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In 2013, the EU implemented a new directive which created a level playing field between paper and electronic invoicing, so that those companies using electronic invoicing do not get an unfair advantage over those continuing to issue paper invoices.

However, this directive may come into conflict with some of the different rules that certain member States already have in place, so your business must be aware and ready to make changes to its processes.

What is electronic invoicing?

An electronic invoice for the purpose of this directive is any invoice which has been issued and received in any electronic format, for example an invoice which has been created, stored as a PDF and then transferred to another party via email. An electronic invoice can be issued as a result of both buying or selling goods and services.

Authenticity, integrity & legibility

Invoices must reflect actual supplies and their authenticity, integrity and legibility should therefore be ensured and it is up to each taxable person to ensure that the invoice information being exchanged reflects an actual supply.

Business controls can be used to establish reliable audit trails linking invoices and supplies, thereby ensuring that any invoice (whether on paper or in electronic form) complies with those requirements. The authenticity and integrity of electronic invoices can also be ensured by using certain existing technologies, such as Electronic Data Interchange (EDI) and advanced electronic signatures. However, since other technologies exist, taxable persons should not be required to use any particular electronic invoicing technology and the new rules state that options should not be restricted by Member States.

Different procedures for different tax authorities?

Many EU Member States already have procedures in place that may conflict with the new rules in the directive. Some examples of current rules in place in Member States include:

  • Italy – Business controls will only be available to businesses with structured organisation and internal control mechanisms which will include a user manual of the business controls used. Other businesses using electronic invoicing will still be subject to advanced e-signature or EDI
  • Netherlands – It is unlikely that the Netherlands will issue guidance notes, binding rulings or certification
  • Poland – it is thought likely that the law will refer to EDI, a signature and business controls. It is thought that there will be no intention to issue binding guidance or certification

What should your business be doing to prepare?

Unlike the majority of directives that the EU publish, this one concerning e-invoicing is completely optional for businesses. They are under no obligation to implement e-invoicing if they do not already have it in place. The main impact to come from this directive is that EU governments previously could impose conditions to use e-invoices whereas once the directive come into force, they cannot.

However there are several things that your company should consider regarding the directive:

  • If you do not already use electronic invoicing, would implementing it bring benefit s to your business?
  • Would your existing systems be capable of producing electronic invoices and accurately tracking this for audit trail purposes?
  • If you have branches/subsidiaries elsewhere in the EU, would you have a system in place to implement electronic invoices?
  • Does your business have adequate systems to receive/ store electronic purchase invoices to ensure they are secure, should the tax authorities wish to view them?
Download our Electronic Invoicing VAT Guide