The 27 EU member states recently reached consensus on the implementation of e-invoicing starting 1 July 2030 (for prior coverage, see the article in the November 2024 issue of Indirect Tax News and visit BDO’s interactive e-invoicing map). As from that date, businesses will be required to issue e-invoices for all cross-border supplies, such as intra-community supplies of goods, EU services under the reverse charge mechanism and the intra-EU transfer of own goods. Member states have a transitional period to adapt their existing domestic digital reporting systems.
The European Commission has indicated that the cornerstone of e-invoicing (aside from the control aspects) will be the simplification of VAT compliance and reporting obligations for taxpayers, e.g., the reduced administrative burdens on businesses should free them up and provide an impetus to focus on other areas such as increased efficiency and improved customer service.
E-invoicing is the exchange of an electronic document between suppliers and their customers that has been issued, transmitted and received in a structured data format, which allows for automatic and electronic processing. A structured e-invoice contains data from the supplier in a machine-readable format that can be automatically imported into the customer's Account Payable system without requiring manual intervention. The European Standard for e-invoicing as per introduction of the VAT in the Digital Age package (VIDA) aims to ensure that all e-invoices are issued in a standardised way, which should make it easier for businesses to process these invoices.
Once the new rules are in effect, e-invoicing will be the default system for the issuance of invoices to B2B recipients of cross-border supplies. E-invoicing will be mandatory for any transaction within the scope of the real-time digital reporting requirements, which will put valuable data in the hands of member state tax authorities and help in their efforts to combat VAT fraud. However, EU member states may still accept paper invoices or invoices in other formats for domestic and B2C transactions.
E-invoices will have to be issued within 10 days following the taxable event and certain data from the invoice will have to be reported within that time frame. Summary invoices will be permitted in certain circumstances. The invoice recipient will have to report certain information from the invoice within five days after receipt of the invoice.
All VAT entrepreneurs involved in B2B and B2G (business to government) cross-border transactions within the EU will be affected by the e-invoicing rules. The supplier issuing (and reporting) an e-invoice and the customer that will have to process and report the e-invoice will be affected.
Subject to certain conditions, EU member states will be allowed to extend the scope of application of e-invoicing and digital reporting to other types of transactions. Member states that had domestic e-invoicing and e-reporting rules in place (i.e., have received authorisation from the European Commission or have adopted a legislative text) before 1 January 2024 must harmonise these rules with the ViDA measures by January 2035.
E-invoicing is clearly a game changer for businesses. However, a seamless transition to the new system throughout the EU could be challenging as businesses will need to ensure their existing systems are compatible with the new requirements and that data is accurate and consistent; businesses will also have to navigate complex and diverse country-specific rules and be aware of data privacy and security issues that may arise, including potential security vulnerabilities in the e-invoicing platform.
With the recent consensus on ViDA, further progress in the standardisation of e-invoicing across the EU is likely. Affected businesses should begin to act now to prepare to transition to the new model by reviewing their ERP systems and/or invoicing software to determine whether updates to existing systems will suffice or whether additional tools/add-ons are required.
Hendy van Hoof
BDO in Netherlands
The European Commission has indicated that the cornerstone of e-invoicing (aside from the control aspects) will be the simplification of VAT compliance and reporting obligations for taxpayers, e.g., the reduced administrative burdens on businesses should free them up and provide an impetus to focus on other areas such as increased efficiency and improved customer service.
Overview of E-invoicing
E-invoicing is the exchange of an electronic document between suppliers and their customers that has been issued, transmitted and received in a structured data format, which allows for automatic and electronic processing. A structured e-invoice contains data from the supplier in a machine-readable format that can be automatically imported into the customer's Account Payable system without requiring manual intervention. The European Standard for e-invoicing as per introduction of the VAT in the Digital Age package (VIDA) aims to ensure that all e-invoices are issued in a standardised way, which should make it easier for businesses to process these invoices.
Format of E-invoicing
Once the new rules are in effect, e-invoicing will be the default system for the issuance of invoices to B2B recipients of cross-border supplies. E-invoicing will be mandatory for any transaction within the scope of the real-time digital reporting requirements, which will put valuable data in the hands of member state tax authorities and help in their efforts to combat VAT fraud. However, EU member states may still accept paper invoices or invoices in other formats for domestic and B2C transactions. E-invoices will have to be issued within 10 days following the taxable event and certain data from the invoice will have to be reported within that time frame. Summary invoices will be permitted in certain circumstances. The invoice recipient will have to report certain information from the invoice within five days after receipt of the invoice.
Affected Parties
All VAT entrepreneurs involved in B2B and B2G (business to government) cross-border transactions within the EU will be affected by the e-invoicing rules. The supplier issuing (and reporting) an e-invoice and the customer that will have to process and report the e-invoice will be affected. Subject to certain conditions, EU member states will be allowed to extend the scope of application of e-invoicing and digital reporting to other types of transactions. Member states that had domestic e-invoicing and e-reporting rules in place (i.e., have received authorisation from the European Commission or have adopted a legislative text) before 1 January 2024 must harmonise these rules with the ViDA measures by January 2035.
BDO Insight
E-invoicing is clearly a game changer for businesses. However, a seamless transition to the new system throughout the EU could be challenging as businesses will need to ensure their existing systems are compatible with the new requirements and that data is accurate and consistent; businesses will also have to navigate complex and diverse country-specific rules and be aware of data privacy and security issues that may arise, including potential security vulnerabilities in the e-invoicing platform. With the recent consensus on ViDA, further progress in the standardisation of e-invoicing across the EU is likely. Affected businesses should begin to act now to prepare to transition to the new model by reviewing their ERP systems and/or invoicing software to determine whether updates to existing systems will suffice or whether additional tools/add-ons are required.
Hendy van Hoof
BDO in Netherlands