EU directive stresses urgency of tax digitisation
On December 8, 2022, the European Commission unveiled a new regulatory framework that sets out plans for the international adoption of “e-invoicing” - the widespread digitisation of the invoicing process.
Largely inline with our predictions, the new legislation includes:
- a new pan-EU Digital Reporting Requirement for intra-EU B2B cross-border transactions and,
- mandatory e-invoicing for B2B intra-EU supplies.
The draft Directive also looks to remove many of the current barriers holding both European countries and individual businesses from adopting e-invoicing - including removing the requirement for the customer to consent to receive an e-invoice and for a Government to request permission from the Commission to mandate e-invoicing. In addition, there will be further harmonisation and interoperability through the use and promotion of the European E-Invoicing standard.
In November 2022, we polled 600 decision makers and finance professionals within businesses in the UK, Republic of Ireland, Germany and France that have cross-border operations in at least one EU market to find out about their approach.
While these changes are welcome by the majority (85%) business leaders have signalled concern over how they will financially manage the switch given the current economic landscape. 91% are withholding investment in digital compliance tools due to the economic downturn.
Full details of the legislation will be ratified in the coming months, so we will learn more in time, but given the recent announcement, there is now a growing sense of urgency for businesses to get ready for long-term compliance obligations for strategic advantage - or risk of missing the transition window entirely.
There is no doubt of the importance of this announcement from the European Commission.
This shift will be a fundamental technological overhaul of the way we trade and do business and is set to bring many benefits for governments and organisations alike - from digitising processes, allowing access to real-time data, and plugging the VAT gap by reducing fraud.
But, with investment on hold due to the economic downturn, there is a risk firms will not effectively capitalise on the early mover advantage and will instead opt for a “sticking plaster” approach to solutions rather than making the right strategic investments long-term.
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