E-Invoicing Requirements: What You Need to Know Now

When tax, finance and IT leaders assess current e-invoicing compliance developments, it helps to start by taking an expansive view.

E-invoicing is a global phenomenon. Of the approximately 560 billion invoices processed annually (today – this figure continually increases), only about 16% are truly paperless. There are enormous amounts of paper invoices that need to be converted to digital formats. Global tax authorities are hard at work on that conversion effort, although other forces are also at play.

The European Union’s [EU] massive VAT in the Digital Age (ViDA) reform includes e-invoicing requirements as one of its three pillars.  This overhaul, aimed at achieving eventual uniformity among EU Member States' e-invoicing compliance requirements, is unfolding even as most countries implement their own e-invoicing rules – each with distinct data formatting and reporting requirements. The European Commission maintains a site containing highlights of each country’s evolving e-invoicing rules.

It is important to note that there is a difference between e-invoicing and e-reporting, which is also referred to as real-time reporting and near real-time reporting. Many, though not all, country-specific rules link e-invoicing requirements to e-reporting requirements.

Notably, these compliance requirements originated in Latin America, where clearance systems with e-reporting allow tax authorities to approve invoices through a centralized platform before they reach the customer. The EU and Asia, with different models compared to LATAM, have recently followed suit with its e-invoicing and e-reporting mandates. There is no e-invoicing framework in place in the U.S., and that seems unlikely to change any time soon.

Regarding e-invoicing compliance, larger enterprises have notched more progress in developing this capability compared to smaller and mid-sized global companies. This is not surprising given that satisfying e-invoicing requirements requires a comprehensive compliance capability with numerous organizational areas (tax, finance and accounting, IT, procurement, legal, etc.) collaborating and aligning. Many, if not most, companies need to implement new supporting automation.

Tax groups, of course, play a central role in the development of an e-invoicing compliance capability. Rules and rates changes occur within the global tax environment every year, and these changes must be accurately reflected on e-invoices.

In my next post, I’ll highlight leading practices and crucial considerations for evaluating and implementing e-invoicing solutions.