Draft Good Practice Guidelines: how to comply with e-invoicing regulations?

Late June 2008 the CEN/ISSS eInvoice Phase II Workshop unveiled the Draft Good Practice Guidelines. The objective of this document is to reduce some of the principal areas of uncertainty and resulting inefficiencies on the e-invoicing market with one single set of good practice. These guidelines should be applicable to both businesses and tax administrations across Europe.

CEN and eInvoicing
CEN is acronym for: COMITÉ EUROPÉEN DE NORMALISATION and has a focus on standardisation aspects. CEN carries out numerous standardisation efforts, one of which is the CEN/ISSS initiative. CEN/ISSS is the name given to CEN’s ICT (Information and Communication Technologies) sector activities. It provides market players with a comprehensive and integrated range of standardisation services and products, in order to contribute to the success of the Information Society in Europe. CEN/ISSS works through CEN Focus Groups, Technical Committees and Workshops.

The CEN/ISSS eInvoicing Phase II Workshop
The CEN/ISSS Workshop Phase II has assumed the overall responsibility, as far as CEN is concerned, for the standards aspects of the European Commission’s expert group on electronic invoicing, complementing and linking with the relevant Commission groups, and ensuring the relevant global standards activities are correctly informed and primed.  In this activity, it aims to ensure collaboration with other CEN/ISSS groups, including WS/ePPE and WS/eBES, with UN/CEFACT (TBGs1 and 5), ISO TC 68 and ETSI/TC ESI.

The eInvoicing Phase II Workshop objectives
The objective of this particular Workshop is to help to fill gaps in standardization for the use of electronic invoice processes, to identify the various practices in member states, to integrate the emerging technical and practical solutions into effective good practices, and to define and disseminate these good practices for e-invoices in close coordination and cooperation with private industry, solution providers and public administrations.
 
Five initial projects
Five initial Task Groups (TG’s) have been established with a focus on:

-          Enhanced adoption of electronic invoicing in business processes in Europe;

-          Compliance of electronic invoice implementations with Council Directive 2001/115/EC and Directive on the Common
   System of Value Added Tax (2006/112/EC) as well as Member States’ national legislation as regards electronic
   invoicing

-          Cost-effective authentication and integrity of electronic invoices regardless of formats and technologies

-          Effective implementation of compliant electronic invoice systems in using emerging technologies and business
   processes and

-          Emerging network infrastructure of invoice operators throughout Europe.

TG2 and TG3: The Draft Good Practice Guidelines

TG 2 (compliance of electronic invoice implementations) and TG 3 (cost effective authentication and integrity) decided to cooperate and created the Draft Good Practice Guidelines. The Draft Good Practice Guidelines identify two major obstacles when it comes to the regulatory aspects of e-invoicing adoption.

First, “businesses that implement electronic invoicing are often faced with thousands of technical and process implementation options along the way. In the absence of implementation-relevant rules emanating from tax administrations or standards bodies, the uncertainty surrounding these many choices creates a significant barrier to investment in electronic invoicing. As a result, for those vendors and users that choose to invest nevertheless, it is hard to make any value judgment as to how “compliant” their services and solutions are. Corporate e-invoicing users, Service Providers and solution vendors that are taking steps to develop and maintain VAT-compliant services naturally have a desire to have to a concrete yardstick against which to measure and with which to demonstrate their compliance.”

Second, nowadays “most tax administrations do not provide accreditation services or self-assessment programmes to assist e-invoicing users or their Service Providers to ascertain that e-invoicing systems are VAT-compliant. Tax administrations’ audit methodologies and tools are often developed based on the experiences of law enforcement and not widely propagated to businesses as compliance checklists.”

How it works

As stated above, the Draft Good Practice Guidelines seek to reduce some of the principal areas of uncertainty and resulting inefficiencies on the e-invoicing market with one single set of good practice Guidelines for both businesses and tax administrations.

It consists of two documents: one word document and one Excel sheet.

The Word document provides context to the Excel document and tries to explain how one should use the Excel. The Excel sheet identifies the main issues in question at each processing step during the life cycle of an electronic invoice for different invoicing methods (direct invoicing from Supplier to Buyer as well as Self-Billing) and provides detailed process guidance for a variety of implementation options including web publication, the use of various integrity and authenticity-enhancing methods and the retention of electronic invoices.

The Excel sheet takes into account:

-          who directs the e-invoicing process

-          whether an intermediate party is involved

-          the possibility of a self billing variant

-          the method being used to guarantee authenticity and integrity: EDI, digital signatures, other instruments

-          the predefined (business) process steps necessary to perform e-invoicing

Based on your choices in these variables, the Excel sheet should be able to present you:

-          the inherent tax risks that your organisation poses when initiating e-invoicing based on the choices made.

-          the tax requirements necessary or even obligatory needed to address the risks

-          the controls or solutions that should be in place to ensure the risks are avoided

Concluding remarks
The Draft Good Practice Guidelines are very promising, as they are intended to rule out uncertainty on e-invoicing form a legal/VAT/compliance perspective.But there are some downsides to this version of the Draft Good Practice Guidelines.

Hence the only two percepted barriers to full scale adoption of e-invoicing: standardisation and awareness, would remain.

First of all the Excel sheet does not, or at least not very easily, provide the results needed for an organisation get a sense of safety. It might be a good idea to create a database version that is much more accessible.

Second, this Draft Good Practice Guideline is still a concept. Or as the Word document states: “These Guidelines and Commentary are a work in progress and out for review. While every effort has been made to ensure consistency with legal requirements that apply to e-invoicing in the European Union, no guarantees of legal compliance or fitness for purpose are made by the drafters or CEN; any use of these documents is at the user’s own risk”.

Download the Draft Good Practice Guidelines (Word)
Download the Draft Good Practice Guidelines (Excel)