Doing Business in the EU? Prepare for Value-Added Tax E-Invoices

Major changes in EU VAT were proposed at the end of last year. If the ViDA proposals are adopted, this will mean not only a major compliance effort for businesses but also a significant change for players assisting taxpayers, such as VAT accountants and software companies.

Many businesses therefore are interested in whether the ViDA proposal will be adopted, and if so, whether it would follow the proposed timeline.

E-invoicing Will Apply From 2024

The ViDA proposal provides that major changes will apply in invoicing from the beginning of 2024:

• Electronic invoicing will be made the rule rather than the exception.
• A new definition of e-invoices will be introduced, and only invoices received and issued in a structured format will be considered e-invoices.
• E-invoices won’t be subject to the acceptance of the recipient—this means that any affected business should be able to receive them and can’t refuse them.

This means that all businesses falling under the new regulation that currently issue and/or receive invoices in a pdf format will be required to issue, deliver, and receive structured invoices by Jan. 1, 2024.

The EU member states and the European Parliament generally are expected to be positive about the proposed ViDA measures.

Responses From Member States

The Dutch government supports the ViDA proposal and has published the report and assessment of the proposed VAT legislation (in Dutch). Implementing the ViDA proposal is expected to have a positive long-term impact on Dutch businesses, as it will simplify trade within the EU market and in certain cases also reduce compliance costs—for example, by harmonizing the different reporting and invoicing requirements in the EU.

In the short term, however, entrepreneurs will have additional compliance costs and will need to adapt their IT systems. The proposal may lead to an increase in the compliance burden, mainly in the short term, especially for small entrepreneurs. In addition, compliance burdens for platforms in the short-term accommodation and travel sectors and in e-commerce are likely to increase if they are considered suppliers by the fiction and need to account for VAT.

The following countries have also already published opinions or launched consultations on ViDA.

• Finland and Sweden have expressed supportive views. Sweden has proposed some amendments.
• Several countries, including Denmark, Italy and Spain, have conducted public consultations on ViDA.

EU Institutions

The EU Parliament has expressed positive views, and its internal services have published a ViDA briefing paper on the proposals. The ViDA has received an initial favorable assessment from the EU’s independent European Data Protection Supervisor.

The European Council, which consists of the representatives of the EU member states, is expected to vote on the ViDA proposal in October 2023.

EU Country Developments

As a response to the EU proposal to introduce e-invoicing for cross-border transactions as early as 2024, many countries have rolled out new e-invoicing developments.

• Germany published a paper on business-to-business e-invoicing. The Federal Ministry of Finance (Bundesministerium der Finanzen) has released the draft paper for discussion on mandatory e-invoicing in Germany, which is expected to be introduced in Germany from Jan. 1, 2025 for B2B domestic transactions between German businesses, in line with ViDA and in compliance with EN 16931 European e-invoicing standard.
• Belgium will introduce mandatory B2B e-invoicing and e-reporting from July 2024. The Belgian Minister of Finance has announced the intention to introduce mandatory B2B e-invoicing from July 2024, most likely through Peppol. The introduction will be phased out in stages depending on the size of the business. Belgium also will introduce digital tax reporting requirements (continuous transaction controls) with the goal of having a pre-filled VAT return.
• Sweden is taking steps towards mandatory B2B e-invoicing/digital reporting.
• Denmark will adopt mandatory B2B e-invoicing. The new e-bookkeeping legislation requires businesses to exchange and archive invoices electronically. The implementation timeline is January 2024 for some companies and January 2026 for others.
• Latvia has published a report stating its intention of introducing mandatory e-invoicing for all B2B and business-to-government transactions from 2025 using the Peppol network.
• Lithuania is introducing a Peppol-based e-invoicing platform.

Most other member states are preparing legislation and infrastructure required for mandatory e-invoicing.

Possible Developments

The VAT community and businesses are awaiting how and when the important changes proposed by ViDA are adopted, since these will overhaul the entire VAT compliance landscape. Many commentators have expressed the view that the EU institutions and member states are likely to agree the ViDA proposal in the second half of 2023. This will mean that the first big step in EU VAT digitalization—the major switch to e-invoicing for many transactions—will take place as soon as 2024.

In anticipation of the obligatory use of e-invoicing in the EU, most member states have either already rolled out obligatory B2B e-invoicing or are taking steps to prepare the necessary legal and technical infrastructure.

Businesses operating in the EU market need to start preparing for e-invoicing by further digitalizing their business processes and familiarizing themselves with requirements, since e-invoicing is expected to go ahead as soon as 2024.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Aiki Kuldkepp is senior manager, tax, with Grant Thornton Netherlands.

We’d love to hear your smart, original take: Write for us.