The European market is only just maturing for the widespread use of electronic invoicing, according to a report prepared by Unifiedpost Group. In Italy, which is the only one of the thirteen countries included in the analysis to make e-invoicing alone mandatory, more than 2 billion such documents were issued between January 2019 and April 2020. The remaining European countries are at different stages of implementing the new solutions. In some of them, e-invoices are still issued only in transactions with the public sector.
According to European regulations(Directive 2014/55/EU), an electronic invoice is a document generated, sent and received in digital form, structured to allow its automatic processing. In order not to confuse them with the "ordinary" e-invoices operating in Poland so far, they are referred to as structured invoices. And it is the use of the latter that the report "The digital invoicing wave in Europe", prepared in Belgium by our specialists, deals with. It describes the legal state of affairs, effective in 2020, in thirteen major European markets - Belgium, Denmark, Estonia, Finland, France, Germany, the Netherlands, Lithuania, Luxembourg, Latvia, Sweden, the United Kingdom and the already mentioned Italy.
In the report, we analyzed the scale of the use of e-invoices in contacts between businesses (B2B - Business-to-Business) and business with public administration (B2G - Business-to-Government). We also characterized the main conditions stimulating and barriers to the introduction of new solutions on an EU scale, as well as in individual countries.
First and foremost, the fight against the VAT gap
Until recently, the initiative in introducing electronic invoices remained in the hands of businesses. Today, however, it is the legislative bodies at the EU and national levels that are pushing for the fastest and widest possible implementation of e-invoices, both in B2B and B2G transactions. This is one part of the fight against the loss of budget revenues, in which the value-added tax plays a significant role. Across the European Union, the VAT gap reached no less than €137.5 billion in 2017. Not surprisingly, in order to bring about its reduction, member states are striving to increase control over companies' financial settlements.
EU legislation also has a stimulating effect on individual countries. In addition to the aforementioned Directive on electronic invoicing, an important role is played by the guidelines on communication of authorities, business and citizens within and between member states, which are contained in the European Interoperability Framework (EIF). Another initiative is Peppol - a unified standard for international electronic exchange of documents (including e-invoices) in public procurement conducted by European government institutions. This standard has already been adopted in 31 European countries, as well as Australia, China, Japan, Canada, Mexico, New Zealand, Singapore and the United States.
Italy and Scandinavia in the lead, UK at the gray end
In most of the countries covered by our survey, the number of electronic structured invoices issued is still small or even marginal. The exception, of course, is Italy, where there is already an obligation to account only in this way. A lot, compared to other countries, is in circulation of e-invoices also in the Scandinavian and Baltic countries. In Sweden, for example, more than half of transactions with the public sector are already done through them. In Estonia, 30% of all invoices are electronic, although this is down to 10% in B2B dealings. The UK is the worst in this regard. Some public entities there are implementing the use of e-invoices, but these initiatives are hampered by a lack of regulations at the central level. The whole thing is further complicated by separate national legislation for all components of the UK.
Doing a review of the regulations of the thirteen countries covered in the report, our specialists focused on whether they have made the use of e-invoices mandatory in three cases. The first is the obligation for state entities to accept this type of billing - here there is no differentiation, it has been introduced everywhere. Next, it was checked whether entrepreneurs have to issue electronic invoices to public entities. Such an obligation was not introduced only in Luxembourg, Latvia, the UK and parts of Belgium. The last criterion was the order for companies to settle with each other by means of e-invoices, sent using state portals dedicated for this purpose, possibly sending key elements of the invoices issued to the tax authorities. As already mentioned, such an obligation has been introduced only in Italy.
Positive impact of the pandemic
Although in the short term the shock caused by the COVID-19 pandemic is having a negative impact on the economy as a whole, our experts believe that in the medium and long term positive effects can be expected in the context of the spread of electronic invoicing. Rising debt and limited liquidity will motivate businesses to undertake optimization projects, especially those that automate business processes and improve financial management. In addition, there will be growing pressure from the largest companies, which are already using e-invoicing to a large extent, on their contractors to implement these solutions as well. At the same time, government authorities, seeking to minimize losses due to tax fraud, will accelerate the possibility or obligation to use e-invoices, which will give them greater control over financial flows.
Our report shows that electronic structured invoices are not yet very widely used in the countries described. However, it can be expected that this will change rather quickly, as the advantages are seen by both businesses and the administration, especially the tax authorities.
Download the full report [EN] here: REPORT
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