• Marco Eeman, Managing Director, Europe at BillTrust


• 13.03.2023 02:00 pm
#e-invoicing

Driven by a desire for growth; a need to cut down on fraud and to make business transactions more seamless, governments across Europe have started changing their mandates for e-invoicing. 

Some countries have already laid out their plans, including Belgium, France and Germany. The plans will not just impact businesses working within those countries but also those who work with them. Another key consideration will be how the UK Government determines what e-invoicing will look like for those companies working with suppliers and clients within the European bloc post Brexit. It is a time of change and uncertainty in which due diligence and compliance will be key. 

Closing the VAT Gap

It is also a time when governments are focussed on closing the VAT Gap, which saw EU member states lose an estimated €93 billion in VAT revenues in 2020. The Gap - an estimate of the overall difference between the expected VAT revenue and the amount actually collected - dropped in 2020 by approximately €31 billion compared to the 2019 figures. It, however, remains a key concern. 

In December, Paolo Gentiloni, the EU Commissioner for Economy, gave more details of what is mooted to be one of the biggest EU VAT reforms in almost three decades.  It will address the Gap as well as other issues, including fraud. 

It proposes amendments to three pieces of EU legislative acts: the VAT Directive (2006/112/EC), the Council Implementing Regulation (EU 282/2011) and the Council Regulation on Administrative Cooperation (EU 904/2010). A focus is helping Member States collect up to €18 billion more in VAT revenues annually “while helping businesses grow”. 

E-invoicing is one of the three main pillars of the reforms alongside digital reporting, the single VAT return for trading across the EU, and the platform economy. As Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said: “Digital technologies like e-invoicing are a powerful way to raise VAT revenues while helping our businesses to grow, especially small ones. They can help to fight fraud, saving many billions of euros lost in tax revenues every year and lessening the pressure on stretched public finances.”

Europe-wide changes 

The e-invoicing mandates have been on the cards for years. The UK Government issued The Public Procurement Regulations in May 2019. The regulations included new rules of e-invoicing usage and was the implementation of a European directive. The same directive saw implementations across the Bloc. Belgium, France and Germany have detailed some of their plans and Poland; Italy and Luxembourg have also signalled plans to make changes. 

Moves to e-invoicing for B2G transactions have often been first. It was e-invoicing for organisations working with the NHS that was mandated first in the UK. In Germany, the states Baden-Württemberg, Hamburg and Saarland have already implemented B2G e-invoicing. In Belgium and France, B2G e-invoicing is mandatory. 

B2B e-invoicing is the next focus. The Belgian Government is planning to make B2B electronic invoicing mandatory on a countrywide basis between July 2024-2025. France is preparing to mandate B2B e-invoicing, and it is expected that e-invoicing will become mandatory, across all sectors, for large enterprises from 1st July, 2024; for medium-sized enterprises from 1st January, 2025 and for the rest of the taxpayers from 1st January, 2026. 

A worldwide trend

This is, however, a worldwide trend. More than 100 different countries across the world are mandating e-invoicing with varying local standards and differences in scope in a variety of digital formats and using a range of technologies. An Imarc group report stated that it expects the e-invoicing market to reach US$35.9 billion by 2028, which is a growth rate (CAGR) of 20.26% during 2023-2028. It reflects a push towards paperless, data-driven and data-focused administrations. 

However, compliance is complicated by a lack of standardisation; countries working to different time frames and issuing different mandates. Keeping track of developments and updates to these mandates can be difficult, with so many languages and authorities to monitor globally. There are calls for standardisation but, in the meantime, companies who work within Europe need guidance. Automated solutions that can generate, present, and deliver invoices, can also ensure compliance. 

What companies must do now

Companies must get to grips with the changes and start to negotiate the different kinds of mandates they will be facing - whether buyer mandates, government mandates or clearance mandates. These will vary from country to country. It is by no means a simple feat, but a necessary one. Far better to have a plan mapped out for when e-invoicing becomes mandatory in B2B and B2C interactions ahead of time than scrambling at the last minute. This will cost time, money and make companies look unprofessional. Companies should focus on the benefits of e-invoicing: improved invoice accuracy, faster processing times and transparency amongst them. 

Working with a partner that understands the complexities of the e-invoicing mandates in whichever countries companies work within and with, will allow them to enjoy the benefits of e-invoicing. However, it will also negate the potential for fines for non-compliance and offer guidance in the complexities of staying on top of what are currently shifting standards in uncertain times.