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Enforcing EU VAT Compliance

A setting on the Miscellaneous Firm/Vendor options page shows your company's requirements for VAT compliance (
Settings
 >
Firm/Vendor Settings
 section >
Miscellaneous Firm/Vendor Setup Options
). The VAT compliance settings help companies ensure that taxes on invoices subject to VAT compliance regulations in the EU are recoverable.
If you intend to recover taxes from EU country invoices, you must require your firms to submit invoices in one of the required formats:
  • LEDES 1998BI
  • 1998BI V5
  • XML 2.1
These formats support fields to identify the Billed to entity. LEDES 1998B invoices are not VAT compliant because they do not contain Billed to entity or VAT information, and are not compliant with EU VAT recovery regulations. Tracker does not prevent firms from submitting invoices in 1998B format. You should communicate this clearly with your firms, and invoice reviewers should reject any 1998B invoices.
Enforcing VAT compliance significantly affects the ability of your firms to post invoices and how company invoice reviewers must deal with invoice issues.

Billed to entity

Billed to entity information includes information such as the organization name, address, and tax ID number. A company system administrator configures the list of billed to entities for your company (
Settings
>
Matter Fields & Help Files
 >
Invoice Processing Information
 collapsible section). The list is used to specify the corporate entities to which a vendor can bill for a matter when submitting international invoices. It is typically used for tax tracking and recovery purposes. Billed to entity information can then be configured as required on the matter type template.
If you enforce compliance, Billed to entity information will be required in certain invoices, and approval options are limited:
  • Non-LEDES Invoices:
     If the law firm posting the invoice is from an EU country, invoice reviewers cannot reduce and approve an invoice—they can only use the dispute or reject functions. Firms see the Billed to entity information when posting the invoice, and receive a notice that the information must also be referenced in the invoice attachment.
  • LEDES 1998BI or LEDES XML Invoices:
     The Billed to entity information is required in the invoice. If it is not present, the law firm receives an error message and will not be able to post the invoice. The ability to post using the LEDES Generator tool on the law firm Post Invoices page is unavailable if the matter does not have a Billed to entity associated with it. If the Billed to entity or the law firm posting the invoice is in an EU country, invoice reviewers cannot approve a reduced invoice. Such invoices can only be disputed or rejected. If your company enforces EU VAT compliance, an invoice reviewer who tries to approve an adjusted invoice will receive an error message.
On LEDES 1998BI invoices that have Billed to entity fields, the invoice can only be posted to Tracker if the Billed to entity data on the invoice matches exactly the Billed to entity listed on the matter (Country Code and Postal Code, unless other options are enabled). If a matter does not have a
Billed to Entity
 field (in other words, the matter type template does not use a
Billed to Entity
 field), or the
Billed to Entity
field is blank, the firm can post LEDES 98BI with any Billed to entity data.
If EU VAT compliance is not enforced, Tracker validates the postal code and country for all VAT-compliant invoices, provided the matter to which the invoice is posted has a
Billed to Entity
 field. If a client does not want to validate any Billed to entity data, they must update the matter type template to turn the Billed to entity off (
Settings
>
Matters Setup
 section >
Matter Type-Templates & Matter Setup
).
Invoices that meet the following criteria are marked as EU VAT Compliance Rule Enforced:
  • The invoice was posted from an EU country or was delivered to a Billed to entity in an EU country.
  • The invoice was posted after your company's EU VAT compliance setting was changed from not enforced to enforced.
All other invoices will be marked as EU VAT Compliance Not Enforced or None.

view the EU VAT Compliance setting

You can check the VAT compliance setting from the Miscellaneous Firm/Vendor options page (
Settings
>
Firm/Vendor Settings
 section >
Miscellaneous Firm/Vendor Setup Options
).
On the Miscellaneous Firm/Vendor options page, the
Enforce EU VAT Compliance
 field shows whether your system is set to enforce VAT compliance.
Required role | Your system role determines whether you can edit this setting. For most users, this is a display-only field. If you need to have this setting changed, contact your Client Success Manager or Tracker Support.

View the Tax Rules Setting

The invoice reflects whether tax rules were enforced. The
Profile
tab of every invoice indicates whether the company enforced VAT compliance at the time the invoice was posted. This information appears in the
Other Invoice and Firm Information
collapsible section.

Jurisdictional Changes

Jurisdictional changes do not affect the compliance stamp. The invoice is marked as EU VAT Compliance Rule ENFORCED if the following conditions are met:
  • The EU VAT Compliance system setting is ON
  • The invoice was originally posted from an EU country, or was delivered to a Billed to entity in an EU country.
If either the law firm office or the Billed to entity relocates to a non-EU country, the invoice is marked as EU VAT Compliance Rule ENFORCED.
If the invoice was originally posted from a law firm office not in an EU country nor delivered to a Billed to entity in an EU country, but either the law firm or the Billed to entity relocates to an EU country, the invoice is marked as EU VAT Compliance Rule not enforced.

This article applies to:

  • Product: Legal Tracker
  • Subject: Invoices
  • Audiences: Company