ViDA spotlight – What is buyer’s consent for e-invoicing?

Ahead of the European Commission’s long awaited big reveal of its recommendations for the future of e-invoicing and digital reporting in its draft “VAT in the Digital Age” (ViDA) Directive that will be released on December 7, 2022, we are setting out some key European e-invoicing concepts and background on the current EU rules which are likely to be impacted by the proposed reforms.

Customer must agree to receive an e-invoice

Under Article 232 of the European Principal VAT Directive, “The use of an electronic invoice shall be subject to acceptance by the recipient” – this means that the supplier can’t unilaterally force e-invoicing upon its customer (the buyer) without their agreement. The reasoning behind this is that paper invoices and e-invoices currently have equal status for VAT purposes. 

Crucially, the customer shouldn’t have the additional burden of being forced to meet the technical system requirements needed to receive an e-invoice, as well as: 

  • The ability to ensure the authenticity (i.e. validating the digital signature of the supplier), 
  • The integrity of the invoice contents (i.e. ensuring the invoice contents is securely archived and not modified), and 
  • The legibility (being able to turn a machine readable format such as XML into a document that can be viewed by a human) of an e-invoice sent by its supplier.

Forms of acceptance

The acceptance by the recipient may include written acceptance, whether formal or not. Currently e-invoicing service providers often provide a template to users to document their customer’s acceptance to add to contracts or procurement workflows, or within the terms and conditions that vendors and customers sign up to under the original legacy two-corner e-invoicing models and Accounts Payable platforms and procurement systems (e.g. Ariba). However, acceptance to receive e-invoices by the buyer can also be tacit e.g. by the buyer simply processing or paying the invoice.

However, a key component of this “buyer consent” rule is that the decision to use e-invoices remains ultimately a matter for the agreement between the two trading parties. This is why a European member state tax authority is unable to simply mandate general B2B e-invoicing without first seeking permission from the European Commission in the form of a derogation. An example of this is the recent derogation Poland has received to enable it to mandate B2B e-invoicing using its KSeF national e-invoicing platform from January 2024.

Likely changes under “VAT in the Digital Age” e-invoicing reform

It is anticipated that this “buyer consent” requirement will be removed from the VAT Directive, allowing European businesses to freely adopt e-invoicing and choose to issue e-invoices to its customers, even where there is no formal e-invoicing mandate in the country. It is possible that there may be additional caveats related to this change, possibly around the standards and format of acceptable e-invoices (e.g. the European e-invoicing standard), or for example ways of ensuring the legibility of the e-invoice (e.g. hybrid PDFs like FacturX).

In addition, it is likely that EU member states will be allowed to introduce mandatory e-invoicing without a formal derogation, with a proposal that no prior permission will be required (possibly replaced by a simple notification to the Commission).

The proposed changes will likely remove many of the barriers faced by both individual European countries and by businesses in relation to adopting e-invoicing. These proposed changes will also ensure that e-invoicing remains the clear direction of travel for tax authorities in Europe, but at the same time trying to remove the current fragmentation in the e-invoicing and digital reporting “wild west,” by moving to harmonised digital reporting, increased interoperability and allowing a more scalable and strategic approach to meeting these requirements by using the European e-invoicing standard.

Read: The EU’s VAT in the Digital Age Directive- Ten things to look out for  for further anticipated e-invoicing and digital reporting changes under ViDA. Avalara will also be hosting a live webinar on ViDA, providing an initial overview, commentary, and insights on the proposed changes when the eagerly anticipated draft Directive is finally released. Get in touch now and speak to one of our VAT and e-invoicing experts to see how Avalara can assist with e-invoicing and digital reporting in over 60 countries.

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