In a bid to keep up with the internet revolution, words like e-cash, e-signatures, and e-invoices have been coined for use in the world of e-commerce. New rules naturally have also followed, with the EU making great strides to ensure that the regulatory transition is easy and efficient. The process, though, is still ongoing and the EU Commission has recently tackled electronic invoicing and electronic signatures in its legislative initiatives.
Electronic invoicing constitutes the electronic transfer of information relating to billing and payment between supplier and buyer, and thus constitutes an essential part of the supply chain. The ongoing creation of SEPA, a single euro payment area, offers the groundwork for a successful EU e-invoicing initiative, with the latter allowing businesses to cut invoicing costs significantly.
Although businesses in the EU have been engaged in paperless invoicing for years, member states’ laws vary in the extent to which they accepted electronic invoices. In some, this type of invoicing was previously prohibited or had to be accompanied by parallel transmission of paper invoices, whilst in others it was permitted subject to varying conditions.
The major stumbling block for the widespread sole use of paperless invoices is VAT compliance, since this carries with it the obligation of storing and retrieving information for a period of time. Earlier this year, a directive setting out new VAT rules regarding e-invoicing was adopted. This was a step ahead towards the recognition of electronic invoices, thereby giving equal status to paper and e-invoices.
According to the new directive, businesses will be free to send and receive e-invoices provided they maintain business controls which create a reliable trail between an invoice and a supply in the same way as is currently done for paper invoices. This directive will need to be transposed by member states in 2013. By that date, member states will no longer be allowed to add specific requirements before recognising e-invoices, as long as businesses guarantee their ‘authenticity of the origin’ and their “integrity of the content”.
In this respect, the EU Commission adopted earlier on this month a communication entitled “Reaping the benefits of e-invoicing for Europe” wherein the Commission identifies a set of actions to promote the benefits of e-invoicing by ensuring legal certainty and encouraging the development of interoperable e-invoicing systems based on a common standard.
The communication also invites the member states to take action and promote e-invoicing at national level. According to the Commission, in 2020 e-invoicing would have to be the predominant method of invoicing in Europe.
A corollary to e-invoices is the recognition of e-signatures. A number of e-invoicing procedures make use of electronic signatures. Electronic signatures allow someone receiving data to determine the origin of such data and that it has not been altered. Currently, member states’ laws differ in their recognition of e-signatures, which has in turn led to cross-border interoperability issues. The European Commission is committed to revise the E-Signatures Directive in 2011 in order to encourage businesses to make more use of electronic invoices.
The European Commission is thus focusing its efforts on removing barriers to the broad-scale adoption of electronic invoicing in Europe.
jgrech@demarcoassociates.com
Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.