We operate in a global economy. Businesses, their subsidiaries, and their suppliers often work across borders, buying and selling goods and services around the world. Each country, however, has its own fiscal rules and tax regulations that business entities must adhere to when invoicing, and not obeying those mandates can result in fines and penalties.
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As we move into an increasingly digital marketplace, many governments are requiring electronic invoicing as a solution to complying with federally mandated tax regulations. Electronic invoicing, or eInvoicing, provides consistency and control to the invoice process and provides governments with transparent access to invoice data.
A majority of the countries currently pushing for eInvoicing requirements are located in Latin America and the European Union. In fact, many are enacting schedules and deadlines by when companies will be mandated to adhere to their eInvoicing policy. Although it is unclear when those deadlines will actually be enforced, it is expected that eInvoicing will be legally required in most Latin American and EU countries. According to Sharespace, surveys show that 50% of companies in Italy (which is launching its eInvoicing project on January 1, 2019) said government-compliant eInvoicing still isn’t even in scope for their workflow, and another 36% said that while they are aware of the deadline, they will miss it.
The bottom line is that eInvoicing mandates are coming, despite some uncertainty on when and where. It’s better to be prepared than to risk penalties from non-compliance. We’ve put together the following primer to help your organization through the process.
What is eInvoicing?
Just as it sounds, eInvoices are electronic versions of bills for goods and services. Many businesses already issue eInvoices as standard practice, but what is required in each eInvoice varies by country. By most government standards, an invoice that is produced, sent, and received digitally is not automatically considered an eInvoice. It must meet certain requirements and contain specific legal and fiscal data to be valid. Some of these specifications include:
- Which type of businesses are required to participate: In some countries, like Mexico, 100% of issuers must participate. In other countries, like France, only suppliers to public administration entities are mandated to participate in eInvoicing. Some countries also have rules based on company revenue.
- File types: Most governments require that invoices are submitted in a specific file format for consistency and standardization. XML appears to be the most widely used format, but raw XML files are mostly code-based and can be hard to interpret. While governments may insist on this file type, it’s important to also keep electronic files of invoices in formats that can be read and interpreted easily, like PDFs. Even though it may not be required to issue or keep both file types, these versions will be useful for any future audits.
- Control codes and electronic signatures: Control codes are intended to reduce tax evasion. Electronic signatures may be required to ensure document authenticity. In countries where these items are mandated, they are issued by the country’s taxing authority before the invoice is submitted to the company responsible for payment.
How Does eInvoicing Work?
The eInvoicing process varies by country. In general, however, the process may work something like this:
How Can DataServ Help?
If your organization has international suppliers or subsidiaries that are required to participate in eInvoicing, the DataServ Single Stream Digital Mailroom can help keep you compliant – no matter what file type is required. Our Digital Mailroom can ingest all electronic document types into a single stream with your other paper and digital invoices. Our workflow offers controls and compliance for all countries meaning you don’t need individual solutions for each country’s different eInvoicing mandates.
As mentioned previously, it’s advisable to also produce and store invoices in an electronic format that is easily readable (like PDFs) because XML files can be difficult (or sometimes impossible) to interpret. If your supplier doesn’t provide this to your organization, DataServ can. We can take any file type, including EDI and markup language files like XML, and use it to generate standard, readable electronic invoices to keep on file in the event of an audit or internal request. These files can be linked to the government-mandated file type in DataServ, so both files are easy to find and access. Additionally, all government-issued certification or control numbers are indexed and searchable.