Mandatory B2G invoicing in Luxembourg: Second phase now in force

On 18th October 2022, the obligations from the second phase of the 13 December 2021 law regarding mandatory electronic invoicing for suppliers performing transactions with a Luxembourg public body enter into force for the “medium size” operators.

We take the opportunity to remind you of the law’s principles to share information about the international context, and to highlight the alternative procedure for economic operators with no PEPPOL access point, as this information was not yet available when we sent our December 2021 newsletter.

The law states that an electronic invoice must be issued by the “economic operators,” i.e., contractors, suppliers of goods, or service providers, for all supplies of goods, services, and/or works which they carry out for the benefit of entities governed by public law. These entities are, mainly, the Luxembourg State and municipalities, but also the bodies created to meet general interest needs, other than industrial or commercial ones, and which are financed and controlled by the public authorities, as well as the associations of these bodies under public law. More briefly, these are called business-to-government (B2G) operations. Public contracts such as those within the framework of development cooperation, diplomatic representations or consulates, participation in international exhibitions, or in the context of visits abroad are excluded from the scope of this obligation.

The primary purpose of the law is to reduce the administrative burden by speeding up the verification, validation, and payment of invoices by public bodies.

The law’s entry in force is progressive. It is applicable within five months of its ratification, i.e. three days after its publication in the Official Journal on 14 December 2021, and within 10 or 15 months of that date for economic operators that do not exceed two of the following three criteria:

Thus, the 10-month period for the second category of economic operators will end on 18 October 2022; from that date, these economic operators will have to comply with the law.

The PEPPOL system

B2G invoices must comply with the European standard on electronic invoicing (i.e., defined invoice and automated invoice transmission system criteria for integrity, authenticity, etc.) . In practice, the operators concerned will have to use the Pan European Public Procurement On-Line (PEPPOL) system either by renting or setting up their own access.

PEPPOL is already widely used in the EU and greater world, as since April 2020, all public bodies are obliged to receive electronic invoices issued under this standard even though their suppliers are not obliged to issue electronic invoices.

Alternative to the PEPPOL system

Even if PEPPOL is a widely spread and used system, the implementation of a new system always imposes extra work and costs. For regular government suppliers, this cost might be partly compensated by quicker payment of their invoices and could thus be easier to accept. But occasional suppliers could be more reluctant. Thankfully, an alternative procedure exists. It might also be of interest for those suppliers that intend to implement PEPPOL, but have not yet done so, and still have invoices to issue.

This alternative procedure is available on MyGuichet.lu: Submission of a compliant electronic invoice as part of a public procurement or a concession contract. The supplier, or its representative, could complete and submit the online invoice form so that an electronic invoice is issued to its client.

To do so, supplies must have a business eSpace on MyGuichet.lu and an accepted form of identification: a LuxTrust product (e.g. Token or Smartcard), an electronic identity card (eID), or a digital ID issued by another EU country (eIDAS).

The following information must be provided manually in the form :

• the identity of the economic operator;
• the identity of the public-sector organization that the invoice is being issued to;
• information appearing on the invoice: invoice number, date of issue, etc.;
• information on the payment of the invoice;
• contents of the invoice:
  • with each row providing details relating to a single item or specific VAT rate;
  • amounts calculated automatically based on entered data.

After form completion and submission, the user will receive confirmation that the invoice has been submitted to the back-office system that distributes electronic invoices to public-sector bodies. Once the invoice has been processed by the back-office system and submitted successfully to the final recipient, the user will receive a message with the original copy of the submitted electronic invoice and another one with a PDF copy, or an error message if, for any reason, the invoice cannot be sent to the final recipient.

Supporting documents are not required but allowed. These documents could be plans, a copy of the invoice, or any other supporting document that may be useful to the supplier.

Lastly, please note that small and very small enterprises may be entitled, under certain conditions, to a financial aid under the Fit 4 Digital Packages Programme scheme; and personalized support provided by the House of Entrepreneurship.

International context

Electronic invoicing (e-invoicing) is more and more used in and outside the EU. For example, Belgium is planning to implement B2B e-invoices beginning in 2024²  until July 2025 when all resident and non-resident taxpayers will be included. Meanwhile, France will make B2B e-invoicing mandatory for all large undertaking resident taxpayers from July 2024.³

Participants in the recent public consultation “VAT in the digital age,” organized by the European Commission have identified e-invoicing has the most appropriate digital reporting requirement (DRR) over VAT listings, SAF-T (standard audit file – tax), and real-time reporting to tackle the questions of VAT fraud and the simplification of the VAT administration.

The law concerns a large range of economic operators, who should consider how to adjust to this new obligation to be able to continue invoicing and receiving payment from their public body clients. The B2G mandatory electronic invoicing is only a step before e-invoicing may become mandatory for business to business (B2B) and business to consumer (B2C) transactions, as is already the case in a growing number of EU and non-EU counties around the world.

The Deloitte Luxembourg indirect tax team remains at your disposal to discuss the potential impacts on your organization.

¹ The 15-month period also applies to companies which are unable to provide information regarding at least one of the three quantified criteria for the year 2019.

² Voluntary phase will start in January 2024 for businesses who want to receive structured e-Invoices.
First step will begin on 1 July 2024 for businesses who have an annual turnover more than 9,000,000 euros -excluding VAT; second step will begin on 1 January 2025 for businesses who have an annual turnover more than 700,000 euros and less than 9,000,000 euros -excluding VAT; third and last step will start in July 2025 and will cover all resident and non-resident taxpayers.

³ 1^st July 2024 for large companies (more 5,000 employees; and either of following: €1.5 billion turnover; or €2 billion balance sheet); 1^st January 2025 for medium sized companies and 1st January 2026 for small businesses (less than 250 employees; and not exceeding either of following: €50 million turnover; or €43 million balance sheet).

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