Value-added taxes: Current requirements for the implementation of electronic invoices
As already pointed out, by the end of 2012, local governments will have to change the law to treat electronic and paper invoices equal (council directive 2010/45/EU). Nevertheless, until then several rules have to be considered when setting up an electronic invoicing system. This article will look at the current requirements for setting up electronic invoicing systems.
From a value-added tax point of view, three major areas have to be considered:
- Content of the invoice (as for paper invoices): According to article 11 value-added tax law, invoices do need to have certain elements (name and address of the sender and receiver, the day of delivery, etc.).
- Way of transmission: Electronic invoices can be submitted only if the receiver agrees to electronic submission and the authenticity of origin and the integrity of the content are guaranteed.
- Archiving of invoices: Not only the receiver, but also the sender have to archive the invoice for at least seven years.
In this article, I will focus on the way of transmission and archiving of invoices:
Way of transmission
As already pointed out, two things need to be guaranteed—the authenticity of the origin and the integrity of the content.
The authenticity of the origin is the guarantee that the company, which provided the services, is the origin of the invoices (third parties may submit the invoices only on behalf of the provider of the invoiced services).
The integrity of the content is the guarantee that the content of the invoices has not been changed during the submission.
In practice—as stated by the Austrian tax authorities—two methods are allowed: an advanced signature and an EDI submission. In case an electronic invoice is submitted in an EDI format, a summary invoice with an advanced signature also needs be submitted.
In both cases, the architecture and the process of creation and transmission of electronic invoices need to be documented (documentation from the software company) and verifiable by the tax authorities. In practice, the sender and receiver have to build up certain business controls and documentation of the creation, receiving and archiving process.
Furthermore, the receiver of the invoices has to prove the validity of the signature, and it also needs to be documented.
Archiving of invoices
As with paper invoices, electronic invoices also need to be archived and the authenticity of the origin and the integrity of the content need to be guaranteed for the whole period for both parties. In detail, the electronic invoice, the signature, the validation protocol need to be archived on a medium that guarantees that no changes have affected the documents.
In practice, organizations can get help for the implementation of electronic invoices from different stakeholders (like the Austrian Chamber of Commerce).
My colleges and I help organizations to build up the required business controls for electronic invoices up-front. Furthermore, a certification process has been developed, where organizations can check the implementation of their electronic invoicing processes.
Please add your experiences and questions regarding electronic invoices as a comment.