Welcome to our regular e-Invoicing newsletter.
Please refer to our “Hot Topics” section for items which may require imminent consideration on your behalf, including some controversy arising from France’s plans to offer free archiving, some further detail about the scope of the Spanish B2B e-Invoicing mandate, and a delay to the planned Mexican CFDI 4.0 implementation.
For more general information see the “Compliance news and updates” section which includes news from Belgium as well as further afield as India expands its threshold for mandatory e-Invoicing, China extends its pilot for e-Invoicing, and Nigeria runs into objections around a rushed implementation of e-Invoicing for imports and exports.
France – controversy related to proposed public e-Invoicing portal
The plans for the public portal discussed in our previous newsletters include the offer of a number of free services such as archiving for the mandatory legal period of 10 years.
Republican Senator Patrick Chaize has posed a question to the Ministry of the Economy, Finance and Recovery about this archiving service, expressing concern that a free public portal would be positioned as a direct competitor to private e-invoice and archival platforms and that the free archiving service is, therefore, a distortion of competition.
He added that this could cause serious financial damage to the players in electronic archiving and jeopardize jobs and expertise. He asks whether the state will reconsider its position on this point.
The full text of the senator’s question can be found here in French.
This issue is also being hotly debated within EESPA (the European E-Invoicing Service Provider’s Association), of which OpenText is a founding member and holds a chair on the Executive Committee.
A response to this question from the French ministry has not yet been issued – we will monitor this topic closely and report back on any developments. Meanwhile, the French tax authorities have published a new version of the FAQ related to the e-invoicing mandate. 15 questions have been added.
Spain – scope and technical details of mandatory B2B e-Invoicing
In earlier blogs, we announced Spain’s planned mandate of B2B e-Invoicing. On February 21st, 2022 the Spanish tax authorities published a draft royal decree that provided the first details of the proposal, confirming that taxpayers will be mandated to comply with the new requirements by January 1, 2024.
The full text of the Royal Decree can be found here in Spanish:
Some of the key highlights of the draft regulation include the scope, which appears to cover all taxpayers – apart from a few exceptions – throughout the Spanish territories.
The regulation is directed to any computer system used by such taxpayers to record and document the supply of goods and services and process invoices.
The decree then goes into some key technical details, which repeats the mandatory content but cites some additional mandatory content that will be required for invoices – an alphanumeric identification code and a “QR” code, as well as specific additional phrases to indicate the verification status of the invoice.
The computer system must generate an invoicing record and send invoice data to the tax authorities continuously, securely, correctly, completely, automatically, consecutively, instantaneously, and reliably, etc, and must guarantee the integrity, conservation, accessibility, legibility. traceability and inalterability of the invoicing records as per existing legislation.
The computer system manufacturer will be responsible for self-certifying their compliance with these requirements in full.
If the draft decree is approved, the deadline of January 2024 will leave Spanish taxpayers – and their providers – with just two years to meet the mandate. Other countries, such as France, have already postponed their mandates based on public consultation to provide for a phased and more manageable implementation timeline.
Mexico – CDFI 4.0 deadline extended by three months
In our previous newsletter, we advised of an update of the mandatory XML format – CFDI from version 3.3 to version 4.0. A recent directive from the Mexican Tax Administration Service (SAT) has extended the transition period which was planned to end on 30th March 2022, and will now finish on June 30th, 2022.
From 1st July all e-Invoices must conform to the new 4.0 standard and older versions will no longer be compliant. More information is available from the Mexican tax agency, the SAT, via this link.
Compliance news and updates
Belgium – update on B2B e-Invoicing mandate
In our February 2022 newsletter, we discussed Belgium’s plan to switch to fully mandatory e-Invoicing for B2B invoices and the objections being raised.
In a conference on 10th February 2022, Mr Vincent Van Peteghem, Deputy Prime Minister and Minister of Finance in Belgium stressed the benefits of electronic invoicing for businesses as well as the state, allowing businesses to gain in productivity by simplifying invoice processing and validation while combating tax fraud. Aware of the difficulties that could be faced by small businesses, which represent a large part of Belgium’s economic base, Van Peteghem indicated that Belgium is planning intensive exchanges with businesses and stakeholders to deploy the B2B electronic invoicing mandate project.
India – revised threshold increases scope of B2B e-Invoicing mandate
On February 24th, 2022, the Indian tax authorities published a new notification (No. 01/2022 – “Central Tax”) that modified the revenue threshold applicable for mandatory e-Invoicing, which had been in force since the 1st of October 2020.
The notice will take effect from April 1st, 2022, at which point e-Invoicing will become mandatory for all taxpayers whose aggregate turnover in a financial year exceeds twenty crore rupees (or approximately $2.6 million USD), a significant reduction to the previous threshold of fifty crore rupees ($6.5 million USD).
The full text of the notification can be found here:
China – pilot program for fully digitized e-Invoice continues to expand
China has always had a unique approach to VAT, having implemented the paper-based “Golden Tax system” with government-certified printers and software to ensure correct tax calculations, issuance of VAT invoices, and statutory tax reporting. Over time there has been a move to align more closely with international tax practices to facilitate cross-border trade with greater transparency and to further reduce fraud.
Today there are two categories of VAT invoices in use in China, namely “VAT special fapiao” (B2B invoices used for VAT reclaim) and “VAT general fapiao” (typically B2C invoices and used for evidence of payment rather than VAT deduction). Since 2016, China’s State Taxation Administration (STA) has launched several pilots allowing taxpayers to issue these VAT invoices in electronic format.
The first wave of e-Invoicing started in 2016 when the STA piloted the first e-Invoicing system for “general VAT fapiao” (B2C) in many cities such as Shanghai, Beijing, Shenzhen, etc.
The second wave of e-Invoicing started in September 2020 when the SAT piloted the first e-Invoicing system for “special VAT fapiao” (B2B) in Ningbo, Shijiazhuang, and Hangzhou. The ability to issue the “special VAT fapiao” in electronic format has been extended to more than 30 regions from December 2020 and January 2021.
The third wave of e-Invoicing started in December 2021 in Shanghai, Guangdong, and Inner Mongolia. Newly registered taxpayers will be allowed to issue a fully digitalized electronic invoice (FDEIs) for both general and special VAT fapiao.
To issue, deliver, and verify the FDEIs, taxpayers can use the electronic service platform free of charge without using the special tax control equipment, such as golden tax USB disk, tax control USB disk, and tax UKey (tax control device containing digital certificate) are no longer needed.
Unlike normal VAT e-fapiao, which are required to be in PDF or ODF (Open Document) formats, fully digitalized e-fapiao is not required to be saved in a specific digital format. The FDEI will contain limited fields such as dynamic QR code, invoice number, invoice date, buyer information, seller information, quantity, unit price, tax amount, etc.
Nigeria – concerns around e-Invoicing and e-Evaluator system for import and export trades
The Trade and Exchange Department of the Central Bank of Nigeria issued guidelines on 21 January 2022 for a new e-Evaluator and e-Invoice system for import and export transactions, which came into effect on 1st February 2022.
This required that all import and export operations are accompanied by the submission of an authenticated e-Invoice to reduce foreign exchange malpractice.
The Nigerian National Assembly along with various corporate bodies have raised strenuous objections, citing concerns around increased transaction costs and bureaucracy, disrupting business and heightening, rather than reducing, the risk of corruption. The National Assembly has requested the procedure be suspended due to the short notice and lack of transition period.
European Union – what is the missing part to reduce the EU VAT gap?
On 16th February 2022, the European Parliament published a resolution asking the question – “the Sixth VAT Directive: what is the missing part to reduce the EU VAT gap?”
This report explores how the transposition and application of the directive could be improved, and suggests that, in order to meet the challenges of digital transformation and an increasingly mobile economy, it is time to move towards a simpler VAT system that can adapt to developments in technology, trade and the broader economy more rapidly and easily.
The report highlights that while the VAT gap, on average, has reduced significantly across member states it still exists and could be reduced by such simplification of the VAT system, greater harmonization in VAT rates, and improved steps to combat fraud through digitization – which enables both governments and businesses to take action in real-time. For more details, please refer to the website of the European Parliament: https://www.europarl.europa.eu/doceo/document/A-9-2021-0355_EN.html