Welcome to the July 2023 edition of our e-Invoicing newsletter.
In our Hot Topics section read about the exciting new changes coming to our blog for 2023.
In “Compliance news and updates” read the latest world news on mandates. In the EU, the European Parliament has provided significant updates to the proposed amendments to the VAT Directive arising from the ViDA report (VAT In the Digital Age).
Germany, Spain and Romania progress with their intent to introduce mandatory e-Invoicing. We have included an update relating to the 2024 reform in France.
Finally, read about the technical update regarding the Polish e-Invoicing format.
Hot topics
Over the past few months we’ve been making some changes to our blogs in response to popular requests from subscribers. We have been introducing country-specific update pages so we can capture what is happening more rapidly, and also to enable you to quickly review the status of a particular country at-a-glance, without having to cross-reference multiple newsletters.
The newsletter will remain, but each iteration will now be simply a collection of the country-specific updates that have been published since the previous newsletter.
As you can see below, from the OpenText Blogs page, if you navigate to “News & Events”, you will now see e-Invoicing as a discrete link on the left. Hover over the link and the latest country updates will pop out for you to click on.
Or click on the e-Invoicing link to view the list of all available country specific blogs.
Compliance news and updates
European Union – Proposed amendments to the VAT Directive
In response to the ViDA report (VAT In the Digital Age) discussed here previously, the European Parliament has reviewed the proposed changes to the VAT Directive.
The EU has offered several amendments that undermine certain aspects of the ViDA proposal, thus impacting the potential for harmonization in favor of accommodating national preferences.
While most of the amendments are minor, some are not, and there are over 250 in total. Of course, ViDA covers broader topics of taxation, not simply e-Invoicing, so not all of these amendments are relevant. Here we will focus on the key amendments from an e-Invoicing perspective.
Timelines
In the first instance, and not terribly surprising, the timelines proposed had been considered very aggressive and so most of the key deadlines / milestones have been pushed back at least one year and, in some cases, longer.
Definition of an electronic invoice relaxed
One of the key changes from an electronic invoicing perspective has been the watering down of the proposal to redefine the term “electronic invoice” to only mean a document transmitted “in a structured electronic format”. The new text reads “in any electronic format”.
A later amendment clarifies that for transactions below €1,000, companies can still use paper or other formats.
This allows PDFs to remain a valid format for electronic invoicing, which could be problematic. While PDFs are “easy” in some regards, companies still process them manually and they provide almost none of the key benefits that can be seen from switching to fully automated e-Invoicing. The EU provided no specific justification for the change but it is likely this is intended to reduce the burden on smaller businesses.
Clearance or prior authorization by tax authorities
Authorities have removed the text proposed, which could have eliminated or at least minimized the use of clearance models for e-Invoicing. With clearance model e-invoicing, widely used in Latin America and introduced in Italy. The tax authority reviews and approves each invoice by validating the content prior to it being issued to the taxpayer with clearance model e-Invoicing which is used in Latin America and Italy. This represents a significant additional burden to businesses in terms of potential delays in invoice issuance.
The original text removed by the EU included, “The issuance of electronic invoices by taxable persons and their transmission shall not be subject to a prior mandatory authorisation or verification by the tax authorities”. The justification for this change is that “pre-acceptance of an invoice after verification of certain formal elements can be an important instrument for combating tax fraud at national level.”
Use of the European Norm optional not mandatory
The new text also removes a stipulation to make European Standard (EN-16931) mandatory when countries impose e-Invoicing. This paves the way for countries to introduce their own invoice standards. As we have seen, this is what has been happening to date, with Italy, France, Poland already introducing their own invoice formats.
Businesses face a new challenge with these regulations and the additional obligation to support different invoice standards in different regions and maintain them with regular updates as they evolve. Keeping up to date with these national changes is already a significant challenge for businesses. Consider how often you have needed to update your paper invoices in the last 10 years. Perhaps once per country to accommodate the addition / amendment of one or more mandatory fields? Often companies handle these changes through amendments to the templates they use to print out your paper / PDF invoices. Changes to the content of structured e-Invoices may require modifications to your ERP or finance/accounting package. In the future you can expect one or two changes per year based on our experience in other countries.
The proposals are still in draft stage and these amendments must still be ratified before the VAT directive can be amended.
You can review the proposed amendments in detail via the links provided. There were two documents, the first document dated 5 May 2023 containing the first 87 suggestions, and the second dated 20 June 2023 covering the remaining 164.
Germany propose B2B e-Invoicing mandate for January 2025
Germany recently announced it’s proposed timeline for implementation of a B2B e-Invoicing mandate covering all domestic transactions. The German Federal Ministry of Finance (Bundesministerium der Finanzen or BMF) issued a discussion document on April 17, 2023, with details of the proposed changes to the current legislation. This timeline would see implementation of the proposed mandatory e-Invoicing regime commencing on 1st January 2025.
The proposal takes into account the framework proposed by the VAT in the Digital Age (ViDA) proposal put forth by the European Commission in December 2022.
This proposal offers some indications as to what key changes would be made to the existing German tax legislation.
Germany will update the legal definition of invoices to include electronically issued invoices. The definition of an e-Invoice would be based on the ViDA proposal and the European Norm (EN16931) standard introduced by the EU Public Procurement Directive (2014/24/EU).
E-Invoices would then become the default and mandatory system of invoicing for all B2B transactions, replacing paper.
Any other types of invoices, such as paper, and electronic formats including PDF and EDI would be grouped together as “Other invoices”, and are out of scope of the mandate. There remains some confusion as to what place there might be for such invoices, if any.
The proposal also includes amendments to the existing German laws which cover the requirements for authenticity, integrity, and legibility of invoices.
The Ministry of Finance is seeking input from businesses, software/solution providers and other stakeholders prior to issuing a draft law. This consultation process is due to run from April through to 8th May 2023.
The BMF is seeking comments around whether the government should seek a phased deployment as per France or should take more of the “big bang” approach of Poland. They are also seeking input regarding whether a phased approach should be based on size of company, invoice amounts or other alternatives.
Also open for comment is whether exceptions to the mandate should be made for certain invoice types such as micro invoices, tickets etc.
The proposal also presents two different implementation models.
One of the proposed approaches would be to leverage the PEPPOL network in a “5-corner model” leveraging the established PEPPOL network. PEPPOL Access Points would send a copy of the invoices to the proposed government e-Invoice portal for validation prior to issuance between PEPPOL end points.
The second approach would be to follow a model more like that proposed in France using certified private platforms to validate invoices prior to submission to the central government platform.
This is an important next step in Germany’s journey to mandatory e-Invoicing and it’s gratifying to see the German tax ministry seek input from key stakeholders. Once the German government collates these comments, we expect to see a more concrete formulation of legislation, although at this point no clear time line has been established for next steps.
Romania – receives approval from EU to proceed with e-Invoicing mandate
Romania has moved a step forward in its plan to mandate e-Invoicing, with a proposal from the European Commission to grant derogation from the EU VAT Directive.
The Romanian Senate first made the application on 14 January 2022, but subsequently modified it on 30 September 2022. This has pushed back the date of the derogation to 1st January 2024, and it would apply until 31st December 2026.
The main objectives discussed in Romania’s request are to combat tax fraud and increase the efficiency of tax collection, while also reducing administrative costs for both the tax administration and taxpayers. Romania has historically maintained one of the highest VAT Gaps within the EU, 35.7% in 2020, which they admit is a fundamental problem and requires urgent and sustained action, of which e-Invoicing will likely be just one component.
The requirement for this derogation process remains in place since the current VAT directive effectively prohibits member states from imposing a mandate due to the following two elements. First, article 232 of the VAT Directive states that the use of an electronic invoice remains subject to acceptance by the buyer – effectively allowing the buyer to refuse an electronic invoice if they do not have the technical means to accept it. Second, article 218 states either paper or electronic invoices must be accepted as long as they meet the other conditions of the directive.
While the ViDA proposal discussed here would remove the need for governments to request such derogation, this proposal remains to be ratified. Once ratified, the derogation granted to Romania would become redundant, but it is required for them to proceed in the meantime.
The existing “RO eInvoicing” system, which came into effect in November 2021, targeted business-to-government (B2G) e-Invoicing and is expected to become the basis for the new mandatory e-Invoicing system. The existing platform is already designed to support B2B transactions and will remain available for use on an optional basis for non-established economic operators.
The proposed system already uses an invoice format compatible with the European Norm e-Invoicing standard (EN16931), which is in line with the ViDA proposal. However, the way the system currently performs semantic checks as well as structural and syntax checks on invoices before certifying the invoice with a Ministry of Finance electronic seal, does not align with one of the key intentions of ViDA. Romania has stated its intent to adapt the system as of 1 January 2026 in order to comply.
While the derogation is not simply a formality, given that all EU members thus far have succeeded in their application, and given the tone of the proposal, it seems highly likely they will be allowed to proceed.
France – Pilot phase of French mandate announced for January 2024
As we have discussed in previous newsletters, the French e-Invoicing reform introduces a new CTC (Continuous Transactions Control) model which will be implemented in stages starting from July 2024 and establishes new requirements for all businesses operating in the country.
Under the new mandate, taxpayers will be obligated to issue their B2B domestic invoices electronically replacing traditional paper-based invoices. Additionally, the mandate introduces electronic reporting obligations for transaction data and payments, facilitating a more streamlined and efficient invoicing process. In order for the French tax authorities to access the data, taxpayers, or their authorised providers (PDP) will have to integrate with the Public Billing Portal (PPF).
In a significant next step towards the implementation of their e-Invoicing mandate, the French Ministry of Economy has announced the launch of a pilot phase for electronic invoicing.
The proposed pilot, which will run between January and June 2024, aims to test the viability and effectiveness of the new electronic invoicing model in real-world conditions. The pilot phase will involve all stakeholders, including the Public Billing Portal (PPF), partner platforms (PDPs), and taxpayers.
Enterprises interested in participating in the pilot phase are required to submit their applications by the deadline of 26 June 2023. Following the evaluation process participants will be notified of the results. This will provide businesses with an opportunity to assess their eligibility and prepare for compliance with the upcoming e-invoicing regulations.
Get help with the French pilot program
OpenText invites customers and prospects to partner with us if they wish to participate in this pilot program, or to check their readiness for the e-Invoicing mandate using our e-Invoicing mandate readiness check service. Reach out to your OpenText account representative or contact us here.
Spain – Draft regulation moves a step closer to B2B e-Invoicing mandate
Spain has moved a step closer to implementing mandatory B2B e-Invoicing with the publication of a draft Royal Decree, which forms part of the “Crea y Crece”, or Law for Creation and Growth of companies published initially in September 2022. The proposed legislation aims to promote digitization, reduce late payments and cut administrative costs for businesses, particularly smaller companies.
While the regulation is still in the draft stage, it offers crucial insights into the scope, requirements, and timelines of the upcoming e-invoicing system in Spain.
Key Points:
- Scope of the Spanish B2B E-Invoicing Mandate: All companies and professionals required to issue invoices under Spanish law will be obliged to do so electronically. Some excluded transactions include simplified invoices and cases where there is no legal obligation to issue an invoice under Spanish rules. The mandate is for domestic e-Invoices only and does not apply if one of the parties is not established within Spanish territory.
- Main Requirements of the Spanish E-Invoicing System: The system will consist of privately owned electronic invoicing platforms and a public electronic invoicing solution managed by the State Tax Administration Agency. E-invoices can be issued in different accepted formats, and an advanced electronic signature is mandatory for integrity and authenticity. All e-invoices must be identified with a unique code, and the recipient must communicate the acceptance or rejection of the invoice and the payment date.
- Accepted E-Invoice Formats: E-invoices will be structured documents and will no longer include PDF formats. Taxpayers must issue e-invoices using accepted formats such as XML CEFACT/ONU, UBL, EDIFACT, or Facturae. Private e-invoicing platforms must be capable of converting e-invoices into all supported formats while preserving integrity and authenticity.
- Communication of E-Invoice Status: The recipient of an e-invoice must communicate its status within four calendar days. Mandatory statuses include commercial acceptance or rejection and full effective payment. Optional statuses include partial commercial acceptance or rejection, partial payment, and assignment of the invoice to a third party.
- Implementation Timelines: The draft regulation will come into effect 12 months after its official publication in the Spanish Official Gazette (BOE). The deadline for compliance is 12 months for entrepreneurs and professionals with an annual turnover over €8 million, and 24 months for others. Reporting of e-invoice statuses will become mandatory 36 months after the publication for entrepreneurs below €6 million and 48 months for professionals below the same threshold.
While the draft regulation for mandatory B2B e-invoicing in Spain is subject to changes before its final publication, it provides businesses with crucial information regarding the upcoming e-invoicing system.
Businesses and professionals were invited to provide feedback on the draft until July 10, 2023, as the government finalizes the details and seeks a derogation from the EU VAT Directive.
More details as well as a the full text of the decree (in local language) can be found on the Spanish Directorate of Economic Policy website.
Poland – key technical updates relating to the mandatory e-Invoice format
The Ministry of Finance in Poland has recently published the final version of the FA(2) logical structure for e-invoices. This marks an important milestone in the process towards reforming electronic invoicing.
During a press conference on June 30, 2023, the Ministry of Finance officially confirmed that the published FA(2) structure is the final version. No further modifications are planned before the mandatory implementation of the new structure, scheduled for July 1, 2024. The Ministry believes that any potential changes in regulations will not affect the shape of the published FA(2) structure.
The FA(2) structure is set to replace the current FA(1) structure in use on the production environment from September 1, 2023. However, it will be available for testing purposes in the KSeF test environment starting from July 1, 2023, and will run concurrently with the existing FA(1) structure until the end of August 2023.
A preliminary examination indicates that the final version doesn’t differ significantly from the earlier draft version published in late spring, but companies are advised to discuss this with their e-Invoicing team to ensure any changes that may be required can be accommodated and tested before the mandate deadline in July 2024.
With the new structure set to replace the existing FA(1) system, businesses and stakeholders can anticipate a smoother transition to the updated electronic invoicing system.
Are you ready for the Polish mandate?
Customers wishing to check their readiness for the Polish e-Invoicing mandate might consider our e-Invoicing mandate readiness check service. Reach out to your OpenText account representative, or contact us here for more details.
