VAT proposal: e-invoicing not equal to paper invoicing

The new VAT is disappointing. At the least. This new VAT Proposal will not boost e-invoicing as planned and hoped for. It is inconsistent.
.
Most of all it seems that e-invoicing will not be regarded as equal to paper invoicing. And it also leaves room for differentiated implementation across Member States. An analysis.
.
.

Credits
The EEI Platform would like to give the credits to Pieter Breyne, as he mentioned this publication on at Twitter (http://twitter.com/PieterBreyne) at http://bit.ly/6ztEku.

VAT Proposal and e-invoicing
It becomes clear that this VAT Directive proposal is a compromise, including related tot e-invoicing. For your convenience, we’ve copied and highlighted the main aspects on e-invoicing in this VAT proposal underneath.

1. General remarks – page 1, 2 and 4
Page 1 clearly mentions the compromise in the VAT Directive:

”In the compromise text the Presidency has, like the Commission, tried to balance the interest of control on the one hand, and the wish to reduce the administrative burden for taxable persons on the other hand. The Presidency has also tried to strike a compromise for the rules regarding electronic invoicing. The Presidency remains convinced that electronic invoicing is the future way to handle invoicing throughout the European Union. In combining new common rules for control with technology neutral rules which provide a safeguard of the content of the electronic invoice, the

Presidency hopes for a solid compromise in the Tax Questions Group.”

On page 2 and 4 respectively however, we hear quite a different sound altogether:

”(1)     [..] certain difficulties with regard to electronic invoicing [..] should be simplified with a view to improving the functioning of the internal market.”

“(11) [..] A technologically neutral approach can only be achieved by ensuring that no distinction is made between paper and electronic invoices on the basis of content, issue or storage.”

Tragically, our hope for an innovative and modern legal e-invoicing framework is diminished  when reading the rest of the relevant phrases.

2. Acceptance of e-invoicing by receiver – page 19
This text implicates that the acceptance by the recipient plays a pivotal role in the mass adoption of e-invoicing. No standard can balance this out. If, that is: if this proposal were to be the final version of the new VAT Directive. Moreover, this clearly does not equal e-invoicing to paper invoicing:

“(23a) In the title of Section 5 of Chapter 3 of Title XI, the words “Sending invoices by electronic means” are replaced by “Electronic invoicing”

(24) Article 232 and 233 are replaced by the following:

“Article 232″

The use of electronic invoicing Invoices sent by electronic means must be subject to acceptance by the recipient. Invoices issued pursuant to Section 2 may be sent on paper or

they may be sent or made available by electronic means.”

3. Acceptance of e-invoicing by Member States – page 20
Article 233 of the new VAT Directive Proposal is a real conundrum. First of al the requirement of “Authenticity of origin” has been swap with ‘legibility’. In stead of a definition on ‘legibility’ the article defines ‘integrity’:

“Article 233”

1. Electronic invoices sent or made available by electronic means shall be accepted by Member States provided that the issuer and the receiver of the invoice can, in their internal business control processes the system that they use, can guarantee the authenticity of the origin and the integrity of their content and their legibility in all stages of the process. “The integrity of the content” shall mean that the content required according to this Directive Articles 226, 226a and 226b can not be altered.“

4. How to guarantee integrity of the content? -  page 20
Article 233 sub 1 is most disappointing. It explains how integrity of content can be guaranteed. What were they thinking when writing this down? A slip of the pen, weren’t they paying attention at this point, or did they just forget what they wrote down earlier with regard to technological neutrality? Why, because they mention only two examples, both technologically biased:

2. The issuer and the receiver may guarantee the integrity of the content of the electronic invoice in for example the following ways:

a) by means of an advanced electronic signature within the meaning of point (2) of Article 2 of Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures, based or not on a qualified certificate and created by a secure signature creation device, within the meaning of points (6) and (10) of Article 2 of Directive 1999/93/EC.

b) by means of electronic data interchange (EDI), as defined in Article 2 of Commission Recommendation 1994/820/EC of 19 October 1994 relating to the legal aspects of electronic data interchange, if the agreement relating to the exchange provides for the use of procedures guaranteeing the authenticity of the origin and integrity of the data.

I have a mere glimpse of hope because of this phrase “in for example the following ways”. Maybe this phrase can be interpreted in such a way that the two examples mentioned are part of an enumerative list. Maybe that is the compromise behind the compromise. We’ll probably never know.

Apart from that. What about ‘legibility’ what does it mean and how can we guarantee ‘legibility’? And why is ‘authenticity of the origin’ still mentioned in the EDI example?!

5. Yet another definition of e-invoicing – page 20
It seems that every new document contains yet another definition of e-invoicing. And this VAT Proposal is no exception:

3. “Electronic invoicing” shall mean invoicing which is not made in paper format. The following shall not be regarded as ‘electronic invoicing’:

a) paper invoice sent via fax machines;

b) scanned paper invoice sent via electronic mail where the content cannot automatically be processed into the accounts of the recipient.”

6. Storage of invoices – page 24
Storage period of (e-)invoices is not harmonised.

(31) In Article 246 is replaced by the following, the second paragraph is deleted.

“Article 246”

The integrity of the content of the invoices stored, as well as their legibility, must be guaranteed throughout the storage period.”

(32) Article 247 is replaced by the following:

“Article 247

1. Each Member State shall determine a period for storage of invoices issued or received

which is not shorter than five years and not longer than ten years.

SlideShare
We’ve uploaded the new VAT proposal to SlideShare, and embedded below (or download it at http://bit.ly/6ztEku)