Two steps forward, one step back: Council of the EU approves on B2B e-invoicing mandate in Romania and Germany, while France postpones implementation

As a follow on from our Alert published July 5, 2023, the Council of the European Union approved the two proposals allowing both Romania and Germany a derogation from Articles 218 and 232 of the VAT Directive.

On the flip side, France’s efforts on the generalization of e-invoicing was perhaps too ambitious as they announced postponement of the entry into force scheduled for 2024. We note Belgium and Spain’s initial 2024 implementation deadlines are also considered obsolete so what does this imply for businesses and their approach to e-invoicing across the EU? In this alert we inform you about these developments.

Derogations Romania and Germany

A reminder that the implication of the derogation from Article 218 governs that documents in a structured electronic format can be considered as formal invoices; and Article 232 permits that no formal acceptance of an e-invoice is necessary from a recipient. Due to the fact that the ViDA proposal has not yet been adopted, Member States are obligated to have a derogation especially since the derogations see to domestic transactions and not cross-border transactions. These derogations apply as of 1 January 2024 with respect to Romania and 1 January 2025 (the start date of the transition phase, likely to be formally imposed as of 1 January 2026.) with respect to Germany.

However, given the approval of the derogation, within 30 days, we expect that Romania will publish further specifications on the e-invoicing mandate as well as the exact date upon which the e-invoicing mandate will be enforced.

It can, however be stated that both Member States will adopt B2B e-invoicing applicable to established taxpayers only. Hence no inclusion of non-established taxpayers with a VAT registration, is expected in the scoping of e-invoicing in Romania and Germany, after having obtained the derogations.

The German Ministry of Finance has published more details in a draft business tax reform bill (the “Growth Opportunities Act”) in which it states that the B2B e-invoicing obligation would not affect supplies to taxable persons established abroad or to private customers. The determination of a taxable person’s place of establishment would be based on the location of the registered office, its management, or the presence of a fixed establishment involved in the relevant transaction for which an e-invoice is issued. Based on the draft bill’s provisions, a taxpayer with a German VAT registration, but without a place of business in Germany, would not be subject to the e-invoicing obligations.

France

The French e-invoicing mandate mentions that the implementation, originally planned for July 1, 2024, will be postponed, with the new go-live date to be determined during the adoption of the 2024 Finance Law. Despite the delay having been announced, the French Government is proceeding with processing the registrations for partner dematerialization platforms (PDPs). The intention to implement e-invoicing under the proposed guidelines remains concrete, as the latest updated Technical Specifications (v.2.3.) were released 31 July 2023 as expected.

In anticipation of the revised timeline for the mandate, it appears that the tax authorities remain dedicated to the update of the technical requirements and the Chorus platform. However, the reason for postponement; to ensure a successful transition to e-invoicing, further emphasizes the onerous impact this reform imposes on businesses as well as tax authorities and that a one year implementation period may not prove feasible in most instances, especially where a centralized clearance model is proposed.

Can we expect a trend of delays, where implementation deadlines of a year or less are proposed and how seriously do you as a taxpayer need to regard these deadlines?

Belgium

The Belgian government was ambitious in its intention to reduce the VAT Gap through mandatory B2B e-invoicing. Draft proposals were presented in 2022/2023, initially as standalone legislation, to introduce mandatory B2B e-invoicing and e-reporting for domestic transactions. A phased implementation was foreseen, with first deadlines as of July 2024.

Subsequently, there has been no further communication from the Government with respect to if and how e-invoicing and e-reporting will be continued, also taking into account that general elections will happen in Spring 2024. Given the current shift in political focus, it appears that e-invoicing implementation in Belgium has regressed from draft proposal to intention, and the 2024 deadlines that were mentioned in the draft proposal are considered obsolete.

Spain

The implementation deadlines for Spain as largely dependent on the publication of the Spanish e-invoicing Decree, which governs the B2B e-invoicing specifications. Subsequent to publication (when the draft mandate becomes enforced) large businesses or taxpayers whose turnover exceeds EUR 8 million will be required to issue e-invoices within 12 months of the publication date; and taxpayers whose turnover threshold does not exceed EUR 8 million will be required to issue e-invoices within 24 months from the publication date.

The scope of the draft Decree includes definitions necessary for the correct implementation of the new obligation, maintenance of the current typology of agents obliged to issue an invoice, definition of the future Spanish e-invoice system, determination of technical aspects of the future system, stipulation of recipients’ obligations and specific modifications to accommodate the new regime of Electronic bill. Whilst businesses operating in Spain have time before the mandate is enforced, we encourage those businesses aiming to standardize their e-invoicing approach globally to already start incorporating the specifications of the draft decree in their global flows and formats, where possible.

We anticipate more announcements to follow with respect to Belgium and Spain towards the end of this year. We will keep you updated. In the meantime, please visit our dedicated ViDA landing page for more updates on e-invoicing and e-reporting in the EU.

Finally

Lamentably, for businesses, e-invoicing is causing disruptions and adding complexities to existing invoicing flows. Hence additional time for testing the necessary updates to ensure e-invoicing is well facilitated, should undeniably be welcomed and exploited. A delay in proposed implementation deadlines also allows businesses to properly assess and rectify inefficiencies in existing invoicing and tax processes in preparatory to an e-invoicing implementation, if they have not done so already.

Accordingly, a delay should not imply that businesses should slack-off or abort their e-invoicing efforts. We urge companies who have already invested in e-invoicing and e-reporting in France, ahead of the announcement, to continue their efforts as planned and to make use of the additional time they have been given to ensure they are more adequately prepared for the inevitable challenges that will ensue when testing commences.

It’s becoming apparent that the reality of e-invoicing may not be as simple as once implied by the proposals and given the magnitude of businesses aiming to adopt the respective mandates, volatility and delays are the only certainties that taxpayers can expect as governments and tax authorities seek to enforce improved and efficient tax collection.

Irrespective of a delay or ever-looming deadline, mandatory e-invoicing across the EU is inevitable and the sooner businesses start preparing the better they can allocate their resources and finances.