Welcome to our regular e-Invoicing newsletter.
Please refer to our “Hot topics” section for items which may require imminent consideration on your behalf, this month just a confirmation of Poland’s authorization to proceed with their e-Invoicing mandate.
For more general information see the “Compliance news and updates” section which includes the merger of the Franco-German PDF/XML standard known as Factur-X and ZUGFeRD, Czech Republic’s abolition of electronically recorded sales, and Romania’s proposal to reduce their VAT gap through introduction of an e-Transport system.
Poland – B2B e-Invoicing mandate gets the go-ahead from the EU
Poland has passed an important milestone in its plan to make electronic invoicing mandatory for all taxpayers from 2023. Poland needed to follow the same path as Italy and France in gaining a derogation from the European Union Commission.
The council, acting on a proposal from the Commission, has now as of March 30th 2022 authorized the request from the Republic of Poland for a derogation from Articles 218 and 232 of Directive 2006/112/EC on the common system of value-added tax. These are the specific articles which effectively prohibit the mandating of e-invoices by requiring the acceptance of the buyer to receive an e-Invoice, and to impose a specific format. The authorisation / derogation applies from 1st April 2023 until 31st March 2026. For more details see: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52022PC0136&from=EN
With the derogation now granted, Poland can continue with its plans to implement an invoicing system based on the clearance model, similar to Italy. Companies will have to send and receive their e-invoices through the public invoicing portal KSeF. Companies can connect to this portal directly or through an e-Invoicing service provider such as OpenText who can assist them with the complexities of integration and mapping to and from the mandatory format. For more details see: https://www.podatki.gov.pl/ksef/informacje-o-ksef/
The Polish Tax Administration has published an extensive questions and answers page for taxpayers here: Questions & Answers – KSeF (podatki.gov.pl)
Compliance news and updates
France and Germany – does Factur-X have the “X-factor” for the French mandate?
The German e-Invoicing standard, ZUGFeRD, originated by the German national e-Invoicing forum (FeRD) in 2014, has now effectively merged with the French version called Factur-X, which had been co-developed since 2017 by the French e-Invoicing forum (FNFE-MPE).
The hybrid standard includes structured data in XML format, which is embedded within a PDF container to allow fully automated processing by computer systems without reliance on manual data entry or OCR technologies – while at the same time ensuring readability through the PDF representation of the data.
The collaboration between the two forums finally reached a point of full alignment in March 2022, whereby the two standards are now strictly identical, sharing a schema and also a code list that fully conforms to the European Norm (EN 196931) published by CEF (Connecting Europe Framework). This merger becomes complete as of version 1.0.0.06 of Factur-X, and ZUGFeRD 2.2, with all details now published in a single specification document which is available in French, German and English.
The intent of the hybrid format was to liberalize e-Invoicing since structured XML data is not natively human readable and requires technical expertise by both the supplier of an invoice to “map” from the existing sales order data in their ERP or financial application to a common format, and the buyer of the invoice to map from that common format back to their internal purchase order data format. Of course, the hybrid format does not remove this technical requirement entirely since mapping to custom internal system formats is still required, and the format introduces a requirement to purchase special software to “embed” the XML data in the PDF, and again extract it on receipt, adding further complexity to the process.
The Factur-X format has been proposed as one of three formats that will be accepted by the new Chorus Pro public invoicing portal in France (Portail Public de Facturation or PPF). The alternatives are UBL and the UN/CEFACT Cross Industry Invoice (CII) format, both of which are also XML formats, so it seems that each format has the “X(ML)-factor” after all!
Since XML can already be visualised using standard technology – XSLT (eXtensible Style Sheet Language for Transformation) which can provide a human readable version of XML invoices in any browser, the benefits of Factur-X/ZUGFeRD are minimal, especially given the special software requirements for generating/processing such invoices.
The French approach adds complexity and confusion when compared to other B2B e-Invoicing mandates we have seen – such as those seen in Latin America, Turkey and Italy – where a single common format was enforced leaving taxpayers with no confusion over which format to use. The current approach could leave taxpayers having to support multiple formats at significant additional expense.
As one of the largest and most well established B2B networks in the world with over 1 million connected parties and processing 33 billion transactions a year, OpenText remains uniquely positioned to help customers simplify this complexity by providing the means to integrate with their partners regardless which formats are selected. Customers looking to get ahead of the impending mandate in France are invited to contact their OpenText account team and arrange a consultation with our inhouse experts on the French B2B e-Invoicing obligations.
Czech Republic – obligation to electronically record sales to be abolished
The proposal from the Ministry of Finance to repeal the Act on Registration of Sales was discussed and approved by the government in March 2022, and comes into effect from 1 January 2023. This means that from next year the legal obligation to electronically record sales, which was suspended for almost two years due to the covid pandemic, will not return.
The original press release from the Ministry of Finance can be found here (in Czech):
Romania – e-Transport legislation proposed to address fraud for high fiscal risk goods
While e-Invoicing and e-Reporting remain the primary focus for most tax authorities in the fight against the VAT gap and tax fraud here in Europe, Romania has joined countries like Brazil in proposing electronic controls around the transportation of goods, both domestic and intra-community transactions.
Romania has the largest VAT gap in the EU at almost 35%, and is moving rapidly in introducing new legislation in their attempts to control tax fraud.
The proposal for an e-Transport system was made in an emergency ordinance published on 21st March 2022, and would become mandatory from July 1st 2022 giving taxpayers little time to comply, and facing significant penalties for non-compliance – in the region of €10,000-€20,000.
Before proceeding, the Ministry of Finance will need to ratify the proposal and establish the categories of road vehicles as well as the list of goods in scope – the proposal targets high fiscal risk products.
Europe – recommendations to the European Commission on e-Invoicing harmonization
On 10 March 2022, the European Parliament (EP) voted in plenary on a Resolution to the Commission’s Action Plan on fair and simple taxation supporting the recovery strategy (2020/2254(INL), and provided several recommendations intended to assist in reducing the costs associated with compliance for taxpayers while increasing transparency and certainty when introducing endeavours to reduce the tax gap.
A clear focus was the potential costs for smaller businesses faced with compliance with requirements in up to 27 different tax systems.
The resolution highlighted the “unprecedented impact and magnitude of the Covid-19 crisis on the economy” and the resultant decrease in tax revenues and increase in government debt.
The recommendations related to the reduction of the tax gap and compliance costs focuses on e-invoicing and e-reporting and includes:
- Promptly establishing a harmonized common standard for e-invoicing across the EU – ideally within fiscal year 2022 – to reduce the cost of the creation of fragmented, disparate and divided systems across the Member States.
- Exploring the possibility of a gradual introduction of obligatory e-invoicing across the Union by 2023, focusing on a significant reduction of costs of compliance, especially for SMEs. Invoice issuance should be administered only via state-operated/certified “system(s)” with full data protection ensured.
- Examining the possibility that such a system would provide tax compliance data/documents for eligible taxpayers, meeting the responsibility for the compliance of these returns, especially – once again – from the point of view of reducing compliance costs and risk for SMEs.
The full text of the resolution can be found here. https://www.europarl.europa.eu/doceo/document/TA-9-2022-0082_EN.pdf