The SAF-T and i.SAF files are instruments to increase transparency of accounting and financial data of profit-making entities, helping to reduce tax evasion and fraud and increase tax revenue collection without increasing tax rates. They also contribute to better financial management and some self-monitoring by businesses.
SAF-T – what is it and where is it used?
SAF-T (Standard Audit File for Tax) is a standardized data format introduced by the Organisation for Economic Co-operation and Development (OECD) in 2005. Since then, a number of countries have adopted this format to simplify tax audits and improve tax compliance.
At its core, it is a standard accounting data file containing reliable accounting data relating to the economic activity of taxpayers, exported from the taxpayer’s accounting system and covering a specific period. The purpose of the SAF-T is to standardize the presentation of accounting data in order to ensure faster, more efficient processing of economic transactions and events recorded in the taxpayer’s accounting system, a more accurate assessment of these transactions and events, and a shorter duration of control actions. The SAF-T is compiled on the basis of accounting data of the public sector and economic operators.
In Lithuania, this file has to be provided to the tax administration only when requested. In addition to Lithuania, other European countries such as Poland, Portugal, Norway and Spain have implemented the SAF-T requirement. Thus, the provision of the SAF-T to the tax authorities is gradually becoming a common practice across Europe. Each country has its own specific requirements for the format and content of the SAF-T file, so businesses need to be familiar with the legal regulations in their country of operation.
And what is i.SAF?
i.SAF is an electronic invoicing subsystem that provides the tax administration with data on VAT invoices issued/received and payments/settlements (optional). Unlike the SAF-T file, this information must be provided on a monthly basis, with the exception of entities whose accounting period is half a year. Such entities may submit information to i.SAF every six months.
SAF-T requirements in European countries – similarities and differences
The essential feature that makes the SAF-T data format standard and thus similar in different countries is that it is a machine-readable format (usually xml or xblr, although the format is not mentioned in the standard) in which the recommended datasets are presented in the appropriate order. The files are designed to be easily processed digitally by the tax administration.
The most common groups of data to be reflected in the files are: general ledger, accounts receivable, accounts payable, fixed assets and inventories. However, depending on the regulations in the country concerned, the amount, groups and detail of data required may vary considerably. Thus, as mentioned above, businesses need to be familiar with the local regulation and provide this file in the format and frequency required in the country of operation.
Who and when should provide SAF-T and i.SAF-T files in Lithuania?
In Lithuania, the SAF-T and i.SAF files must be submitted by companies that are registered in the VAT register and that have exceeded a certain threshold of sales revenue per year. This turnover threshold is subject to change and is determined in accordance with the procedure laid down by the Law on the State Budget of the Republic of Lithuania.
In 2015, the Lithuanian Government adopted a law which stipulates that profit-making legal persons, as well as accounting registers using technical means, must be prepared to submit their accounting data in a standard format called SAF-T (Standard Audit File for Taxes) as of 1 January 2018 if their net sales revenue exceeded EUR 700,000 in 2016, and as of 1 January 2019 if their net sales revenue exceeded EUR 300,000 in 2017.
Despite this legal requirement, many companies are still not prepared for such regulation and do not have the necessary tools to generate and submit the required data to the National Tax Authority or external auditors. It should be noted that in addition to the State Tax Inspectorate, the SAF-T file can be requested by the Customs Department, the Financial Crimes Investigation Service and other authorities.
InnoForce tool for SAF-T and i.SAF data file generation
Clearly, the need to provide accounting data to the State Tax Inspectorate in the SAF-T/i.SAF format necessitates the need to find IT solutions tailored for this purpose.
InnoForce has developed a tool, which has been successfully implemented in SAP ERP systems, whereby the submission of the required data to the State Tax Inspectorate or to external auditors can be carried out at the click of a button. Once the solution is implemented, the submission of the SAF-T/i.SAF file becomes a particularly simple, time-saving process. During the development of the tool, particular attention has been paid to security, which is why this technological solution also provides full information/data protection. The tool has also been tested with major Lithuanian and foreign companies and is capable of handling huge amounts of data.
InnoForce started the project to develop a tool for generating i.SAF and SAF-T data files in SAP in early 2016. After obtaining the agreement of the software manufacturer SAP SE to use the entire knowledge base and experience gained in other countries, we developed a standardized solution for i.SAF and SAF-T data file generation in SAP systems, which is adapted to the Lithuanian market and meets all the requirements of the State Tax Inspectorate. The tool is an add-on to the “parent” accounting system, in this case SAP, closely linked to the accounting system itself and implemented centrally. This means that it is secure and reliable for all large companies that centrally manage their IT resources and provide access to the system to branches or subsidiaries located in many countries. It should also be mentioned that the tool is suitable for both older versions of SAP business management systems (ECC) and newer ones (S/4 HANA). The tool developed by InnoForce is the only one recommended in Lithuania by the SAP software manufacturer itself.
It should also be noted that the SAF-T in Lithuania requires by far the largest volume of data compared to other countries, so the tool developed by InnoForce has been optimized and tailored for the conversion of very large volumes of data.
The tool developed by InnoForce is already used by several dozen Lithuanian and international companies. The tool is updated and upgraded with each update of the i.SAF and SAF-T specifications by the State Tax Inspectorate. The tool is also supported and modifications can be made to the tool if customer needs change.
InnoForce solution can be easily adapted to foreign countries
Given that the SAF-T format used in Lithuania requires by far the highest volume of data submission compared to other countries, the InnoForce solution can be easily adapted to other countries. This is particularly relevant for companies with operations in several countries.
The SAF-T tool can not only be used for the information needs of the tax authorities, but can also become a powerful control tool in the company itself, helping to manage accounting and tax risks and to protect against potential errors. The information provided by the tool can reduce the time taken to complete a company’s financial audit processes, improve audit quality and reduce audit costs.
If you are using a business management system from the SAP software vendor and are currently looking for a reliable SAF-T/i.SAF solution partner, please contact us at info@innoforcegroup.com or by phone +370 686 49573. We will answer any questions you may have and, if necessary, we will be able to demonstrate how our solution works.
Terms and conditions for licensing, installation, maintenance and support of the solution are available upon request to info@innoforcegroup.com.