E-invoicing: A Global Phenomenon – Which Countries are All Set to Implement it?

In our rapidly evolving digital world, the shift towards electronic invoicing, or e-invoicing, has gained immense traction across the globe. This transformation is more than just streamlining the processes. It helps to enhance efficiency, reduce errors, and foster greater transparency in financial transactions. Several countries have taken significant strides in implementing e-invoicing systems by revolutionizing the traditional pen-and-paper methods.

We shall delve into the power of e-invoicing and e-reporting, showcasing their significance for companies to stay competitive and follow the rules. Let’s explore what lies ahead for e-invoicing, the usual CTC models, upcoming shifts, obstacles, and why it’s crucial to take a proactive stance.

Future of e-invoicing and e-reporting:

By 2028, a big shift in the e-invoicing rules, especially for business transactions, is expected as more countries are planning to adopt e-invoicing. Particularly, governments in Europe are making it a must for companies working with government departments to use electronic invoicing. This sets an example of how e-invoicing can help in business-to-government relations. Even in business-to-consumer transactions, more invoices are being sent electronically because some countries are requiring them.

 

Many European countries are planning to use electronic invoicing. For instance, Poland will make it mandatory for businesses to use e-invoices by July 2024. Other countries like Romania, Belgium, France, Germany, and Spain are also getting set to do the same for business transactions. One big thing happening in Europe is the ViDA proposal. It’s still being talked about in politics, and governments need to stay updated on how it might affect the way they use e-invoicing.

What is ViDA? Is it a prospect?

The ViDA proposal, known as “VAT in the Digital Age,” aims to standardize the electronic invoicing and digital reporting carried out across all EU countries. This proposal was first introduced in December 2022.

Discussions for ViDA are still on but if approved, it could significantly change how businesses in the EU trade with each other. It would make e-invoicing and reporting in real-time, and it would ease the routine. By using technology, EU countries could improve their current VAT system and help reduce fraud in the country.

If this plan goes ahead (expected by January 2024), electronic invoices won’t be accepted in formats like PDFs. Instead, a setup will be required in the computers so that invoices are automatically prepared when notified/received.

ViDA includes some important changes:

  • Making e-invoicing the main way invoices are created
  • Removing the need for people to accept e-invoices
  • Allowing countries to make rules about e-invoicing for businesses without needing special permission
  • Requiring e-invoicing for transactions between different countries
  • Creating a standard way of doing e-invoicing
  • Getting rid of the option to use summary invoices

It’s essential to know that ViDA is still just a proposal being talked about in politics. Feedback from the latest ECOFIN meeting shows that not all EU countries agree with every part of the proposal. Also, the short time between now and when ViDA might be fully working (between 2024 and 2028) means businesses need to think deeply about how it might affect them.

Major Challenges:

The legal rules businesses are bound to follow are getting more complicated. Keeping up with invoice requirements is tough because the rules and technical details are always evolving. To keep up with e-invoicing and e-reporting rules, companies need enough resources to figure out how these changes might affect them by walking hand in hand with the legal formalities.

In Europe, efforts are being made to do things right and consistently. All the countries are finding the best models for the same. This makes a big impact on how businesses run because they have to adjust their systems, processes, and even how they work with their people to fit in the global rule books.

The technology we’ve been using might not be enough for all these changes and differences, especially for companies working across different countries. To handle the new rules coming up, businesses need a more sustainable, centralized, and global way of dealing with e-invoicing.

Instead of just dealing with one rule at a time, companies need to look at the bigger picture. This future approach will help countries to accept and enhance their e-invoicing and reporting processes worldwide.

Countries moving ahead with e-invoices:

  1. Austria:

Austria started its e-invoicing journey in 2012 with the ICT Consolidation Act. By January 1, 2014, it became a must for businesses to use electronic invoicing when dealing with the government (B2G). But, there were some cases where e-invoicing wasn’t mandatory, for example, insurance deals, leasing contracts, and immediate payments.

The Federal Ministry of Finance in Austria manages the e-invoicing system. To make sure its e-invoicing system works well with other European Union (EU) countries, Austria follows the EU Directive 2014/55/EU.

Using e-invoicing in Austria makes the government procurement process smoother and more efficient. Suppliers have choices like ebInterface through the Federal Services Portal (Unternehmensserviceportal – USP) for local deals or PEPPOL for international transactions.

2. Belgium:

 

In an effort to reduce Belgium’s significant VAT gap of 12.3%, totaling around EUR 4.4 billion in lost VAT, the government has introduced a compulsory e-invoicing system for Business-to-Government (B2G) transactions.

Belgium aims to make all its public services digital by 2025, and this mandatory e-invoicing rule is part of that digital transformation plan. The requirement initially started with specific regional bodies but now applies to all regions. There’s a staged timeline for when this rule comes into effect:

Starting November 2022: E-invoices are a must for contracts above EUR 215,000. By May 2023: E-invoices are required for public contracts equal to or above EUR 30,000; by November 2023, E-invoices must be used for public contracts below EUR 30,000.

3. Chile:

 

Chile was one of the first to adopt optional e-invoicing back in 2001, and since then, it has built a strong digital system. In 2018, Chile’s tax authority, Servicio de Impuestos (SII), made it a must for all taxpayers to use e-invoices for business transactions, making sure everyone followed the rules.

From August 1, 2022, Chile stopped needing daily sales reports. Instead, the SII now gathers tax information through Electronic Tax Documents (DTE). DTEs are what Chile calls e-invoices, and companies have to sign up with SII to make and receive them. SII checks these documents in real-time. Companies also need a Folio Authorization Code (CAF) from SII. If they’re not good with technology or can’t make their software, they might need to get help from certified e-invoicing providers.

4. Denmark

Denmark started its e-invoicing journey in 2005, making it a must for business-to-government (B2G) dealings. Now, they’re expanding it to cover business-to-business (B2B) transactions, showing their dedication to using technology for smoother financial processes. The recent Bookkeeping Act says that invoices must be sent and stored electronically. This rule will be put in place between January 2024 and January 2026.

Denmark’s e-invoicing works through the NemHandel platform, ensuring that transactions are standardized and safe. And because this platform follows PEPPOL standards, doing business across borders becomes easier.

Denmark’s active approach to e-invoicing fits into a global trend aiming for better efficiency and lower costs. By making e-invoicing mandatory, Denmark helps businesses make their processes smoother, keep better track of things, and prepare them for future international e-commerce.

5. France:

 

Since its establishment in 2010, the French government has been pushing for an e-invoicing system to fight VAT evasion and improve transaction efficiency. However, the government recently changed its approach by delaying the expected start of mandatory e-invoicing and e-reporting, originally set for 2024. Citing the need for better preparation and more collaboration, they extended the deadline without setting a new one. This move shows a commitment to getting businesses ready for the upcoming e-invoicing rules by aligning their processes, tech, and resources.

Initially, France made e-invoicing compulsory for business-to-government (B2G) transactions, using Chorus Pro, a public platform for e-invoice approvals. Now, they’re working on making e-invoicing mandatory for business-to-business (B2B) deals, but the details are still being finalized.

As per the official ordinance no. 2021-1190 of 15 September 2021, the plan includes:

  • Making e-invoicing mandatory for all VAT-registered companies, starting from a new, yet-to-be-announced date.
  • Different implementation dates based on company size: January 1, 2025, for mid-sized companies and January 1, 2026, for small and micro businesses.
  • Mandatory e-reporting for all transactions, even those not linked to e-invoicing, like dealings with non-VAT liable individuals or exempted entities in cross-border sales.
  • Companies can use Chorus Pro or a government-approved e-invoicing solution like Store Cove, depending on their needs. 

5. England:

 

England made it mandatory to use e-invoicing for public procurement through the Public Procurement Regulations 2019, which came into effect in May 2019. This move puts England among 31 European countries that have adopted electronic invoicing to make business transactions smoother.

PEPPOL, a standardized e-procurement network, plays a crucial role by offering a shared platform for e-ordering, e-invoicing, and electronic credit notes. This system allows UK businesses to have one unified e-procurement connection, simplifying interactions with suppliers of all sizes, whether they’re local or international.

6. Hungary:

Hungary’s approach to electronic invoicing stands out. Instead of making Business-to-Government (B2G) and Business-to-Business (B2B) e-invoicing mandatory, Hungary focuses on real-time invoice reporting (RTIR).

Starting from April 1, 2021, companies must share invoice data through the Online Invoice System (Számla platform). This includes any changes, cancellations, and transactions that cross borders. It covers transactions between businesses and customers (B2C) and those involving non-residents.

Hungary’s tax authorities, Nemzeti Adó és Vámhivatal (NAV), oversee the fiscal system. The RTIR system requires companies to immediately send invoice details to NAV as soon as they issue them.

7. Italy:

 

In January 2019, Italy took a big step by making electronic invoicing mandatory for all businesses registered for VAT, covering transactions between businesses (B2B), businesses and consumers (B2C), and businesses and the government (B2G). This requirement operates through the Sistema di Interscambio (SdI) platform, aiming to improve how taxes are managed, reduce tax evasion, and simplify administrative tasks.

From July 2022, even cross-border transactions must follow these e-invoicing rules, making transactions within and outside Italy’s borders smoother.

Italian Revenue Agency (Agenzia Entrate) backs the FatturaPA (XML) format, which is the standard for electronic invoices. This format includes a digital signature (CAdES-BES or XAdES-BES) to make sure the data is genuine and hasn’t been tampered with.

8. Latvia:

Latvia

Starting in 2025, the Pan-European Public Procurement Online (PEPPOL) framework will make e-invoicing compulsory for both business-to-business (B2B) and business-to-government (B2G) transactions. This forward-thinking move comes after the Latvian Cabinet approved a report in October 2021 outlining plans for an e-invoicing system.

The system will rely on PEPPOL, a standardized system across Europe, ensuring consistency in how e-invoices are exchanged. There are different ways to submit e-invoices, including using official electronic address tools and established platforms like ePakalpojumi.lv.

This shift towards e-invoicing suggests significant changes for businesses. Aligning B2G transactions with EU directives sets the stage for a major transformation in the B2B landscape by 2025.

9. Malaysia:

 

As of 1st August 2024, the Malaysian Inland Revenue Board (IRB) has made it compulsory for businesses earning RM100 million in sales yearly to use e-invoicing. The aim is for all companies to adopt this system by January 2027.

This move is a strategic effort to simplify tax management and update the way e-invoicing rules are followed. The e-invoices will be made in formats like XML, UBL, IDOC, or EDIFACT, making it easier for automation and processing by the accounting system.

Even though the requirement starts in June 2024, the IRB is urging businesses to get involved early. They’ve set up a pilot project that companies can join voluntarily, giving them a chance to get ahead in transitioning to e-invoicing.

10. Netherlands:

 

In 2011, the Netherlands made it a must for central agencies to handle electronic invoices through Digipoort. From 2017, suppliers to the central government had to send e-invoices, and this rule expanded to sub-central agencies by 2019.

This move to e-invoicing has hugely digitized government dealings, with about 95% of entities adopting it. If you’re running a business in the Netherlands, you can create electronic invoices using the PEPPOL network, which the Dutch government suggests for smooth cross-border transactions.

11. Poland:

Poland has taken a cue from Italy by choosing to make e-invoicing and e-reporting compulsory for all transactions. Originally, it was planned to start on January 1, 2023, but the government made changes to its schedule.

On August 7, 2023, the Ministry of Finance introduced new rules for the National e-Invoice System (KSeF), which are now set to become mandatory from July 1, 2024. This forward-thinking move toward digitalization aims to make processes more efficient and better fight tax fraud.

Conclusion:

Businesses must create a thorough strategy to meet global e-invoicing requirements effectively. By staying aware of present and future obligations and understanding their effects, companies can develop a unified and consistent plan to comply more efficiently. To navigate the changing e-invoicing landscape successfully, consider elements like customer networks, transactions under scrutiny, and your existing technical setup. Evaluate how these demands impact your current operations and address them on a global or regional scale.

The shift towards standardized electronic invoicing systems enhances operational efficiency and also paves the path for a more transparent and interconnected global economy. Stay tuned for further updates as more countries join the e-invoicing revolution, transforming the way businesses manage their financial transactions on a global scale.

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