Billing and payment mechanisms have changed throughout the years. Over the past decade or so, ICT tools have permeated many aspects of business transactions. Many business processes are now automated: Paper invoices have been replaced by electronic ones and cash payments by wire transfers.
The new rules allow all EU businesses to determine for themselves the technology they use to ensure the authenticity, integrity and legibility of their invoices
E-invoicing, the electronic transfer of invoicing information via the internet, is an essential part of an efficient financial supply chain. In the ongoing creation of a Single Euro Payment Area in the EU, the e-invoicing initiative offers huge advantages for business and consumers alike.
Electronic invoices are easier to process, they reach the customer faster and can be stored centrally at very low cost.
Lack of harmonisation on the format and accepted standards of e-invoices has hindered the smooth transfer of an e-invoice during a commercial transaction, with the full benefits and cost savings being lost in the process. EU rules that came into effect in the beginning of this year are intended to create a standardised format of e-invoices in such a manner as to have a widely recognised means of electronic billing and payment mechanism.
The new regulations are primarily intended to simplify, modernise and further synchronise electronic invoicing rules in the EU. They are also intended to create greater uniformity in invoicing rules.
These new rules for electronic invoicing allow all EU businesses to determine for themselves the technology they use to ensure the authenticity, integrity and legibility of their invoices. This can involve the use of advanced electronic signatures, electronic data interchange or a different system.
The only requirement imposed is a business control that creates a reliable audit trail between the invoice and the supplied goods or services, and allows for a determination of the legibility of the invoices.
This harmonisation exercise brought along new invoicing requirements, with which traders supplying goods or services taxed in another EU member state must comply. For instance, if the customer is liable for the payment of VAT under the reverse charge arrangement, the reference “reverse charge” must be mentioned in the invoice. In cases where the customer produces the invoice, the latter must mention the reference “self billing”.
In addition, the second VAT Directive, through which these changes were brought into effect, also amends the deadline for issuing invoices. The deadline will be the 15th day of the month following the intra-community supply of goods or cross-border services subject to the reverse-charge mechanism. The VAT Directive also standardises the language to be used on invoices to indicate that a sale is exempt, zero-rated, or subject to a country-specific regime. The requirement for a supplier to obtain the buyer’s prior acceptance of electronic invoicing remains in the Directive.
With these changes, almost identical VAT invoicing requirements will apply throughout the EU.
As the benefits of e-invoicing are becoming increasingly recognised and benefits are being reaped in other sectors, the EU has recently taken another step to launch this mechanism in public procurement.
The primary objective of this initiative is the improvement of the functioning of the internal market by diminishing market access barriers in cross-border public procurement, generated by insufficient interoperability of e-invoicing standards.
E-invoicing in public procurement is currently mandatory to some degree in a number of member states. Despite these national efforts, the adoption of e-invoicing in public procurement is still limited in the EU. To correct this situation, on June 26, 2013, the European Commission adopted a proposal which aims to make e-invoicing the standard invoicing mode in public procurement.
A new European e-invoicing standard to be developed by the European Committee for Standardisation will eliminate interoperability issues between national standards. Member state administrations will be required to accept e-invoices which comply with this new European standard.
This new standard that will apply across the trading bloc will boost the shift towards paperless public administration, and reduce the additional costs and complexity involved for economic operators who wish to participate in cross-border procurement.
The Commission’s proposal for a Directive on e-invoicing will be discussed and eventually adopted by the Council and the European Parliament. The Commission’s proposal foresees that member states will have to transpose the Directive on e-invoicing within four years after its adoption by the legislators.