The days of paper invoices in Europe may be numbered. Proposed changes to European invoicing requirements could improve electronic invoice adoption while making it easier for U.S. companies to reclaim value-added tax payments.
A press release issued by the European Union announced that the Council of Economic Affairs has decided to simplify VAT invoice requirements, specifically with the goal to promote the adoption of e-invoicing.
Existing rules for VAT invoices vary from country to country. As a result, it’s been difficult for European companies to embrace electronic invoicing. In fact, some countries used to require businesses that send e-invoices to also send original paper invoices as well. If you are still receiving paper, it defeats much of the purpose of going electronic.
If the proposed rules are adopted, there will be uniformity. Key provisions of the proposed changes (as noted in a news report posted by Balkans.com Business News) include:
- harmonizing the rules for electronic invoice storage for all member states
- requiring VAT authorities to view paper and electronic invoices equally
Regulatory compliance efforts have long hindered European e-invoice adoption. By replacing the existing patchwork of invoicing requirements with a single set of rules, the European Commission estimates that e-invoicing could help European businesses save Euro 18 billion.
Simplifying VAT invoices could also impact U.S. companies that reclaim VAT payments made in Europe. The single most difficult requirement for U.S. organizations to follow is keeping and storing original invoices. American businesses are used to receiving paper, scanning it into their accounting systems, and destroying the original. Meanwhile, VAT authorities require original invoices in order to process VAT reclaims.
By encouraging more firms to issue invoices electronically, and allowing electronic invoices to be considered original, then U.S. companies that buy from European vendors could opt to receive e-invoices and still be able to reclaim VAT.
In addition to simplifying rules for electronic VAT invoices, the Council also wants to improve VAT fraud control. Measures include tightening rules on deductions and establishing deadlines for issuing invoices, which would guarantee a speedier exchange of information.
These rules will be applied once they are reviewed and approved by the European Parliament. For the full story, see the EU press release.
While Europe is already ahead of the U.S. in terms of B2B electronic payments, this move could also put them ahead in terms of e-invoicing.