Supply Chain

October 2023: E-Invoicing & VAT compliance update

Welcome to the October 2023 edition of our e-Invoicing & VAT compliance newsletter. This newsletter contains the most recent collection of updates to our real-time country updates blogs.

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. It also enables you to quickly review the status of a particular country at-a-glance, without having to cross-reference multiple newsletters.

The newsletter will remain. However, each iteration will now be a collection of the country-specific updates that have been published since the previous newsletter.

If you wish to keep abreast of the latest news from the OpenText Blogs page, navigate to “News & Events” and select e-Invoicing.

In “Compliance news and updates” read the latest world news on mandates as Germany, Romania and Poland progress with their intent to introduce mandatory e-Invoicing. Meanwhile, France has issued a delay to their planned 2024 reform, and we provide the latest news on that too.

E-Invoicing & VAT Compliance news and updates

October 2023 – Germany – Further updates and clarifications on proposed e-Invoicing regime

The latest update from the German Federal Ministry of Finance provided clarification around some key points relating to their roll out. This update specifically relates to EDI procedures and the ZUGFeRD hybrid invoice format. It also clarifies the timelines for optional and mandatory e-Invoicing in Germany.

The “soft mandate” from January 2025 is not as soft as it looks!

There had been some confusion about the proposed timeline for the German e-Invoicing mandate. Some parties reported an “optional” use of e-Invoicing as of 1st January 2025, which would become mandatory the following year. This would mean 1st January 2026 for large enterprises (those with revenues above €800,000). Small businesses beginning 1st January 2027.

What Germany is actually doing is implementing what I refer to as a “soft mandate” for e-Invoicing. This is an approach many governments took. These governments implemented business to government (B2G) e-Invoicing in response to the Public Procurement Directive (2014/24/EU).

In these cases, government agencies had to accept electronic invoices issued by suppliers. However, suppliers were not mandated to issue invoices electronically. Hence it was only a “soft mandate”. As a result, we often saw very low volumes of B2G electronic invoices in these countries. A few governments went further. They either directly or indirectly implemented a “hard mandate” requiring suppliers to issue their invoices electronically. Not unexpectedly, these countries saw a complete switch from paper invoices to electronic, almost overnight.

In a B2B scenario this approach is unusual, although not unprecedented. Turkey is one such example. It has important implications.

In Germany, from 1st January 2025 ALL taxpayers must ensure they deploy an e-Invoicing solution to receive invoices issued electronically by their suppliers.

Now, you may be thinking “my suppliers don’t issue electronic invoices, so I don’t need to rush”. And you may also be thinking “look what happened in those B2G cases”.

I urge you to think again.

The buyer acceptance clause slowed adoption. What happens when it’s gone?

Everyone in the e-Invoicing industry agrees that there is one of the primary reasons that e-Invoicing adoption has been so painfully slow in the European Union. Despite it being formally allowed since 2001 (Directive 2001/115/EC aka the “EU115 Directive”) it contains one specific and troublesome clause in the directive. We call this the “buyer acceptance” clause.

The buyer acceptance clause is Article 232 of the VAT directive. It simply states, “the use of an electronic invoice shall be subject to acceptance by the recipient.”

How can one simple sentence be responsible for hampering e-Invoicing initiatives so badly? Very simply put – in a buyer/supplier relationship, as we say here in the UK, “the customer is king” or “the customer comes first”. Suppliers do not dictate to their customers how they buy. So, if the customer says “no” to electronic invoices, the supplier must send paper versions.

In other words, attempts by suppliers to implement e-Invoicing have been severely hampered by the willingness or technical readiness of their buyer community to accept an electronic invoice.

German may remove the requirement for buyer acceptance

With the German proposal to remove this requirement for buyer acceptance, it will be open season for suppliers to invoice ALL of their customers electronically. Many of them have been ready and waiting for this day. Even for those who have not yet implemented e-Invoicing, a majority will be ready by January 1st, 2025.

Savvy supplies may wonder how to make the most of the investment in e-Invoicing technology they have been forced to make. One great way to do this is to digitize outbound invoice process and send all their domestic invoices electronically.

With an electronic invoice customers can no longer claim to have not received an invoice. Businesses no longer have to deal with the, “it’s probably lost in the post” excuse. Electronic delivery mechanisms come with assured delivery, which is a huge benefit to the supplier in ensuring timely payment.

Expect to see increased volumes of e-Invoices as of January 1, 2025

So, the message is clear. This may not be a full e-Invoicing mandate. And you are certainly not obliged to implement e-Invoicing for your own outbound flows. However, you absolutely should expect to see a huge volume of your inbound domestic German invoices switch to electronic formats as of January 1st, 2025.

Of course, it certainly makes a lot of sense to also consider your own outbound invoice flows if you are a supplier as well as a buyer. Switching to fully digitized electronic invoices will save you significant additional costs. This will help to pay for the implementation of your electronic invoice reception solution.

Of course, e-Invoicing solutions are not created equal. Ensure that when you deploy an e-invoicing solution, it provides all the capabilities and coverage you require.

Likely changes to EDI procedures – to be confirmed

The Ministry of Finance also note that further clarification will be forthcoming regarding EDI procedures. It notes the importance of this technology for key areas of the economy. “A solution is currently being worked on to ensure the continued use of EDI procedures as far as possible under the future legal framework.” However, they also add the, “possibility that technical adjustments will have to be made to certain EDI procedures with the introduction of the transaction-based reporting system”. Finally, they clarified that “the aim will be to limit this conversion effort to what is necessary in the interest of the economy.

Clarification around the hybrid invoice format – ZUGFeRD

There is some question whether the ZUGFeRD hybrid invoice format widely used in Germany would be acceptable under the European Union ViDA (VAT in the Digital Age) proposal. The ViDA proposal seeks to redefine an invoice as structured electronic data. Since a PDF is generally considered to be unstructured data this raised some concerns.

According to the latest update (translated from German): “In order to provide legal and planning certainty to practitioners as early as possible, the Federal Ministry of Finance (BMF) and the highest tax authorities of the federal states have discussed this issue. They have come to the conclusion that, from the point of view of the tax authorities… an invoice in accordance with the ZUGFeRD format as of version 2.0.1 basically represents an invoice in a structured electronic format that complies with the European standard for electronic invoicing…”

They also clarified that, given that there are two distinct components to a hybrid invoice. These are the invoice image, a human readable representation of the invoice data, and the underlying data itself in an XML format. The BMF will consider structured data to be the legal original for tax purposes. “The structured part will be the leading one in the case of a hybrid format. In the event of a discrepancy, the data from the structured part will then take precedence over that from the image file.”

For more background regarding ZUGFeRD see our April 2022 newsletter.

September 2023 – Romania – further steps along the road to mandatory e-Invoicing

In recent years, Romania has been making significant strides in refining its electronic invoicing regulations. These changes promise benefits for both businesses and the government, ranging from increased efficiency in transactions to enhanced transparency.

The journey so far – from B2G to B2B

Mandatory e-invoicing in Romania began with the introduction of B2G (Business-to-Government) e-invoicing through the RO e-Factura system in September 2021. This system, managed by the National Agency for Fiscal Administration (ANAF), provided a platform for reporting, storing, and downloading invoices.

The pilot program for B2G e-invoicing commenced on October 1, 2021, under Ordinance no. 120/2021. It marks the initial step toward e-invoicing integration in the country.

Romanian technical specificaitons announced

By December 2021, Romania had approved technical specifications and basic elements for e-invoicing, known as RO_CIUS. For B2B (Business-to-Business) transactions, it remains optional, contingent on both the sender and recipient being registered in the e-Factura registry.

January 2022 marked a significant shift in Romania’s e-invoicing landscape. B2B taxpayers dealing in high tax risk products must use electronic invoices via the RO e-Factura system starting from July 1, 2022. These high-risk products include items such as fruit and vegetables, alcohol, construction materials, mineral products, clothing, and footwear.

As we reported in July 2023, Romania applied to the EU Commission for a derogation to the EU VAT directives. The EU approved this derogation, paving the way for their mandate.

The road ahead – the updated e-Invoicing timeline in Romania

As of the latest update, Romania’s e-invoicing timeline is as follows:

  • January 2024: Established taxable persons and VAT-registered entities must submit invoices in the RO e-Factura system. This must be done within five days of issuance for reporting purposes (e-Reporting).
  • April 2024: Fines will be applicable to non-compliant taxpayers.
  • July 2024: The system shifts to a full invoice clearance system. This also transmits invoices to Romanian-registered trading parties – similar to the Italian model.

Preparing for the Romanian changes

As businesses in Romania prepare for these forthcoming e-invoicing changes, it’s crucial to take proactive steps:

  1. Review Your Resources: Conduct an internal audit to assess your current resources, technical capabilities, and awareness of regulatory changes. Optionally, consider partnering with an expert provider like OpenText who can help you assess your readiness for the impending changes.
  2. Avoid Short-Term Thinking: Choose a flexible e-invoicing solution that can adapt to evolving requirements. E-Invoicing regulations are expected to become even more complex, and it is very much an integration problem. It is a core part of the overall order-to-cash and procure-to-pay process. Ensure you consider a partner who can help you digitize the entire buying and selling process, not just the invoice.
  3. Don’t Procrastinate: Avoid postponing the implementation of a new e-invoicing solution. Last-minute decisions can lead to poor choices.

Romania’s e-invoicing journey landscape is gaining pace. Mandatory e-invoicing for B2B transactions approaching in less than a year from today. Businesses need to be proactive to ensure they not only comply with the new requirements. However, they must also enhance their operational efficiency and competitive advantage in the digital age.

The full draft legislation (in Romanian) is on the Ministry of Finance website here.

September 2023 – France – New timeline proposed for B2B e-Invoicing reform

The postponement of the long-anticipated French e-Invoicing mandate we announced in July has caused much turmoil in France. This turmoil has extended to the e-Invoicing industry, which was already ramping up for the 2024 roll-out.

Two French agencies share responsibility for the new e-Invoicing platform. These are the Direction Générale des Finances Publiques or directorate of public finances (DGFIP) and Agence pour l’informatique financière de l’Etat (AIFE) or agency for state financial information). On September 14, 2023, they offered the first real clarification of the causes of the delay, as well as a modified timeline.

The delay is primarily due to issues in developing the government’s centralized e-Invoicing platform – the Portail Public de Facturation (PPF). The PPF is based on the existing Chorus Pro platform used for B2G. However, it appears the development work to expand its usage has been significantly underestimated.

Possible new timeline for the French mandate

Businesses should consider the proposed new timeline below from the DGFIP and AIFE as preliminary at this stage. It will not be confirmed until October 2023 at the earliest, when the government will announce the 2024 Finance Act.

  • March 2024 – registration for PDPs (service providers) will open
  • July 2024 was the intended “go-live” date. The government is now proposing this date as a period for ongoing development of the new PPF e-Invoicing platform.
  • 2025 – commencement of pilot program which was due to begin January 2024
  • 2026-2027 – roll-out reform in two or three phases based on size of taxpayer as previously indicated.

Additionally, the tax administration confirmed that there will be a fresh call for applications for the pilot phase.

OpenText is closely monitoring these developments and will keep you posted.

August 2023 – Belgium – E-Invoicing launch delayed due to political disagreements

Belgium’s plans to launch a PEPPOL based e-Invoicing model in July 2024 have collapsed. Parliamentary opposition parties rejected the proposal, citing a lack of confidence in the government’s revenue estimates from the proposal. The proposed e-Invoicing reforms aimed to increase tax revenue by reducing the VAT gap.

The withdrawal of the proposal means a substantial delay. Any fresh attempt to gather political agreement and revisit the reforms are impossible until after the summer elections in 2024.

Given the delay, it’s unlikely any e-Invoicing reform will come to Belgium before January 2026 at the earliest.

August 2023 – Polish President signs legal act mandating the KSeF e-Invoicing system

On August 4, 2023, the President of the Republic of Poland endorsed an Act that introduces the obligation to issue invoices through the National e-Invoice System (KSeF). With the Act’s approval awaiting publication in the Journal of Laws, the final stage of the legislative process is underway. Once published, the Act will transition into a legally binding mandate, and the majority of its provisions will spring into action on 1 July 2024.

Learn everything you need to know about the National e-Invoicing System (KSeF)

Presently, e-invoicing through KSeF is optional, coexisting alongside various traditional invoicing methods. However, the clock is ticking. In less than a year (starting July 1, 2024), the government will mandate active VAT taxpayers based in Poland to exclusively use KSeF for issuing invoices. This mandate will also extend to foreign entities possessing a fixed establishment within Poland’s territory, as defined by VAT regulations.

Prepare for the transition to the Polish e-Invoicing mandate

To ensure a smooth transition, the Ministry of Finance is preparing an information brochure detailing the final version of the FA(2) XML schema for e-invoices. In tandem, comprehensive technical documentation is in the works, encompassing critical aspects such as generating and managing collective identifiers for payments and QR verification codes.

We anticipate the release of the final versions of regulations outlined in the Act, notably concerning KSeF utilization and exemptions from the e-invoicing obligation. This transition will also prompt changes in other regulations. These will include those governing invoice issuance, as well as the precise scope of data to be incorporated in VAT-related tax returns and records. These regulatory adjustments aim to align existing frameworks with the requisites of e-invoicing. The government took an initial step in this direction on 7 August, with the publication of a draft amendment to the regulation governing KSeF usage.

As the clock ticks down to July 2024, businesses both within Poland and those with a fixed establishment on its soil need to gear up for the e-invoicing revolution.

Ensure your e-Invoicing solution can access KSeF

OpenText Active Invoices with Compliance is already online and connected to the KSeF portal for customers wishing to prepare for the transition. In addition, our e-Invoicing mandate readiness check service is available to assist customers in assessing the output from their ERP/finance/accounting systems to ensure it meets the new legislation. Reach out to your OpenText account representative or contact us here.

Disclaimer: This newsletter is intended to reflect the direction the industry is moving and does not a reflect a commitment for the OpenText Active Invoices with Compliance (AIC) product development roadmap to meet any particular stated regulations.

Ken Clark

Ken Clark is a Director of Product Marketing for OpenText Business Network based in the UK. For over 30 years Ken has been a subject-matter expert in the areas of digital transformation and automation, B2B/EDI/A2A integration, and e-Invoicing and tax compliance. Ken spent much of his career as a hands-on practitioner, consulting on customer problems and implementing business-focused solutions around global supply chain management, order-to-cash and procure-to-pay. Today Ken focuses on solutions for information exchange, B2B and A2A integration, and e-Invoicing.

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