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Principle statement from the Directorate of Taxes regarding SAF-T and COVID-19

Principle statement from the Directorate of Taxes regarding SAF-T and COVID-19.

Principle statement from the Directorate of Taxes regarding SAF-T and COVID-19.

During the past two years, we have kept you informed about the progression of the implementation of the Standard Audit File- Audit ("SAF-T") requirements. Originally scheduled to be effective from 2018, the implementation was postponed for two years, to 1 January 2020. One of the reasons for postponing the implementation is said to be that the ERP system suppliers simply did not have the capacity to make all the requested changes in own software in time.

As a result of the COVID -19, the Directorate of Taxes has released a principle statement regarding entities that, due to the COVID-19 pandemic, will not be ready to submit a SAF-T accounting file by 10. April 2020.

Background

From 1 January 2020, all entities that has a book-keeping obligation in Norway, shall be able to export their accounting information in standard data format (SAF-T accounting) via the electronic reporting portal (Altinn), at the request of the tax authorities upon inspection or control, cf. the Accounting Regulations section 7-8, i.e. data related to general ledger, vendors, suppliers and value added tax (VAT).

For entities that are liable to pay VAT, the first time the Tax Administration can request a SAF-T accounting file would be the deadline for the first VAT-term: April 10, 2020.

The principle statement

In the principle statement dated March 20, 2020, the Directorate of Taxes sheds light on how the Tax Administration will deal with entities that has an accounting obligation in Norway that, due to the COVID-19 pandemic, will not be able to produce a SAF-T accounting file by April 10, 2020.

We quote from the statement:

Due to the current situation with the pandemic, many companies have had immediate production and capacity problems, which can therefore have a major impact on a final technical effort such as SAF-T accounting adjustment and programming. If the delay is due to unforeseen capacity problems due to the COVID-19 pandemic, it is not necessary to apply for an exemption in accordance with § 7-8 third paragraph of the Accounting Regulations. It is assumed that the work on SAF-T accounting will be completed as soon as practicable.

Our interpretation of this statement is that the Tax Authorities will continue to request SAF-T accounting files with effect from first term 2020 (and later periods), but that entities may be exempted from filing if the entity is affected by immediate capacity problems due to COVID-19, and that these capacity problems makes it impossible to complete the SAF-T accounting file by the statutory deadline. Our understanding is that the exemption from applying for an exemption only applies if the delay is due to unforeseen capacity problems due to COVID-19.

Why is this important?

Many entities that are covered by the accounting obligation in Norway, are either Norwegian subsidiaries or branches of foreign companies. Many of these entities base their reporting on book-keeping done abroad, in shared service centers, within the foreign parent company's ERP-system and account plan. The reporting in Norway is then done through various solutions that involves a more or less manual procedure for "translation" and "mapping" of the data to meet Norwegian standards. The SAF-T requirements, however, means that these entities have to invest in solutions to extract, structure and submit the data in file-transmissions that meet the requirements. The files are tested, and if they are not compliant, they will be rejected, and the submission will be considered void; which will be considered equal to no submission at all. The Norwegian tax authorities may then levy penalties and fines.

If your company is still not able to comply with the SAF-T requirements, you should not consider the principle statement from the Directorate of Taxes to be a "carte blanche" to postpone the development of a solution further. We assume that for a short period of time, the Norwegian tax authorities may accept that the entity does not comply with the regulations, but we assume that it will not take long before the tax payer actually will be challenged and required to prove that the inability to meet the requirements is due to issues caused by the COVID-19 pandemic.

To the extent that it is possible, the development and implementation process should be given priority. There will come a time when the Norwegian state will need funds to finance all the initiatives that have been launched to battle the adverse financial effects of the pandemic for businesses, and when that time comes, we anticipate that the Norwegian tax authorities will use SAF-T based audits as starting point in their audit work to secure the tax payments in the future.