The once-familiar scene of audit rooms crowded with brown boxes and towering stacks of paper is fading fast. Businesses and governments alike are embracing the efficiency of a fully digital tax return preparation and filing process. And while several digital solutions are emerging, one in particular is gaining rapid traction, especially in Europe: SAF-T.
SAF-T (Standard Audit File for Tax) is a standardized format for digital tax reporting that is transforming how businesses approach tax compliance. By providing a consistent structure for tax data, SAF-T offers a path towards greater transparency and efficiency for businesses and governments alike.
SAF-T: An emerging global trend
Standard Audit File for Tax is a standardized electronic format for exchanging reliable accounting data from businesses to tax authorities. It originated from a 2005 Organisation for Economic Co-operation and Development (OECD) initiative which aimed to improve international cooperation in tax administration. By creating a standardized format for the electronic exchange of accounting data, it would be easier for multinational companies to comply with various tax regulations. It would also enable tax authorities to go about audits more efficiently.
Globally, SAF-T has now been adopted by several countries, particularly in the EU. Portugal was one of the pioneers, implementing SAF-T in 2008. Other countries followed suit, with Poland adopting it in 2016 and Norway in 2020. Recently, Ukraine, Denmark, Bulgaria, and Belgium have also started implementing SAF-T. As more countries embrace SAF-T as a mandatory format, its relevance for international businesses continues to grow, making it essential for companies operating across borders to stay informed and prepared to integrate it in their tax flows.
We are now seeing refinements in SAF-T implementations, such as Poland's JPK_CIT, which aligns more closely with corporate tax returns while still being a SAF-T filing. Similarly, Portugal's IAS report, though deferred, represents another step towards more integrated tax reporting.
What is SAF-T, technically?
SAF-T is an XML-based format designed for the electronic exchange of accounting data between businesses and tax authorities. It includes comprehensive financial information such as general ledger accounts, accounts receivable, accounts payable and inventory data. For example, a SAF-T file might contain detailed entries like the company's registration number, address and currency code, as well as specific transactions recorded in the general ledger.
While it is a global standard, its implementation often involves local interpretations and adaptations to meet specific national requirements. The core structure and data elements of SAF-T are standardized internationally, ensuring a consistent format for financial data reporting. Meanwhile, countries can set their own requirements for the data to be included, the frequency of reporting and the method of submission. Tax authorities can also customize the SAF-T standard to align with their local tax laws and audit practices.
The many benefits of SAF-T
The Standard Audit File for Tax is making it far easier for tax administrations and taxpayers to exchange information, which results in significant advantages for both parties.
One of the primary benefits of SAF-T is the enhancement of efficiency and speed of tax audits conducted by tax administrations. By providing a standardized format for data exchange, SAF-T allows tax authorities to access necessary information quickly, reducing the time and effort required for audits. This streamlined process not only reduces costs for tax administrations but also minimizes the disruption to businesses during audits.
For businesses, the adoption of SAF-T is a boon for operational efficiency. The standardized format streamlines the process of fetching and organizing data, making it easier to manage and retrieve information as needed. Furthermore, using SAF-T as an archival source improves the quality and accessibility of data.
The establishment of SAF-T as an international standard holds the potential to further enhance efficiency on a global scale. By providing a consistent framework for data exchange, SAF-T simplifies the process for multinational companies operating in different jurisdictions. Easier access to necessary information also leads to more efficient data management for tax administrations, as they can seamlessly process data from various sources. Importantly, this also means tax administrations can deploy AI to conduct data mining across the broad set of data provided by SAF-T. This enables them to uncover patterns and insights, leading to more informed and targeted policy decisions.
Real-time vs periodic tax controls
Discover how real-time and periodic controls work together to ensure compliance in a digital-first world. In this Compliance Over Coffee episode, we explain how businesses can navigate this shifting digital compliance landscape.
What is the relationship between SAF-T and CTC e-invoicing?
SAF-T and e-invoicing are both integral in the digital transformation of financial operations, and work hand-in-hand to streamline compliance and level up efficiency. While CTC e-invoicing focuses on the real-time or near-real-time exchange of digital invoices between trading partners and tax authorities, SAF-T provides a standardized way to report detailed accounting data to tax authorities on a periodic basis. Think of e-invoicing as forward-looking transactional data, and SAF-T as the comprehensive review of your financial records — together, they give tax authorities a complete picture of your business activities.
Importantly, the two must match. Automatically reconciling e-invoice and SAF-T data reduces errors in tax reporting and keeps your financial records precise. Moreover, aligning the two ensures you meet local tax regulations, which often require proof of data consistency. Continuous monitoring and maintaining detailed audit trails of reconciliations and adjustments further enhance the accuracy and reliability of your financial reporting.
Align your business with the future of digital tax
SAF-T is an increasingly popular tool for efficient and compliant tax reporting. By embracing SAF-T, businesses can not only ensure compliance but generate opportunities for growth and improved operations.
Interested in joining the future of digital tax compliance? Thomson Reuters ONESOURCE Indirect Compliance helps your company manage its distinct VAT, GST and supplementary compliance reporting in one central environment, which of course includes SAF-T.
As part of Thomson Reuters, Pagero customers can enjoy pre-built reconciliation between their e-invoices and indirect tax data in ONESOURCE. Seamlessly connect to your existing ERP, CRM, e-commerce or POS platform to make sure tax calculation and compliance is consistent across your business globally.
