January 16, 2023
Widespread changes in the Europe-wide electronic invoicing regulation have been taking place in recent years. However, only one European country — Italy — has fully rolled out electronic invoicing nationally. The country transformed its invoicing requirements to make e-invoicing obligatory for most entities (B2B, B2C, B2G (business to government)) in 2019.
As of 2023, many European countries are in the pipeline of adopting electronic invoicing regulations.
Why is the e-invoicing transformation happening now?
Electronic invoicing provides many benefits to governments, taxation authorities, and businesses. E-invoices make VAT reporting easier, bring more transparency, and simplify business-government relationships. For businesses, e-invoicing allows them to digitalize and automate business processes and speeds up bureaucratic procedures.
However, the main obstacle to an earlier and more active e-invoicing transformation is the European Directive No. 2006/112/EC or the VAT Directive. In the directive, it is described that the invoice recipient must consent when the seller wants to issue an invoice electronically — which would make obligatory e-invoicing impossible. To make e-invoicing mandatory, countries have to receive a special derogation from the European Union, just like Italy did in 2018.
Status quo: e-invoicing in the EU
Most countries on the way to e-invoicing implementation begin by making B2G e-invoicing mandatory. In such instances, businesses providing services or selling goods to governmental institutions have to provide digital invoices via special-built platforms. Among countries with e-invoicing for B2G are the Netherlands, Lithuania, Estonia, Poland, Finland, Norway, Denmark, Sweden, Czechia, Spain, France, Serbia, Luxembourg, and Portugal. Some more countries — Belgium, Austria, and Germany — have partial B2G e-invoicing requirements. In Austria, e-invoicing is mandatory in cases of some contracts, and in Belgium and Germany — in a limited number of administrations, with the plan to further extend the requirement.
From the perspective of the private sector —more and more countries have announced the intention to make e-invoicing obligatory in the upcoming several years.
Most countries choose their own platforms for e-invoicing processing, which requires infrastructure preparations. There are some shared standards throughout the EU, but generally, countries rely on national platforms similar to the Italian SDI. Some examples of the platforms include France’s Chorus PRO, Germany’s central administrations’ ZRE, and Poland’s KSEF.
Some countries, such as Belgium, Norway, and the Netherlands, base their platforms on the UBL (OpenPEPPOL) format, which allows for easy adjustments to build their own platforms. This step could potentially help in the case of crossborder e-invoicing cases.
Together with e-invoicing, countries are implementing digital tax compliance regulations and SAF-T protocol. With e-invoices, continuous transaction control (CTC) is spread. Among countries adopting the SAF-T protocol are Portugal, Luxembourg, Austria, Poland, Norway, and Romania. Spain, Germany, and Greece have their own protocols (SII, E-Bilanz, and myDATA, respectively).
E-invoicing outside the EU
There are no directives stopping e-invoicing development outside the EU. Therefore, several countries have already implemented electronic invoicing mandates. Among them is Saudi Arabia, which started the second phase of implementation in 2023. The UAE began the transformation in 2022. Egypt made e-invoicing mandatory for B2B transactions in 2021, with plans to extend to B2C sales. Australia chose to use the PEPPOL infrastructure and plans to fully implement e-invoicing by 2025.
Preparing for your transformation?
If you own or manage a business and are preparing for digital transformation, e-invoicing is an important area for consideration. If you need any help with your tax compliance throughout the process, make sure to reach out to 1StopVAT’s team for professional support.