ADDITIONAL explanations on the new EU e-invoicing directive

Sometimes the preliminary notes on a new European directive aren’t enough. That is why they invented explanatory notes. And occasionally these regular explanatory notes aren’t satisfactory too. For instance because practitioners experience questions while implementing new legislation. Or to convince a few other market practitioners And that is exactly what happened with the new EU E-invoicing directive.

One of our readers forwarded us some answers from the European Commission to additional questions from EESPA on the new E-invoicing directive. We asked both the EESPA representative (Markus Hautala, TIETO) and the DG Taxud representative permission to publish the questions and answer. And luckily they did.

3 questions on the EU E-invoicing directive

These are the three questions and answers we believe that you should know of (the question is in italic. The answer is in regular):


The concept of the original invoice

Does the new VAT directive acknowledge the concept of the original invoice?
In the sense that both the supplier and buyer need to store the e-invoice in identical format for TAX auditing purposes? The format in this context refers to both data content as well as syntax (for example ISO20022 XML).

I. The concept of an original invoice is not mentioned in the VAT Directive. What the Directive says now and from 2013under the new rules, is that Member States may require that the original form of the invoice be stored.

II. In the Explanatory Notes on Invoicing the DG Taxud has taken ‘”form” to mean: either paper or electronic. So, a Member State can require that an electronic invoice is stored in electronic form but it can’t insist that the format is unchanged.

III. However, the VAT content must remain the same. By way of example:
- not acceptable is: a situation where for instance the date of supply changes,
- it is acceptable: that the format of the date changes


Integrity only over mandatory e-invoice data elements

Is it correct to assume that corporations only need to guarantee the integrity of the e-invoice data elements mandated by the directive (approximately 15 data elements), but that the integrity requirement does not extend to any other data elements nor e-invoice syntax?

That is correct. The integrity of content only applies to the mentions on the invoice required for VAT purposes.


Deviate from or interfere with the VAT directive

Assuming that the concept of original invoice - as defined above - doesn’t exist, can national legislation in any member state deviate from the principle introduced by the VAT directive?

I. Member States can always introduce legislation on invoicing outside of the VAT Directive. So for instance, in the UK documents issued by limited companies, including invoices, sent to third parties must mention the company registration number.

However, Member States cannot interfere in the VAT rules and so for instance deny a right to deduct VAT if the invoice received by the customer does not mention the company registration number of the supplier.

See also: Highlights of the Explanatory Notes on the EU E-invoicing Directive

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  1. It is fascinating to see how some concepts raised in the TAXUD guidance document have created a snowballing email thread among various market players. I guess some of us underestimated just how confused or misled many people have been (and judging from comments I have seen, continue to be) in relation to e-invoicing VAT compliance.

    Take the TAXUD statement that (if you pardon my paraphrasing)the form of an invoice is legally unrelated to a company’s ability to prove invoice integrity and authenticity. This seems to upset some people while others present it like a revolution.

    The phrase “substance over form” has been used to summarize the changes introduced with Directive 2010/45. It is a great injustice to penalize a company which has perfect evidence of its invoices merely because this evidence is not in a predefined imposed form. This injustice was legally possible under the previous VAT Directive rules, and the market should applaud its removal.

    This positive change however has nothing to do with the form in which invoices are received or archived. The form of an invoice and the form of evidence of integrity and authenticity of an invoice are two entirely unrelated issues - that, in my reading at least, is one of the key reasons for the TAXUD clarification.

    The pre-2010/45 situation was never characterized in any significant way by Member States’ insistence on symmetry of form for invoices stored by trading partners. There are some countries were form symmetry has been or continues to be a written rule (in France, for example, the tax administration’s guidance notes on the 2001 Directive transposition required form symmetry for e-invoices under the EDI option) - but thios has not been an overwhelming majority. So why this cheering or depression over a minor and really quite logical explanation from TAXUD?

    To be VAT compliant, each trading partner must store:
    (1) an invoice -and there can only be one invoice, which is why the market has often used the term “original” invoice to distinguish it from other invoice-like data that parties may exchange or process; however this term has fallen into disrepute because it has become frequently misused to imply symmetry of form- that is or can be made legible and
    (2) evidence of its integrity and authenticity.

    Under the 2001 rules, the form of (2) could be restriced by Member States. (1) has always been defined by its content. Under the 2010 rules, now also (2) can take any form. (2) is determined by its adequacy -read: is it sufficient to convince a tax auditor?- and in some cases (Art 233.2) by law.

    (1) and (2) are legally completely separate notions, however the form of (1) may be affected by or play a role in the strength of (2) — it should not come as a surprise that if a taxable person can prove that the form of an invoice is identical to the form in which it was issued, this can contribute to evidence that also the semantic content has not changed. Conversely, if you store e.g. an EDI message that has been converted seven times before you formally received it from your supplier, this means (at least under the EDI compliance option) that you must maintain evidence of these conversions all being sufficiently controlled in order to convince a tax auditor that the content of the invoice has not changed. If you have and maintain this evidence there should be absolutely no problem - but naturally, maintaining audit trails of seven historical conversions requires quite a bit more control and thus introduces risk compared to maintaining no such audit trails at all.

    The key point here is, however, that legally under the new Directive you’re free to make your own choices as long as you have (1) and (2).

    This is not the place to go into the differences as regards the role of form in the different compliance approaches, however hopefully the above shows why I believe the noise about freedom of invoice form to be unjustified.

  2. Hello Christiaan,

    Thank you for your elaborate comment.

    The E-invoicing Team