A Brief History of E-Invoicing

Two businesswomen in casual dress sit across from one another in a cozy lounge area. They both have laptops, phones, and paperwork on the coffee table as they work.

The clock is ticking on new e-invoicing and digital reporting requirements evolving throughout the European Union (EU), so it’s worth a quick look back for some context on how we got here. Organisational concerns about these e-invoicing and additional reporting requirements are also worth considering.  

Most VAT legislation around the globe originally assumed that a valid VAT invoice was a paper document. Over time, this changed from allowing digital options like PDFs and EDI to permitting digital structured e-invoices alongside paper-based invoicing and, most recently, requiring e-invoicing as a complete replacement for paper-based invoicing. Mandated e-invoicing often comes with additional digital real-time reporting requirements. 

E-Invoicing can be defined as the issuance of structured electronic invoices capable of being exchanged between economic operators and automatically processed. This structured e-invoice contains data in a machine-readable format that can be automatically processed into the buyer’s AP system. 

There are several arguments for legislators to enact mandated e-invoicing. The primary (related) arguments in many cases for mandating B2B e-invoicing are a reduction of a VAT gap, pushback of the black/grey economy, fraud reduction and increased compliance. For B2G the primary argument for mandating e-invoicing is procurement efficiencies, which is sometimes also used in the B2B context.  

Brazil’s pioneering e-invoicing requirements took effect in 2008. Brazil’s legislators and tax authorities enacted these rules, in large part, to push back against grey- and black-market activity. Other countries in Latin America followed Brazil’s lead by mandating their own e-invoicing rules in subsequent years.  

Italy mandated B2G e-invoicing in 2014, followed by their e-invoice clearance portal for B2B transactions in 2019 as part of an effort to counter VAT non-compliance and fraud. Until about a year ago, e-invoicing in the EU felt more like an Italian anomaly than an indication of upcoming of EU-wide e-invoicing. But that perception quickly faded, as more countries, such as France, Poland and Germany, began to consider mandatory e-invoicing and subsequently are moving ahead with formal proposals and final rules. 

Last December, the European Commission published its comprehensive VAT in the Digital Age (ViDA) proposal, which calls for a mix of mandatory and optional e-invoicing, combined with digital and traditional reporting. The proposal seeks to harmonise e-invoicing within the EU and mandate how vendors and recipients electronically submit invoice data to the tax authorities. 

The fate of this harmonisation figures prominently among tax groups’ top e-invoicing concerns, which include:  

  • A spaghetti bowl of stipulations: Tax leaders are understandably concerned about the expense and effort that would be required to comply with numerous different, country-specific e-invoicing regulations. At the moment, Italy, France, Germany, Poland, Hungary, Spain, Belgium, Romania, Latvia and Croatia have proposed or finalised unique rules. While the ViDA initiative seeks to harmonise e-invoicing rules and compliance processes across EU member states, this objective hinges on the proposal being finalised – which is not guaranteed.  
  • Heightened transparency: E-invoicing rules require businesses to provide substantial amounts of transactional data and tax information to tax administrations. As a result, tax administrations will have more visibility than ever into a company’s procurement activities, sales activities and tax data (including data related to transfer pricing). There’s even a risk that some technologically advanced tax administrations will know more about a company’s sales and procurement activities than their corporate tax groups with less advanced supporting technology in place.  
  • Opportunity cost: If the magnitude of the e-invoicing compliance burden becomes excessive, it could impede companies as they enter new geographies, launch new products and attempt to perform other strategic activities.  

While these concerns are valid, e-invoicing also offers benefits, including efficiency opportunities, improved tax controls and more certainty regarding VAT deductions. Tax leaders and teams should learn as much as possible about the pros and cons of e-invoicing requirements; see my other post about ViDA as a possible place to start.

Blog Author

Peter Boerhof, VAT Director at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Peter Boerhof

Senior Director, VAT

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Peter Boerhof is the Senior VAT Director for Vertex. In his role, he provides insight and thought leadership regarding the impact of tax regulations, policy, enforcement, and emerging technology trends in global tax. Peter has extensive experience in international transactions, business restructuring, tax process optimisation, and tax automation. Prior to joining Vertex, Peter was responsible for leading the indirect tax function at AkzoNobel, where he designed and implemented a tax control framework, optimised VAT, and managed the transition to a centralised tax operating model for global tax processes.

He was also responsible for indirect tax planning and compliance for merger and acquisition, supply chain, and ERP projects, as well as the implementation of tax automation initiatives like tax engines and robotics. Boerhof also worked at KPN Royal Dutch Telecom managing VAT, as well as Big Four accounting firms Deloitte and Ernst & Young (EY) advising on VAT compliance and optimisation processes. Boerhof holds an MBA from the Rotterdam School of Management and a master’s in tax law from the University of Groningen.

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E-Invoicing Requirements and VAT in the Digital Age

Learn more about e-invoicing mandates in the European Commission's VAT in the Digital Age (ViDA) proposal.

Tax Solutions for Europe by Vertex