these are now brought forward.
Additionally, we can expect itemized checks in connection with the various mentioned databases. Unlike the online invoice data submission system, however, here we need to interpret and handle messages returned by NAV related to the entire VAT declaration and analytics.
The phasing out of ÁNYK
With the introduction of the eVAT system, the era of ÁNYK will start to phase out. Thanks to modern technology and automated processes, the eVAT system can be an effective tool for managing tax declarations, which helps ensure the accuracy of VAT declarations, thereby reducing the number of tax audits. However, the mentioned tasks need to be performed for the successful and efficient introduction of eVAT, which requires not only IT or taxation knowledge but a combination of both.