Taxation, customs union and anti-fraud

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VAT Invoicing directive

Summary
Evaluation
Commission Proposal
Legal Act
Implementation

Overall State of Play:

Evaluation finalised: SWD(2020) 29, 10.02.2020; COM (2020) 47

Summary:

The Directive (Council Directive 2010/45/EU –Second Invoicing Directive; SID) provided the acceptance by tax authorities of electronic invoices under the same conditions as applied to paper invoices. It created a set of harmonised rules by reducing the options previously allowed for Member States and thus enabled companies to reduce the cost of issuing and processing invoices by switching to a fully electronic invoicing system. The initiative suppressed additional requirements on invoices and enabling wider use of electronic invoicing. The aim of the Commission proposal (COM (2009)21) was to increase the use of electronic invoicing, reduce burdens on business, support small and medium sized enterprises (SMEs) and help Member States to tackle fraud. The proposal aimed to simplify, modernise and harmonise the VAT invoicing rules. In particular, it aimed to eliminate the barriers to e-invoicing in the VAT Directive by treating paper and electronic invoices equally. Member States have transposed the Directive into national law between 2011 and 2013. Only one Member State had implemented as late as 2014.

The main elements of the Commission proposal, i.e. equal footing of the paper and electronic invoices, no technical restriction on issuance of e-invoices and no legal obstacles to the transmission and storage of e-invoices were achieved. However, the Council could not agree on further simplification as proposed by Commission and Parliament, such as the simplification of the content of invoices, their storage, as well as self-billing and outsourcing). Council also decreased the ceiling for use of simplified invoices to EUR 100. The proposed standardised date for chargeability to tax and invoicing date was also not accepted in full.

An evaluation of the Directive was finalised in 2020. The evaluation resulted in a largely positive assessment of the Directive.

Estimated savings and benefits

The initially estimated savings were up to EUR 18 billion assuming that two conditions were fulfilled: (i) all companies needed to switch to e-invoicing; and (ii) only automatically processable e-invoices had to be used. The benefits of the original Commission proposal were likely to be reduced.

The savings for the years 2014-2017 elevated to EUR 1.04 billion, of which EUR 920 million due to the uptake of unstructured e-invoices. This is due to the fact that the Directive did not differentiate between the two e-invoice formats and enforced the technology-neutrality principle. Thus it did not directly stimulate the use of automatically processable invoices and did not lead to an increase in the uptake of structured e-invoices.

A study conducted in the framework of the evaluation showed that the assumptions made were indeed not fulfilled. By not differentiating between the two e-invoice formats and enforcing the technology-neutrality principle, the Directive did not directly stimulate the use of automatically processable invoices and did not lead to an increase in the uptake of structured e-invoices. Thus the actual savings for the period 2014-2017 were limited to EUR 1,04 billion.

According to the study supporting the evaluation, the rules on the issuance and content of simplified invoices are considered to ‘work well’ or ‘very well’ by the majority of interviewed stakeholders.

REFIT Platform

The REFIT Platform opinion XVIII.17.a on simplified invoices raised the issue of the limit of the simplified invoices as set by the VAT Directive and the VAT invoicing Directive to a maximum of EUR 400 and a minimum of EUR 100. The REFIT Platform stakeholder group was in favour of increasing the threshold up to EUR 1000 as this would decrease administrative burden and benefit to consumers while a majority of the members of the government group are in favour of keeping such a threshold, mainly for considerations related to fraud.

State of Play

Evaluation finalised: SWD(2020) 29, 10.02.2020; COM (2020) 47

Scope:

Evaluation of Directive 2010/45/EU on the common system of value added tax as regards the rules on invoicing.

Evaluation findings:

The evaluation resulted in a largely positive assessment of the Directive (Second Invoicing Directive –SID). The Directive contributed to the simplification and harmonization of invoicing and e-invoicing rules across the EU. The Directive had an overall positive contribution to its general policy objectives, namely i) the reduction of the administrative burdens on businesses, ii) the reduction of VAT frauds, iii) the proper functioning of the Internal Market and iv) SMEs promotion.

In particular, the SID has contributed to foster the (unstructured) e-invoicing uptake, to reduce the administrative burdens on businesses, to increase legal certainty for economic operators, and more generally to support the proper functioning of the Internal Market. As a main impact, the SID contributed positively to the burden reduction objective and has produced administrative burden savings of almost EUR 1 billion in the 2014-17 period.

The major benefits generated by the simplification of the e-invoicing rules are estimated to have occurred because of the e-invoicing rules being enacted at EU level. The higher uptake of e-invoicing attributed to the Directive is the main driver of the reduction in administrative burdens. The issuance of a higher number of unstructured e-invoices is estimated to have generated about EUR 920 million of cost savings over the 2015-2017 period. At the same time, the unstructured format allows achieving only a (minor) part of the potential savings from e-invoicing, thanks to a quicker issuance process, in particular for data handling and the elimination of paper and postage costs. Only automatically processable structured e-invoices allow for a full (or quasi-full) automation of the invoicing process.

Estimated savings and benefits

State of Play:

Adopted: COM(2009)21, adopted by the Commission on 28/01/2009

Which objective(s) did the Commission pursue?

The initiative suppressed additional requirements on invoices and enabling wider use of electronic invoicing.

The aim of the proposal was to increase the use of electronic invoicing, reduce burdens on business, support small and medium sized enterprises (SMEs) and help Member States to tackle fraud. The proposal simplifies, modernises and harmonises the VAT invoicing rules. In particular, it eliminates the current barriers to e-invoicing in the VAT Directive by treating paper and electronic invoices equally.

Estimated savings and benefits

Estimated savings EUR18 billion. Actual savings (2014-2017) EUR 1 billion since all EU companies did not switch to e-invoicing; and did not use only automatically-processable e-invoices.

State of Play:

Adopted 13 July 2010, Council Directive 2010/45/EU

Outcome of Legislative Procedure

The main elements of the proposal, i.e. equal footing of the paper and electronic invoices, no technical restriction on issuance of e-invoices and no legal obstacles to the transmission and storage of e-invoices were achieved.

Council could not agree on further simplification as proposed by Commission and Parliament, such as the simplification of the content of invoices, their storage, as well as self-billing and outsourcing). Council also decreased the ceiling for use of simplified invoices to EUR 100. The proposed standardised date for chargeability to tax and invoicing date was also not accepted in full.

Estimated savings and benefits

The benefits of the original Commission proposal are likely to be reduced. The savings for the years 2014-2017 elevated to EUR 1.04 billion, of which EUR 920 million due to the uptake of unstructured e-invoices.

State of Play:

• Application on Date of effect: 01/01/2013; Application See Art 2
• Date of transposition: 31/12/2012
• Evaluation ongoing

Implementation reported by Member States

The Directive provides several provisions for Member States to enable electronic invoicing. Member States have transposed the Directive into national law between 2011 and 2013. Only one Member State had implemented as late as 2014.