Digitisation of tax reporting > e-invoicing FAQs

e-invoicing FAQs

Digitisation of tax reporting > e-invoicing FAQs

e-invoicing FAQs

General e-invoicing questions

What is e-invoicing?

E-invoicing is the process of creating and providing an invoice in a digital format. Broadly speaking, an e-invoice is exchange of an electronic invoice document between a supplier and a buyer. When provided as structured data, an e-invoice allows the recipient to automatically insert the invoice data into their accounting or ERP system. Many countries are requesting to use e-invoices in structured data formats for B2G, B2B and even for B2C business activities. Increasingly, e-invoicing includes live tax reporting to tax authorities.

How can e-invoice data be automatically entered into accounting systems?

It can be done if the data exists in a structured format that is machine readable, such as XML, CSV, EDI EDIFACT, ANSI X12 or VDA, and the invoice data is transferred directly into the accounting or ERP system of the buyer.

Do invoices in PDF-format qualify as e-invoicing?

In terms of mandatory e-invoicing as defined by numerous governments, PDF invoices do not qualify as e-invoices. Although invoices sent in PDF format via email are digitally created, transmitted, and received, processing of the PDF invoice data still requires manual entry on the buyer’s side. This limits the possibilities for the automation of digital Account Payable processes, as PDF invoices do not support live transaction reporting for tax authorities.

What is digital Accounts Payable?

Digital Accounts Payable (AP) is the digitisation and automation of the AP processes. Within these processes, the invoice data is received in electronic format via various communication protocols such as PEPPOL, AS2, OFTP2 and Web Services and transferred directly into the customer’s ERP system.

What is digital Accounts Receivable?

Digital Accounts Receivable (AR) is the digitisation and automation of the AR processes. Within these processes, the invoice data is created in the ERP system directly in standardised electronic formats, such as EDIFACT, CSV and XML, and electronically signed or otherwise validated.

What is B2B / B2G e-invoicing?

B2B / B2G e-invoicing is the use of e-invoices when conducting business between two private companies (B2B) or between a private company and a government agency (B2G).

What is meant by the term ‘mandatory e-invoicing’?

Mandatory e-invoicing is the obligatory use of e-invoicing by companies, imposed by the country’s government.

Why are governments mandating e-invoices?

There are many reasons for mandatory usage of e-invoices, such as increasing efficiency in the economy, improving conditions for international business, protecting the environment and others. One of the most important topics for governments is their aim to optimize tax collection processes and close the VAT gap, which could be as much as €134 billion in Europe alone (2019).¹

What is the VAT gap?

The VAT gap ¹ is the difference between the VAT revenue a government expects to collect, and the amount actually collected. The gap can be caused by mistakes in VAT reporting and tax fraud.

Which countries are mandating e-invoicing?

As of January 2022, there are 80+ countries worldwide with some form of e-invoicing or e-reporting legislation. Get the latest information on e-invoicing requirements by country.

As of January 2022, over
80 countries
have introduced some form of e-invoicing or digital reporting

See the list

What is driving the adoption of e-invoicing?

In response to mandatory e-invoicing requirements, businesses are proactively adopting e-invoicing to achieve compliance in all the territories they operate, as well as those they plan to enter. On top of staying compliant with local tax authorities, businesses benefit from increased efficiency and automation in their finance departments when implementing e-invoicing.

What are the penalties for failing to comply with e-invoicing mandates?

Fines and penalties vary between tax authorities. In Italy, the penalty is between 90% and 180% of the VAT due, whereas in Hungary businesses who fail to submit invoices in time can be fined up to HUF 500,000 (approx €1600) per invoice. Our country guides page provides more information about the VAT regulation in individual countries.

What is real-time or live reporting of e-invoices?

'Real-time' or 'live' reporting means to transfer transactional data of invoices to the tax authorities immediately, typically by using the clearance model in e-invoicing (where the tax authority is part of the invoice exchange between the seller and the buyer. The e-invoice contains all VAT relevant data in a structured format, and the ‘immediate’ transfer of this data allows tax authorities an early insight and monitoring of business activities. This helps tax authorities to effectively track discrepancies and detect possible fraudulent activities.

What are the e-invoicing requirements in different European countries?

Each local tax authority has different requirements, deadlines, and penalties for failure to comply. For the most up to date information visit our list of countries with e-invoicing requirements page.

Why should businesses adopt e-invoicing?

To stay compliant and keep trading in countries where e-invoicing is mandated, to ensure compliance in countries where the business is looking to begin trading, and to benefit from automated AP / AR processes as a part of a wider digital transformation strategy.

What are the benefits of e-invoicing?

Businesses can save on the costs of printing, posting, and staff processing and archiving invoices. Also, automation and optimisation of AP / AR processes increases overall efficiency and shortens invoice cycle times. Quicker cash collection improves cash flow on the vendor's side, and the buyer can benefit from early payment discounts and avoid fees associated with delayed payments.

What is the return on investment (ROI) for e-invoicing?

According to a recent report, e-invoicing projects typically result in a payback period of 6 to 18 months.²

What is the potential cost saving of using e-invoicing compared to manual paper processes?

A recent study based on a volume of 50,000 invoices suggests that organisations who send e-invoices could save as much as €330,000 compared to the more traditional manual processes (including sending PDF invoices via email). Organisations who receive electronic invoices can potentially save upwards of €550,000 on processing and handling.²

Where is e-invoicing going in the future?

A recent study suggests that as many as 80% of businesses will have to adopt e-invoicing either as a result of legislation by local tax authorities, or by significant trading partners insisting on the exchange of electronic invoices.² It’s also expected that local tax authorities will widen the net to cover other supply types, such as B2C, and an increased use of QR codes.

Additionally, tax authorities may seek to replace traditional VAT returns with pre-populated returns, or more dynamic returns based on real-time transactional data.

What is driving adoption?

Automation, compliance, and control combine to deliver compelling business benefits, beyond expected cost savings

Implementing an e-invoicing solution

How does e-invoicing work? How is an e-invoice issued?

An invoice is created in the ERP system and sent directly to the recipient via their established EDI connection. To stay independent of proprietary systems, many businesses use e-invoicing systems/portals of e-invoicing service providers. In such a system, the invoice data from the seller is then converted into the correct file type/format before being distributed to the buyer. Advanced solutions support bi-directional communication, offering both parties full visibility into the invoice exchange.

When is a good time to implement e-invoicing?

Now that government agencies are disclosing their intentions in advance, companies should plan ahead to ensure operations are not disrupted and that practices are compliant with regulations.

What are the challenges of e-invoicing in businesses?

Lack of harmonisation of e-invoicing standards across Europe (and beyond). Each country has different requirements, timelines for reporting and submission, and wide-ranging penalties for failure to comply.
Determining which data exchange platform to use. Lots of ERP or accounting software vendors have not committed to developing e-invoicing as standard functionality. Businesses therefore need to actively find a solution to bolt on or integrate with their existing systems, without knowing exactly which document format they should choose.
When there are no mandates in the country of issue but where mandates exist in the country of the business partner receiving the invoice. This requires the issuing party to identify a way for the recipient to receive the invoice in an electronic format. Consequently, an increasing number of businesses are adopting e-invoicing to support the needs of their customers, and by doing so improve their customer experience.
Change management and the adoption of new internal processes. According to Billentis, 40% of larger organisations cite this as an obstacle to adopting e-invoicing. ²

What are the risks associated with delayed e-invoicing implementation?

Being reactive can be hugely disruptive to a business, and stall growth. Being proactive can ensure a business can effectively plan, prepare, and implement an e-invoicing solution to meet upcoming compliance requirements.

How do I build a business case for e-invoicing?

Successful implementation of e-invoicing requires thorough project planning. If you evaluate implementing e-invoicing in your company, the following points should be taken into consideration.

Align reasons for automation to overall company Vision, Strategy, Objectives, Initiatives, and external factors
Define current state, desired future state, and barriers
Align Key Performance Indicators (KPIs) to desired future state
Determine improvement to KPIs across time
Connect KPIs to the overall company vision, strategy, objective, initiatives, and external factors.
Validate KPIs with stakeholders
Validate ROI and agree on a governance plan
Deliver communications for scope, timeline, change management, and the case for change for approvals

How do I define the scope of an e-invoicing project?

If you have identified a need for e-invoicing, either resulting from emerging legislation or to take advantage of automating your AR/AP processes, the first step in the journey is to define the scope for your e-invoicing project.

Below is an overview of what to consider when defining the scope of the project:

If applicable, align e-invoicing with the wider corporate digital transformation strategy.
What are your goals and objectives for the project? These might be stated in financial terms, and/or achieving compliance in the territories where you operate/plan to operate.
Consider short term goals and objectives but also look to the future in terms of medium to long term goals and objectives. How will the solution scale to meet new requirements?
Consider whether you plan to automate processing of both inbound and outbound invoices, or plan to add other e-documents.
What are your requirements regarding invoice archiving for audit purposes?
What technology is supporting your existing process workflows? How will e-invoicing solutions integrate into these financial systems, or that of your business partners?
Determine the resources and budget requirements to execute the project.
Consider the timeline for implementation, or deadlines imposed by local tax authorities.
Communication and Change Management; who will be impacted by the change? What processes will change and how do they differ from the current state?

How do I measure the success of e-invoicing implementation?

There are numerous metrics or key performance indicators which determine the success of an e-invoicing solution implementation.

Below are a few common measurements:

Reduction in cost per invoice
Increased efficiency of AP/AR employees
Reduction in the time spent processing invoices
Improved employee satisfaction and customer experience
Environmental, social, and governance (ESG) targets
Fines and penalties for non-compliance are avoided
Lower (or no) late payment fees
Shortened invoice cycle times / cash collection periods
Savings resulting from early payment discounts

Does e-invoicing include long-term digital archiving?

Advanced e-invoicing solutions provide the ability to archive created and received e-invoices in line with regulations, helping organisations stay compliant by providing a trail for audit purposes.

Can e-invoicing solutions integrate with my existing ERP or finance systems?

Advanced e-invoicing solutions offer broad integration options which allow businesses to integrate e-invoicing capabilities into their existing ERP system, often avoiding the need to overhaul their existing legacy infrastructure.

Can e-invoicing solutions scale as my business grows, and can they adapt to the changing requirements of tax authorities?

Advanced e-invoicing systems are flexible and scalable and can be easily integrated into existing systems. To meet new and emerging requirements, businesses should seek out solutions that comply with e-invoicing rules wherever they operate, or plan to operate.

What should I look for when considering e-invoicing solution providers?

Start by asking yourself the following questions:

Does the vendor offer certified e-invoicing processes within the territories where you operate today or plan to conduct business in the future?
Does the pre-selected solution offer the capability to convert invoice data into all formats you or your business partner require, and is it ready for upcoming changes?
Does the solution offer security and encryption services to prevent you and your business partners from possible misuse of the invoicing data?
If necessary, in specific territories, does the solution offer live tax reporting services for B2G, B2B and possibly B2C type of business relationship?
Does the e-invoicing solution include digital signatures and long-term digital archiving?
How easily can the e-invoicing solution integrate with your existing ERP or financial system?
In countries of relevance, is the vendor a certified provider of the PEPPOL Access Point?
What are your requirements for document monitoring, data views, downloads and user dashboards for easy handling and performance reporting?
Does the vendor demonstrate global expertise in handling the legal and commercial challenges of multi-jurisdictional requirements for e-invoicing ?
Can the vendor offer any additional value-added-services supporting compliance activities with the local tax authorities, such as indirect tax compliance?

Implementation challenges:
40%
of businesses
cite change management and the adoption of new internal processes as the biggest barriers to adoption ¹

Contact an expert

Technical e-invoicing questions

Are digital signatures required for e-invoicing?

It depends on the local legislation and varies from country to country. Some countries strictly enforce the signing of e-invoices digitally, while others consider e-invoices valid even without a digital signature.

What is PEPPOL?

PEPPOL (Pan-European Public Procurement OnLine) is a common framework which facilitates the secure cross-border exchange of e-invoices and other e-documents during the electronic procurement process for both public and private entities. If you want to leverage the PEPPOL network, you need to select a PEPPOL Access Point Certified Provider that is authorised to connect you to the OpenPEPPOL network.

What is ZUGFeRD?

ZUGFeRD* standard is an e-invoice format established in Germany. Usage of the ZUGFeRD standard allows companies to create invoices in a hybrid format (human-readable and machine-readable) and exchange them digitally with their business partners. The ZUGFeRD invoice format is now the most widely used form of e-invoice in Germany.

The ZUGFeRD invoices are based on the PDF-A/3 standard that allows visual interpretation as PDF (human readable format) and at the same time contains structured invoice format data embedded as an XML file (readable for algorithms that can extract the information).

*ZUGFeRD stands for the acronym of the German title 'Zentraler User Guide des Forum elektronische Rechnung Deutschland'

What is ZATCA and Fatoorah in Saudi Arabia?

ZATCA is Saudi Arabia’s Zakat, Tax and Customs Authority. Saudi Arabia is launching their e-invoicing system Fatoorah in two phases, with phase 1 starting in December 2021. The new rules are applicable to all taxable persons resident in Saudi Arabia and third parties who issue tax invoices on behalf of resident taxable persons.

Read our blog to learn more about e-invoicing requirements in Saudi Arabia. Alternatively, visit and bookmark our VAT and indirect tax country guide pages to learn more about e-invoicing requirements in Africa and the Middle East.

What is SAF-T?

SAF-T stands for Standard Audit File for Tax. SAF-T was developed by the OECD in 2005 to harmonise the exchange of tax information between the tax authorities and businesses. The aim is to ensure some uniformity of standards around digitally based transactional reporting. SAF-T is currently used in Portugal, Hungary, Poland, Norway, Lithuania, Luxembourg, and Austria.

What is the Sistema di Interscambio (SdI) in Italy?

Sistema di Interscambio (SdI) is the Italian Revenue Agency’s exchange system for delivering e-invoices. SdI effectively acts as an invoice approval hub. Since 2019, Italian businesses are obliged to send invoices on all of their transactions (B2G, B2B and B2C) via this portal, where all taxable transactions are verified live by the Italian tax authorities.
Read more about the latest e-invoicing developments in Italy in our blog.

What is the post audit model in e-invoicing?

In a post audit model, the invoice is sent to the local tax authority only after the transaction has been completed. The business must guarantee the authenticity and integrity of the invoice, and archive the document for a given period of time to satisfy requests for audit.

The post audit model however is still open to the potential of fraud and is rapidly giving way to the clearance model which reduces fraud by providing real-time transparency and insight into business transactions.

What is the clearance model in e-invoicing?

The clearance model in e-invoicing means that a tax authority is involved in the invoice data exchange between the vendor and the customer as a third party. In many countries, the clearance model is mandatory with e-invoicing as it allows the tax authorities a nearly real-time insight into the business transactions. In this system, the e-invoice must be approved by the appropriate tax authority before being sent to the recipient, which typically takes place in real time and allows the government's tax administration to gain the information about the amount of VAT to be collected.

What is a QR code used for in e-invoicing?

A QR code is a two-dimensional code that allows the storing of information in a machine-readable format on a compact graphics element. With e-invoicing, the QR code is used to provide information related to a particular invoice. As the QR code contains information about the invoice and payment modalities, it is increasingly popular as a time-effective instrument to initiate payment and serves to prevent possible tampering of the invoice.

Which countries use QR codes for e-invoicing?

The Portuguese government makes QR codes mandatory on all invoices - both printed and electronic, starting January 2022. The main purpose of using QR codes on invoices is to provide invoice information in a structured format that can be captured and processed by IT systems. The QR code on Portuguese invoices contains invoice data that must be mapped to the Portugal SAF-T fields.
Learn more about e-invoicing in Portugal.

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