March 17, 2023

What is electronic invoicing?

Featured image for “What is electronic invoicing?”

Electronic invoicing is the exchange of an electronic invoice document between a supplier and a buyer. An electronic invoice (e-invoice) is an invoice that has been issued, sent and received in a structured data format that enables its automatic and electronic processing, in accordance with Directive 2014/55/EU.

eInvoices worldwide

E-invoicing is becoming more common based on the global adoption rate and e-invoicing mandates that several countries have introduced.

In 2019, the European Union mandated the use of electronic invoices (e-invoices) for all B2G (business to government) transactions. However, before the EU mandate, some EU countries had been using them for years.

For example, Finland started issuing e-invoicing for public purchases in 2010, and the Finnish government now exclusively uses e-invoicing in all its operations. Private Finnish companies have also started using them.

Regarding national B2B payment practices, France, Italy and Poland follow the same practice.

Around the world, the adoption of e-invoices is moving in a similar direction.

In fact, e-invoices were initially used in commercial operations in Latin America. Initially mainly for the private sector to ensure efficient and safe trading.

Chile was the first country to do so in 2003, and Argentina, Mexico, Peru, Uruguay, Brazil and Ecuador quickly followed suit.

As a result of these early directives, the procedure is now standardized and applied consistently to every transaction.

Asia-Pacific is another growing region where e-invoicing is being used.

With the implementation of e-invoicing in more than 30 provinces since January 2021, countries such as China have been able to achieve a B2B e-invoice transaction rate of 79.3% thanks to automation technologies.

Japan’s tax system has long needed improvement. Over the last few decades, most developed countries have been gradually digitalizing and moving away from paper processes, but Japan has not done so and still requires companies to keep records to support all VAT claims. In Japan, paper-based procedures are still very common and handle more than 80% of the country’s administrative tasks.

Japanese enterprises are encouraged to start implementing Peppol-compatible e-invoicing software by October 2022, even if the new “Qualified Invoice” system is expected to be launched in October 2023.

E-invoicing is a global trend, with nearly 90 countries now implementing e-invoicing for B2B and B2G transactions worldwide.

E-invoicing is the answer to the multiplicity of invoice formats, which causes unnecessary complexity and high costs for companies and public entities. It is becoming increasingly difficult to justify maintaining paper-based processes.

World governments also emphasize the importance of e-invoices for the quick and efficient identification of tax fraud. In 2019, a major VAT carousel investigation was completed. It has been found that EU countries lose up to EUR 50 billion a year.