E-Invoicing compliance refers to practices executed according to local rules that define how businesses process e-invoices in a given country. These rules govern how electronic invoices are exchanged, their format, archiving, archive formats, and archive location.
Businesses are expected to automate their invoice processes and use electronic invoices to fulfill their audit and VAT reporting needs.
The European Commission established this directive in 2001 and named it Council Directive 2001/115/EC (aka, EU115). It was later updated and is now known as Directive 2006/112/EC.
The European Commission aims to simplify, modernize and harmonize the laid-down conditions for invoicing concerning value-added tax within the European Union.
The e-invoicing directive took full effect in 2004 when it became compulsory for every member state to accept electronic invoices (e-invoices).
This article dives into e-invoicing compliance and how to achieve it.
Read also: Easily Comply With E-invoicing Regulations
How to ensure e-invoicing compliance?
The original e-invoicing directive defines three main approaches to compliance: Advanced Electronic Signatures, Electronic Data Interchange (EDI), and other electronic means depending on what the concerned member states accept.
Advanced Electronic Signatures ensure that the content of the invoice has not been altered. Electronic Data Interchange (EDI) enables companies to interact with one another electronically in a standardized format.
With electronic invoicing (e-invoicing), companies no longer need to maintain a paper trail to comply with Value Added Tax (VAT) laws. An advanced electronic signature uniquely identifies the signer. The signatory has sole control of the signing key.
An electronic signature must meet the following requirements to be considered as advanced:
- Uniquely identify and link its signatory
- The private key used to create the electronic signature must be under the sole control of the signatory.
- The signature must detect when data has been tampered with after the message has been signed.
- If the data accompanying the signature has changed, it must invalidate it.
Important concepts global compliance
Some important concepts are fundamental to global compliance for all jurisdictions with e-invoicing requirements.
1. Authenticity of origin: The invoice must come from whom it purports to be from. A QR code verifying app enables you to verify the authenticity of an e-invoice quickly.
2. Integrity of the content: The content of the invoice must not be altered. An advanced electronic signature under the sole control of the signatory detects when data has been tampered with. If the data accompanying a signature has been changed, it invalidates the signature.
3. Standard formatting: This requirement makes sure that the invoice is readable. You need to send e-invoices in the format that is acceptable in the recipient’s country. For example, a German company sending an e-invoice to the Italian government must send FatturaPA invoices.
4. Storage: This requirement is the duration in which e-invoices should be made available for tax inspection and audit. It also defines where the archive is located.
How to implement e-invoicing for an organization?
Here are a few tips for implementing e-invoicing across an organization:
Step 1: Determine the project scope
A project sponsor should help the e-invoicing implementation project by ensuring the highest level of commitment across the organization. The entire transition process should go through a thorough requirement analysis.
The process of implementing an e-invoicing solution comes with a few challenges.
Multiple departments such as procurement, project management, and finance need to adopt the transition.
Make sure the scope and objectives are predefined as they contribute majorly to the outcomes.
You also need to ensure that these fundamental tasks are completed during the early stages of the e-invoice implementation:
- Identify the stakeholders involved (group companies, suppliers, customers, shared service centers).
- Identify the departments involved.
- Examine the state of the e-invoicing landscape.
- Review your market and develop a list of the available solutions.
- Review and evaluate the available e-invoicing solutions to meet both the commercial goals and the imposed requirements by the tax administrations.
Step 2: E-invoicing solution requirement analysis
An e-invoicing solution requirement analysis is vital to e-invoicing implementation. You need to come up with a detailed list of expectations and requirements for the software performance.
Here are a few guidelines to follow:
- Ensure that the objectives of the entire project are clearly defined.
- Find out how the new invoicing system will integrate with your existing AP and AR systems.
- Determine how your customers and suppliers will comply with the new invoicing policy. You should know that some industries are more at home with e-invoicing practices than others.
- There should be an implementation budget and timeline to determine the expected duration, cost, and ROI.
Step 3: Validate the e-invoicing solution provider
Choose an e‐invoicing service vendor that provides many different e‐invoice formats and supports conversion from paper invoices to electronic invoices and vice versa. Your service provider should handle both the legal and commercial challenges of e‐invoicing.
With Storecove, you can send e-invoices in various formats. It would be best to have a solution that can exchange different documents between the suppliers and customers since their current standards may vary depending on their accounting systems.
Take note that some e-invoicing software can work smoothly with the existing accounting system. Integrating new electronic invoicing software is easier when you have an ERP system in place. You will then be able to leverage the current workflow and data management without making much adjustment.
Step 4: Implement
At this point, you and your provider will begin the implementation process. Make sure you obtain all the required permissions and ensure the solution’s compliance. This is the part where you train your staff properly and notify all the affected parties.
You may face a few challenges during the implementation. You may have difficulty integrating the new invoicing software with the existing AR and AP systems due to skill gaps in your employees’ capability. Keep all employees on track by giving out guidance and manuals.
Step 5: Review the project's effectiveness
After implementing, you need to assess the new software to see if it meets the expected performance set at the beginning. It is an excellent way to ensure that you have gone with the right choice.
E-invoicing compliance made easy
Businesses must process e-invoices following the local rules in their country. Companies that send e-invoices abroad need to familiarize themselves with the laws governing e-invoicing in the recipient’s country.
Did you know that you can comply with the local tax regulations, without having to do any research yourself?
At Storecove we feel that it is our duty to make this process as easy for you as possible. We will do the research, build the integration, and activate custom global compliance features for your business or software.
More information about e-invoicing compliance?
Call us on +31 (0) 20 261 1791 or send an e-mail to firstname.lastname@example.org.