Major EU developments in e-invoicing and digital VAT reporting

Background

Major changes in the EU VAT were proposed at the end of last year, see more information in our article “The European Commission proposes ambitious VAT reforms”. The proposed measures include an EU real-time digital reporting requirement (DRR) based on e-invoicing. Please find more information in our article “ViDA: digital reporting based on e-invoicing”

If the ViDA proposals are adopted,  this will not only mean a major (short-time) compliance effort for businesses, but also a major change for players assisting taxpayers in their compliance efforts, such as VAT accountants and software companies.

Therefore, many businesses are interested in whether the ViDA proposal will be adopted and if yes, whether it would follow the proposed timeline. You can find an overview of latest developments and expected future steps below.

Major changes in invoicing rules already in 2024

• The ViDA proposal provides that major changes will apply in the invoicing starting in 2024. Namely, it is proposed that from the beginning of 2024:
  the electronic invoicing will be made the rule rather than the exception;
• a new definition of electronic invoices will be introduced and only invoices received and issued in a structured format will be considered e-invoices;
• e-invoices will not be subject to the acceptance of the recipient (this means that any affected business should be able to receive them and cannot refuse them);

If the proposed changes are adopted, all businesses falling under the new regulation who currently issue and/or receive invoices in a pdf format will be required to issue, deliver and receive structured e-invoices already by 1 January 2024.  

The proposal provides that the European standard (EN 16931, hereafter also “EN standard”) should be accepted. Many questions remain open, e.g.: 

• how the invoices in a structured format other that EN can be received; and
• how to include additional data not included in the EN standard?

The EU asks for feedback on the current standard for e-invoicing 

On 17 March 2023, the European Commission announced an evaluation of the EU Directive on e-invoicing which stipulates EN standard 16931.

The aim is to collect feedback from the whole e-invoicing community on the following topics:

• Success of EN standard in meeting its objectives;
• Its effects on the EU internal market;
• Cost and benefits for e-invoicing users; and
• Consistency with other relevant EU initiatives, such as the VAT in the Digital Age and the specifications of the eDelivery Building Block, the standard for sending e-invoices in an interoperable manner.

The input will help identify possible areas for improvement and shape the future of e-invoicing.

ViDA – responses from the EU institutions

Update on legislative procedures of the EU

The European Parliament has expressed a positive view and its internal services have published a briefing paper on the proposals: ViDA Briefing Paper.

The ViDA has received an initial favorable assessment from the EU’s independent European Data Protection Supervisor (EDPS), especially the Digital Reporting Standards for delivering transaction data on B2B invoices to the European Commission starting in 2028.

The EU Council which consists of the representative of the EU MSs, is expected to vote on the ViDA proposal in October 2023.

Responses from the EU Member States

The Dutch Government supports the EU VAT in the Digital Age (ViDA) proposal. 

•  The report and  assessment of the proposed VAT legislation (in Dutch only) has been published. 
• The implementation of the ViDA proposal is expected to have a positive long-term impact on Dutch businesses as it will simplify trade within the EU market and, in certain cases, also reduce compliance costs, for example by harmonizing the different reporting and invoicing requirements in the EU.
• In the short term, however, entrepreneurs will have additional costs for compliance and need to adapt their IT systems. 
• The proposal may lead to an increase in the compliance burden for some entrepreneurs (mainly in the short term), especially for small entrepreneurs. 
• In addition, compliance burdens for platforms in short term accommodation and travel sectors and e-commerce are likely to increase if they are considered suppliers by the fiction and need to account for VAT.
• The Member States and the European Parliament are generally expected to be positive about the proposed ViDA measures.

Responses from other EU Member States

The following countries have already published opinions or launched consultations on ViDA: 

• Finland and Sweden have expressed supportive views
• Sweden has proposed some amendments
• EU Commission and several countries (Italy) have launched public consultations on ViDA

Latest EU country developments in the e-invoicing and digital reporting

As a response to the EU proposal to introduce e-invoicing for cross-border transactions as early as 2024, many countries have taken (further) actions to roll out e-invoicing.

Germany will publish a paper on B2B e-invoicing 

The Federal Ministry of Finance (Bundesministerium der Finanzen or BMF) has said that it will publish in April a discussion paper on options to introduce mandatory e-invoicing. The scope or format of the German e-invoicing is not made clear yet, but Germany has already announced to adopt the EN standard as proposed by ViDA.

Belgium will introduce mandatory B2B e-invoicing and e-reporting from July 2024 

The Belgian Minister of Finance has announced the intention to introduce mandatory B2B e-invoicing from July 2024, most likely through Peppol. The introduction will be phased and related to Belgian established companies with turnover over the threshold. Belgium will also introduce Continuous Transactions Controls with the goal to have a pre-filled VAT Return.
For the deployment of this system, Belgium intends to follow the EU guidelines, as published in the framework of the ViDA, thus promoting the interoperability of data exchange systems between EU countries. The obligations will be introduced in stages:

• July 2024: every taxpayer needs to be able to receive an e-invoice;
• July 2024: issuance of e-invoices by large taxpayers;
• January 2025: issuance of e-invoices by medium-sized taxpayers;
• July 2025: issuance of e-invoices by the rest of the taxpayers

The following countries also made public their plans to introduce e-invoicing and/or DRRs

• Sweden is taking steps towards mandatory B2B e-invoicing / DRRs 
• Denmark enables automated e-invoicing via e-bookkeeping systems and plans further digitize business processes
• Baltic states are also rolling out new e-invoicing developments. Latvia has published a report that states its intention of introducing mandatory electronic invoicing for all B2B and B2G transactions from 2025 using the Peppol network. Lithuania introduces Peppol-based e-invoicing platform.

Conclusion and expected further developments

The VAT community and businesses are awaiting with interest how and when the important changes proposed by ViDA are adopted since those will overhaul the entire VAT compliance landscape. Many commentators have expressed the view that the EU institutions and EU MSs are likely to agree with the ViDA proposal in the second half of 2023. This will mean that the first big step in EU VAT digitalization – major switch to e-invoicing for many transactions - will probably take place as soon as 2024.

In anticipation of obligatory use of e-invoicing in the EU, most of the MSs have either already rolled out obligatory B2B e-invoicing or are taking steps to prepare the necessary legal and technical infrastructure for e-invoicing.

The businesses operating in the EU need to start preparing for e-invoicing by (further) digitalizing their business processes and familiarizing themselves with the requirements since the e-invoicing is expected to go ahead as soon as 2024.

Please contact your consultant for more detailed information