On July 1, 2024, many changes will occur in Polish companies. That’s when the use of the National e-Invoice System will become mandatory. However, electronic invoicing will be obligatory not only in our country. The e-invoice system has been in operation for years in several countries around the world. According to the assumptions of the ViDA project “VAT in the Digital Age”, the obligation to introduce e-invoices will eventually apply to all European Union countries. According to a report from the European Commission in 2021, one of the objectives of this project is to reduce the estimated tax gap of 134 billion euros in VAT revenue. Let’s take a look at how the e-invoice system functions in other countries.
E-invoices in the European Union. ViDA in the spotlight
One of the key objectives of the ViDA project is to introduce a transaction reporting system using e-invoices. This innovative functionality will take the form of RTR (Real Time Reporting), or real-time transaction reporting.
RTR is a principle that requires almost instantaneous information transfer about VAT transactions – for example, immediately after issuing an invoice in the appropriate application. The implementation of the Real Time Reporting system is becoming increasingly attractive for governments not only in Europe but on a global scale. It is an effective strategy allowing better control over the flow of VAT revenues and at the same time enabling a more successful fight against tax fraud.
Why did this have to happen?
The introduction of e-invoices is an answer to several needs of the global economy. The first is the galloping digitization and the need to adapt the style of work and document circulation to the needs of modern business. Another reason for the need to introduce a unified e-invoice system was the need for quick, remote access to all customers during the COVID-19 lockdown. Finally, the implementation of a structured invoice system is one of the assumptions of the VIDA project.
E-invoices in Europe
In Poland, it is KSeF. In other countries, the system has different names. However, the principle of operation is the same: the transfer of structured electronic invoices to the system, which sends this data to tax authorities. As one can easily guess, this allows these institutions to have a current insight into VAT liabilities on entrepreneurs’ invoices.
“One of the biggest challenges related to the introduction of mandatory e-invoicing is appropriate technological preparation. Not only government units but also manufacturers of tools supporting the daily work of accountants and accounting offices are working on it. The integration of these systems is essential for companies to smoothly and painlessly switch to issuing and receiving structured invoices”, says Krzysztof Wojtas, President of the Management Board of BrainSHARE IT, the producer of the SaldeoSMART system.
Italy as a leader
The Italian equivalent of the Polish KSeF, the Sistema di Interscambio (SdI), was launched in 2019. Italy has thus become a pioneer of e-invoicing among all EU countries. Following the example of Italy, France, Spain, Poland, Greece, and Turkey have also embarked on the path of invoice digitization. It can be assumed that the list of countries using various e-invoice systems will grow over the next few years. France, Spain, and Poland are now introducing mandatory e-invoicing. New systems will be in force in Spain in 2023 and in France and Poland in 2024.
“It is worth noting that Germany, Portugal, Belgium, and the Netherlands are already gradually preparing to introduce a mandatory e-invoice system. Admittedly, mandatory B2G (Business to Government) electronic invoicing has been operating in Europe for almost a decade, but e-invoices in the B2B sector are still a novelty and controversial”, explains Krzysztof Wojtas.
France will operate with a hybrid system
Those who complained about the system solution of the native KSeF may be comforted by the information that in other countries e-invoicing is more complex. In France, the entire process of issuing and sending structured invoices will be in hybrid form. This means that entrepreneurs will be obliged to use the government portal or the PDP platform (plateforme de dématérialisation partenaire). PDP is a tool certified by the French tax administration, which collects and transfers invoice data to the tax authority.
Spain and FACeB2B
On July 8, 2022, the Spanish government published new proposals for the “Ley Crea y Crece” bill. From the time of its entry into force, large companies (those with annual revenues exceeding 8 million euros) will have one year to adjust processes and applications to the required system. Smaller companies will have two years to do this. The Spanish equivalent of the Polish KSeF is the free platform FACeB2B, which enables B2B electronic invoicing.
Greece and the MyDATA platform
The Greek system MyDATA collects data from e-invoices for B2B and B2G transactions. On this platform, Greek authorities process the collected information and generate financial reports for each taxpayer in the country. Interestingly, MyDATA played a key role in reducing Greece’s estimated tax gap.
Germany with problems on the horizon
In Germany, the process of implementing universal e-invoices is becoming somewhat more complicated as each land governs by its laws. These can establish individual regulations and set different tax deadlines. However, the concept of e-invoices is not unfamiliar to Germans. Since 2019, all electronic invoices related to public orders in this country must be processed in a structured form through the Electronic Invoice Platform (PEF).
E-invoices not only in Europe
E-invoices have proven to be an effective tool in such countries as Australia, China, Hong Kong, Taiwan, Japan, South Korea, India, Brazil, Chile, and Mexico.
In Mexico, their task was to minimize the tax gap resulting from unpaid VAT. Interestingly, they quickly achieved their goal. Dr. Jay Rosengard’s research paper “Tax Digitalization in Mexico: Pathways Forward” shows that the introduction of e-invoices in this country improved tax revenues by as much as 48%.
“Following the example of Mexico, Italy followed. It was the first European country to introduce mandatory electronic invoicing for transactions. Interestingly, this happened contrary to the then EU VAT directive (2010/45), which clearly stated that the buyer must agree to exchange electronic invoices”, adds Krzysztof Wojtas from SaldeoSMART.
Slowly, but surely
The report of the Unified Post Group shows that the European market is moving towards full use of electronic invoicing. Italy, as the only analyzed country, has introduced mandatory use of e-invoices in its settlements. From January 2019 to April 2020, they generated over 2 billion such documents. Other European countries are now at different stages of implementing e-invoice-related solutions.
In some of them, e-invoices are currently used only in transactions with the B2G public sector. This means that although the European market is beginning to accept the idea of electronic document exchange, this process is taking place at a different pace in each country.
“Although the road to the widespread use of electronic invoicing in Europe may be winding, eventually following it will accelerate the digitization of financial processes in Europe. And it is definitely worth investing time and resources into that,” concludes Krzysztof Wojtas.
