Global changes to e-invoicing rules have been on the cards for years. In Europe, France, Belgium and Germany are among the countries who have detailed their intentions, but there are changes afoot worldwide. Now is the time for companies to take stock of what is coming and how it will impact their business.
Why now?
In the EU, the changes are being driven by the desire to make business transactions simpler between Member States, which will drive growth. Amongst the proposals is the plan to allow businesses selling to consumers in another Member State to register only once for VAT purposes for the entire EU. They would also be able to fulfil their VAT obligations using a single online portal in one single language. The EU says:
“Estimates show that this move could save businesses, especially SMEs, some €8.7bn in registration and administrative costs over ten years.”
There is also a unified desire to cut fraud. In November 2022, 14 countries collaborated on Operation Admiral, which unraveled one of the biggest VAT fraud schemes ever investigated in the EU, and saw 67 million Euros in criminal assets seized.
Paolo Gentiloni, the EU Commissioner for Economy, has detailed a final key focus – closing the VAT Gap. Every year, about €1 trillion is collected in the EU in VAT revenue, but Member States lost an estimated €93 billion in VAT revenues in 2020. In what is claimed to be the biggest reform in 30 years, the EU has proposed amendments to the VAT Directive (2006/112/EC), the Council Implementing Regulation (EU 282/2011) and the Council Regulation on Administrative Cooperation (EU 904/2010). These amendments are hoped will help businesses grow and allow Member States to collect up to €18 billion more in VAT revenues annually.
What do the reforms look like?
In Europe, it is B2G e-invoicing mandates that are changing first. In May 2019, the UK Government issued The Public Procurement Regulation. This was its reaction to a directive, which is being implemented across Europe. In Belgium and France, B2G e-invoicing is already mandatory as it is in some states in Germany. Poland, Italy and Luxembourg have also announced plans to make changes.
B2B e-invoicing is set to follow, but each nation is working to a different time frame. For example, France is currently preparing to mandate B2B e-invoicing but e-invoicing will become mandatory across all sectors. There is a phased roll-out planned – for large enterprises it will take place from 1st July, 2024; for medium-sized enterprises from 1st January, 2025 and for the rest of the taxpayers from 1st January, 2026.
What does this mean for my business?
E-invoicing is going to become mandatory across Europe and beyond, but each country is working to its own standards, scopes and timeframes. This will make compliance complicated, especially for those businesses working internationally.
For businesses in the UK, there is much still to be determined as to how they will interact with companies in the EU. The EU, taken as a whole, is the UK’s largest trading partner. The British Government stated in December 2022: “In 2021, UK exports to the EU were £267 billion (42 percent of all UK exports) and UK imports from the EU were £292 billion (45 percent of all UK imports). For existing and future business relationships, seamless and compliant transactions are key.
The complexity of working across borders is never going to be an excuse for non-compliance, so companies need to get guidance now on what impacts there will be for their transactions and how to prepare for the changes.
Businesses cannot bury their heads in the sand. An Imarc group report stated that the e-invoicing market could reach US$35.9 billion by 2028. It is a huge area of growth. Bringing in a company which understands the developments and updates to e-invoicing — and who can partner with them to negotiate these over the coming months and years — is absolutely key.
Governments across the globe are focusing on data-driven and focused, paperless administrations, and e-invoicing is central to this. Companies must act now or face the financial, operational and reputational consequences of non-compliance.
