There’s good news for businesses across Europe. From January 1, simpler, more modern rules on VAT invoicing will come into force, designed to cut red tape and reduce compliance costs for companies. The procedures should help bring VAT invoicing fully into the 21st century. Two areas in the new legislation are particularly worth highlighting – electronic invoicing and cash accounting.

There is more good news to come- Algirdas Šemeta

From the new year, all businesses will have the right to choose the VAT invoicing solution that best suits their needs.

Electronic invoicing will be placed on the same footing as paper invoicing, with common rules applied to both. No longer can member states’ tax authorities impose certain pre-conditions, such as e-signatures or electric data interchange. The requirements will be uniform throughout the EU, creating legal certainty and greater simplicity for cross-border enterprises. Moreover, invoices will be allowed to be electronically stored, even if the original is on paper, and the storage periods will be the same for both.

The benefits of electronic invoicing are well recognised: shorter payment delays, fewer errors, reduced printing and lower postage costs.

It is estimated that €18 billion could be saved if all businesses were to move from paper to electronic invoicing, mainly through reduced bookkeeping costs. The new VAT rules should provide added incentive and ease the way for businesses to make the switch.

The second important change in the EU VAT rules is designed to make life considerably easier for SMEs. New cash accounting provisions will enable member states to ease the cash flow for business with an annual turnover of less than €2 million. These SMEs will only have to declare the VAT once they have been paid by their customer, rather than when they issue the invoice.

As such, the EU’s smallest businesses will not be left out of pocket because of VAT payments. Each member state itself must decide whether to offer this cash accounting option provided under the new EU rules. Given that SMEs are the backbone of the EU economy, and are particularly hard hit by the economic crisis, it is hard to imagine why they would not.

A more business-friendly environment in Europe is a prerequisite for economic recovery and growth. Therefore, we must remove administrative burdens, cut compliance costs and reduce national divergences that create legal uncertainty for companies. That is what the new VAT invoicing rules are all about.

Next year, the Commission will present a proposal for an EU standardised VAT return to further simplify things for businesses. So there is more good news to come.

Algirdas Šemeta is European Commissioner for Taxation, Customs, Anti-fraud and Audit.

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