In the digital age we live in, e-invoicing comes quite naturally as a modern method of replacing paper invoices, saving time and resources for companies of all sizes. Globally, more and more companies are reaping the benefits of e-invoicing, and more and more countries are taking steps towards its mandatory adoption for transparency and to reduce the grey sector.
In the digital age we live in, e-invoicing comes quite naturally as a modern method of replacing paper invoices, saving time and resources for companies of all sizes.
Globally, more and more companies are reaping the benefits of e-invoicing and more and more countries are taking steps towards its mandatory adoption in order to ensure transparency and reduce the grey sector. This is also happening in the EU - to date, various models related to mandatory real-time digital accounting based on e-invoicing have already been introduced in some Member States.
Real-time reporting of tax documents based on e-invoicing is to become absolutely mandatory for all Member States as a natural next step in the overall digitisation of the EU, and this is expected to happen by 2028.
In this regard is the report of the European Commission of 08.12.2022, in which the European Commission proposes a number of measures for business in order to comprehensively modernize and improve the EU value added tax (VAT) system. The measures are aimed at embracing and promoting digitalisation, transparency and accountability of the invoicing process, and the main points are summarised below. The report highlights the importance of e-invoicing in the digital economy and the challenges that VAT poses to e-invoicing.
- E-invoicing is becoming increasingly important in the digital economy because it helps reduce VAT fraud and the grey economy - the new system introduces real-time digital reporting for VAT purposes based on e-invoicing, which will provide Member States with valuable information to reduce VAT fraud - Member States will recover up to €11 billion a year in lost VAT revenue over the next 10 years. Businesses are expected to save €4.1 billion a year over the next 10 years in compliance process costs under the new legislation.
- The report notes that the current VAT rules are not designed with e-invoicing in mind, which creates challenges for businesses using e-invoicing. For example, different rules apply to paper and electronic invoices, which can create confusion for businesses.
- One of the main challenges for e-invoicing is the requirement for invoices to be stored electronically and easily accessible for VAT checks. The report suggests that businesses should ensure that their e-invoicing systems comply with the relevant VAT rules and can store invoices securely.
- The report also highlights the importance of interoperability in e-invoicing. Businesses must be able to exchange electronic invoices with their customers and suppliers, regardless of the software or system they use.
- The report suggests that e-invoicing can play a role in simplifying VAT compliance, especially for cross-border transactions. The introduction of a one-stop-shop (OSS) system, as proposed by the European Commission, could simplify VAT compliance for businesses selling across borders.
Real-time accounting on the basis of e-invoicing will undoubtedly bring many benefits to the EU and Member States, such as reducing the grey sector and VAT fraud, but there are undoubtedly many benefits for business too. You can read more about them here.