Fiscal Modules in Online Electronic Cash Registers: Goals, Capabilities, and Implementation Options

Summary

This article describes the goals, capabilities, and options for the implementation of financial modules that work with cash registers.

Fiscal modules aim to enhance tax compliance, increase efficiency in tax administration, and ensure transparency and accountability in retail business practices. They can be implemented as hardware or software modules.

Hardware modules are physical devices integrated or connected to cash registers, while software modules run on various devices.

Software modules offer advantages such as flexibility, cost effectiveness, and scalability, but they also have limitations in offline operation and vulnerability to cyberattacks. DTT’s software fiscal module supports fiscal data processing, storage, network interaction, and cryptography. It emphasizes the module’s password protected asymmetric encryption for key protection.

Goals and Capabilities

The application of online electronic cash registers (OECRs) in B2C (business-to-consumer) operations is based on the process of online fiscalization of simplified tax invoices or receipts.^[1]

Online fiscalization of a receipt is the process of assigning necessary fiscal attributes to the receipt, online transmission, and registration of the receipt with the tax authority.

A fiscal module is an element of a cash register that is responsible for assigning fiscal attributes to receipts, encrypting fiscal data, processing, recording, and transmitting them to the tax authority. Depending on legislative requirements, it may also be referred to as a fiscal storage device, fiscal token, electronic fiscal device, technical security device, and so on.

The deployment of fiscal modules aims to improve tax compliance, increase government revenue, and promote fair and transparent business practices:

1. Enhancing Tax Compliance. Fiscal modules aim to improve tax compliance by accurately recording and reporting financial transactions. They help reduce the possibility of tax evasion, fraud, and underreporting of sales or revenue.
2. Increasing Efficiency in Tax Administration. Implementing fiscal modules streamlines tax administration processes by automating the recording and reporting of fiscal data. This reduces the administrative burden on tax authorities and enables more efficient and timely tax collection.
3. Ensuring Transparency and Accountability. Fiscal modules provide a transparent record of transactions, making it easier for tax authorities to verify the accuracy of reported sales and tax payments. This promotes accountability among all retailers and helps maintain fair conditions in the marketplace.

Major capabilities of a fiscal module include:

• Generating fiscal attributes for receipts.
• Encrypting fiscal documents transmitted to the fiscal data operator/tax authority.
• Decrypting fiscal documents received from the fiscal data operator/tax authority.
• Managing counters and numbers of fiscal documents.
• Managing the duration of a cash shift.
• Transmitting fiscal data in realtime or deferred mode.

Implementation Options

Fiscal modules can be implemented in hardware and software variants.

Hardware fiscal modules or HFMs utilize physical storage media for internal or external use with cash registers.

External modules can be implemented as separate devices connected to cash registers and POS systems, including flash and smart cards.

Software fiscal modules or SFMs can be implemented locally on client devices or in a cloud based manner.

According to IMF data^[2], popular implementation options for fiscal modules include:

• Offline and online electronic cash registers.
• Fiscal printers.
• Electronic signature devices.
• Electronic tax registers.
• Sales control devices.

The following table presents a comparison of key features for different implementation options of the fiscal module.

Capability	Hardware FM		Software FM
	Built-in HFM	External HFM	Cloud SFM	Local SFM
Compatibility with cash registers[3]	Models with built-in HFM	Cash register models that support external HFM connection via USB, Ethernet, smart cards, etc.	All types of cash registers	All types of cash registers
Memory limitation	Memory size is limited by the manufacturer	Memory size is limited by the manufacturer	Is limited by the amount of memory available in the cloud environment	Is limited by the size of the memory of the host device
Offline mode	Yes	Yes	No (online only)	Yes
Usage duration	Set by the manufacturer	Set by the manufacturer	No restrictions	No restrictions
Fiscalization Performed	Locally on the side of the taxpayer with the formation of a queue of checks	Locally on the side of the taxpayer with the formation of a queue of checks	On the side of the tax authority or cloud provider	Locally on the side of the taxpayer with the formation of a queue of checks
Cost	Included in the cost of the cash register	Average or high, purchased additionally for cash registers	Free of charge or for a monthly subscription	Can be provided free of charge by the tax authority or purchased as part of POS solutions

Hardware Fiscal Modules

A traditional hardware fiscal module is a physical device with non-volatile memory and a sealed enclosure. It can be embedded in a cash register or connected externally. The hardware module supports the standalone operation by using a queue of receipts in case there is no connectivity for the online transmission of fiscal data to the tax authority.

An external fiscal module, separate from the cash register, is implemented on a standalone device and requires a connector to be connected to the cash register or POS system. It can be implemented as a standalone device or integrated into a fiscal printer for the simultaneous printing of fiscal receipts for customers. Fiscal modules on flash or smart cards have limitations on the size of memory used for storing receipts and a manufacturer-defined number of data write operations.

The above-mentioned characteristics, along with regulatory requirements, often necessitate the systematic replacement of hardware fiscal modules, which increases taxpayers’ costs. When using external hardware fiscal modules, there may be difficulties with firmware and compatibility with cash registers. If the tax authorities control the replacement process, it may take from 9 to 12 months to search for a supplier and subsequently produce the module.

Cloud Fiscal Module

In contrast to hardware and local software fiscal modules, a cloud fiscal module operates only in an online mode, which may not be suitable for certain types of trade formats and geographical locations of taxpayers. In case of internet connectivity issues, an online cash register with a cloud module will not function. The advantage of a cloud fiscal module is that it has virtually no limitations in terms of usage period and memory, and it can be more cost-effective for taxpayers.

Software Fiscal Module

Software modules do not require specialized hardware and can run on standard computers, tablets, smartphones, and mobile devices. In terms of functionality, they are similar to hardware fiscal modules and operate in offline mode with the deferred transmission of fiscal data to the tax authority.

Features of software fiscal modules (SFM):

• SFMs do not have a physical carrier, i.e., they are software designed for joint use with cash registers.
• They are compatible with all types of electronic cash registers, including hardware and software registers for smartphones, POS terminals, tablets, or computers.
• They support the most popular operating systems such as Linux, Windows, iOS, and Android.
• They have virtually no limitations in terms of the usage period.
• Memory and storage capacity limitations depend solely on the device being used.
• They support the storage of an emergency queue in the absence of a connection with the server.
• Remote support and updates (without personal presence) are available.
• They can be provided to taxpayers free of charge.

Advantages of Software Fiscal Modules

Software fiscal modules have the following advantages over hardware modules:

1. Flexibility, adaptability, quick support, and updates. Software modules usually provide real-time support and regular updates, allowing for rapid response to changes in legislation and tax authority requirements.
2. User-friendliness. Software modules integrate more easily with existing accounting and management systems, making it easier for businesses to operate and simplify fiscal operations.
3. Cost-effectiveness. Software modules do not require additional hardware, reducing the expenses associated with purchasing and maintaining hardware devices.
4. Easy scalability. Software modules can be easily scaled to accommodate different types of businesses and transaction volumes, including cloud implementation options.
5. Greater functionality. Software modules offer a wider range of features, such as report generation, analytics, inventory management, and other capabilities that can be beneficial to businesses.

However, software fiscal modules also have some disadvantages compared to hardware modules:

1. Dependence on computer systems. Software modules require the presence and proper functioning of computer systems, including the operating system, hardware components, and relevant software. Any failures or malfunctions in the computer system can affect the operation of the fiscal module.
2. Vulnerability to cyberattacks. Software modules running on computers or connected to networks can be targets for cyberattacks and malicious activities, potentially leading to the leakage of fiscal information or system disruptions. Appropriate security measures, such as using antivirus software and encryption mechanisms, must be implemented to minimize this risk.
3. Limitations in offline operation. Some software modules may have limitations when operating offline, without access to the internet. This can cause inconvenience in situations where stable internet connectivity is not available or technical issues arise.

These disadvantages can be mitigated or overcome through proper selection of the software module, adequate maintenance, and adherence to relevant security measures.

DTT’s Software Fiscal Module

For online fiscalization projects, DTT uses its software fiscal module as part of the Tax Revenue Suite DTA for B2C.^[6]

The DTT’s Software Fiscal Module is a dynamically loaded library developed in C++ and compiled for Linux, Windows, iOS, Android, and Java Card. It consists of 4 functional blocks:

1. Processing fiscal data.
2. Storage of fiscal data.
3. Support for network interaction to transmit fiscal data.
4. The cryptography block supports encryption, decryption, digital signatures, and certificate management using the OpenSSL library.

To protect the keys used for generating fiscal signatures, the software fiscal module employs password-protected asymmetric encryption.

During the installation of the software on the taxpayer’s side, a key pair is generated. The private (secret) key is password-protected and stored on the taxpayer’s side.

During the registration, the public key is sent to the server, where it is used to encrypt symmetric keys before sending them to the taxpayer. Only the holder of the private key and password can decrypt these keys. The keys accepted by the taxpayer are stored in their file system in encrypted form and are decrypted only after the user enters the password at application startup.

[1] For more information about the goals and objectives of online fiscalization and the application of online cash registers, please refer to the article “Goals and Methods of Implementing Online Fiscalization Projects for B2C”, A. Gaverdovskiy. URL: https://taxtech.digital/2020/06/30/implementing-online-fiscalization-b2c/

[2] Final Appendices: Electronic Fiscal Devices (EFDs) An Empirical Study of their Impact on Taxpayer Compliance and Administrative Efficiency; by Peter Casey and Patricio Castro; IMF Working Paper No. 15/73; March 1, 2015. URL: https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Electronic-Fiscal-Devices-EFDs-An-Empirical-Study-of-their-Impact-on-Taxpayer-Compliance-and-42820

[3] Cash register equipment can be divided into hardware (physical cash registers) and software (software applications on smartphones, POS terminals, or computers).

[4] FisCat. URL: https://www.fiscat.com/Product/Entry-Level-Mobile-ECR.html

[5] Elgin. URL: https://www.elgin.com.br/Produtos/automacao/sat-mfe/smart-sat

[6] DTT Tax Revenue Suite (TRS) is a comprehensive tax administration solution that helps tax authorities improve revenue collection and compliance through the modernization and automation of tax processes. URL: https://taxtech.digital/tax-revenue-suite/