The Global Landscape of E-invoicing Mandates and Associated Risks
Companies operating internationally must consider cultural and market differences, as more and more countries around the globe are introducing electronic invoicing mandates. While the push for e-invoicing is becoming standard, the specifics of each mandate vary significantly from one country to another.
Keep reading to learn about:
- What countries are introducing e-invoicing and why
- How couldwide are approaching the introduction of e-invoicing mandates
- The types of risks associated with non-compliance
The rise of e-invoicing mandates
The momentum behind e-invoicing regulations can be attributed to several factors. Governments are motivated by the need for unified communication that offers a structured, real-time view of tax information, helping to combat tax fraud. By implementing these mandates, they aim to enhance tax compliance, resulting in increased revenue that can be allocated to public services and infrastructure projects.
For instance, the value added tax (VAT) gap in the European Union was estimated at a staggering €99 billion in 2020. While some residual effects of the COVID-19 pandemic may have temporarily contributed to the reduction, the introduction of digitized tax systems, real-time transaction reporting, and e-invoicing helped lower the VAT gap by €38 billion, bringing it down to €61 billion in 2021.
Invoicing mandates are no longer a matter of "if" but rather "when," with over 65 countries expected to implement these regulations in the business-to-government (B2G) sector and more than 70 in the business-to-business (B2B) sector by 2028.
Countries preparing for e-invoicing
Germany is one of the countries preparing for a phased introduction of e-invoicing mandates, starting in 2025. Interestingly, unlike many other countries, Germany will not establish a centralized government platform for the private sector. Instead, businesses will need to adopt specific formats, with invoices required to comply with standards approved by the European Committee for Standardization (CEN).
The rollout will begin with the obligation for companies to receive CEN-compliant invoices, followed by a mandate for larger companies (with an annual turnover exceeding €800,000) to send them by 2027.
Other countries implementing various e-invoicing mandates include:
- France
- Poland
- Spain
- Belgium
- Croatia
- UAE
E-invoicing implementation approaches
When it comes to the structure of e-invoicing mandates, there's a common pattern emerging globally. Typically, mandates start with the B2G sector, requiring companies that work with government entities to use a standardized format for invoicing. Once the government sector is covered, the mandate gradually extends to the private sector, starting with larger companies and eventually expanding to smaller businesses. Additionally, recent regulations target the B2C sector, requiring businesses to report retail transactions made with individual consumers.
Different countries implement e-invoicing through varied models. One of the most prevalent is the centralized transaction model, where a government-controlled platform manages all invoice exchanges between buyers and sellers. Italy’s SDI platform, introduced in 2019, is an example of this model. While it allows governments greater control over invoicing and tax compliance, it may reduce operational flexibility for businesses dependent on the central platform.
Other countries, such as Mexico and Chile, use the “four-corner” model, which involves multiple parties in the invoicing process, including buyers, sellers, governments, and financial institutions. In Hungary, real-time reporting mandates require companies to transmit invoice data to tax authorities immediately or near real-time, enabling close monitoring and helping to prevent tax evasion.
Finally, PEPPOL is an example of an interoperability model, designed to standardize e-invoicing processes and facilitate cross-border trade. Initially developed to simplify invoicing within the European Union’s public sector, PEPPOL has gained traction beyond Europe, with countries such as Japan, Australia, and New Zealand adopting it for exchanging invoices with public authorities. This model uses PEPPOL Access Points, such as Comarch, as intermediaries to transmit invoices between senders and receivers, ensuring smoother communication and compliance across different systems.
E-invoicing risks explained
With the rapid adoption of e-invoicing mandates comes an array of risks that businesses must navigate. E-invoicing compliance is not just about adhering to regulations; it has direct operational, reputational, and financial implications.
Financial risks
One of the most significant operational risks of non-compliance is the risk of fines. Financial penalties for non-compliance vary widely across countries. For example:
- In France, companies face penalties starting at €15 per invoice, capping at €15,000 annually.
- Saudi Arabia imposes fines ranging from SAR 1,000 to 40,000 based on the frequency of violations.
- Malaysia, having recently introduced its e-invoicing mandates, outlines fines between MYR 200 and MYR 5,000, with the possibility of prison time for severe infractions.
- In Poland, penalties can reach up to 100% of the tax indicated on the invoice or 18.7% of the total amount due, emphasizing the need for vigilance.
Operational risks
Another risk of non-compliance is the potential inability to issue invoices to clients. Unlike traditional tax compliance that can be addressed after the fact, invoicing mandates require immediate data submission to tax authorities. Failing to meet these requirements can disrupt business operations and revenue flow, especially for companies entering new jurisdictions without the necessary invoicing infrastructure.
Reputational risks
Governments are becoming increasingly creative in their efforts to combat tax evasion. For instance, Chile has published the names of non-compliant companies, attracting media attention and potentially damaging the reputation of those listed. This trend highlights the importance of maintaining compliance to protect an organization’s standing in the market.
Are you ready for e-invoicing?
As more countries adopt e-invoicing mandates, businesses must stay informed about the evolving regulations to ensure compliance. Understanding the specific requirements and potential risks of non-compliance is crucial for successful operations in the international market. Embracing these changes early will enable your company to prepare on time, streamline its invoicing processes, enhance efficiency, and reduce the likelihood of financial penalties.
Stay proactive: contact our experts at Comarch to navigate the complexities of e-invoicing and ensure compliance from the start.
