Directive 2014/55/EU – opportunity for Europe to catch up with the leaders

Although the Directive 2014/55/EU obliges all the public administrations in the EU Member States to support a certain e-invoicing standard and to process them automatically from the end of 2018, the level of preparation across Europe differs.

On the one hand, some countries, like Denmark, Finland, Spain or Italy have already mandated some or all enterprises to send B2G invoices electronically (or at least indicated some timeline like France) while, on the other hand, the laggards are still in the planning and design phase. Hopefully, these processes are under control but worth mentioning is the risk of political aspects with suddenly emerging ‘urgent’ issues with higher social priority especially in the election years. And the time is ticking away – 2 years left.

Will Europe use this chance?
According to E-Invoicing/E-Billing Billentis report, the new directive will affect 100,000+ public administrations/agencies in Europe. On the issuers’ side, there are, according to Eurostat, 26 million active enterprises (data for 2013) with Italy having the leading position (3.9 million). Assuming that, on average, 40-50% of enterprises have business relationships with municipalities or other public bodies – the penetration of e-invoicing will significantly boost in 2019-2020 and hopefully at least 40% of ca. 37 billion of total invoice volume (Billentis’ estimation) will be exchanged in the electronic way.

The main question to achieve such a growth is the countries’ approach. The Directive obliges only public administrations to receive and process e-invoices and there is no obligation for enterprises to send electronic documents. Fortunately, the governors in some countries have used this opportunity and implemented obligation of sending only e-invoices to public administrations step by step (depending on the company size or central /regional level of public administration). Will other countries follow this good practice? Hopefully as from the experience in B2B e-invoicing projects, once the company starts sending e-invoices and perceives the advantages it would never go backwards to paper documents.

The hope in the potential revenues from decreasing VAT gap
The invoicing process has gained importance due to the increasing interest in decreasing VAT fraud. Each Member State has its own statistics but the VAT gap, which is the difference between the expected VAT revenue and VAT actually collected in the Member States, was almost EUR 170 billion in 2013. Cross-border fraud itself is estimated to be responsible for a VAT revenue loss of around EUR 50 billion a year in the European Union. The governments are aware of this scale and have implemented procedures to have a greater control over the VAT revenues. Portugal, for instance, implemented the mixed model of post-audit and clearance systems in which the e-invoices are exchanged between the partners while the audit files with selected data from invoices are provided electronically to tax authorities. This model seems to be increasingly common in Europe.

To sum up, globalisation is in progress and volume of cross-border transactions has been on the growth curve. Electronic invoicing is typically an international project as most of the enterprises cooperate with foreign counterparts. Thus, the biggest challenge, at least at EU level, will be to elaborate, implement and maintain common standards and procedures to pave the way for cross-border e-invoicing instead of allowing for local requirements.

About Bartlomiej Wojtowicz:
He has over 10 years of experience in the field of B2B communication in the supply chain. Initially responsible for the EDI market development in Southern and Central Europe, he is currently responsible for the development of Comarch EDI portfolio.

About Comarch EDI:
Comarch EDI is a B2B platform, which provides a competitive advantage by a fast and secure data exchange with business partners. The solution provides the automation of data processing throughout the supply chain: from the procurement process, through the logistics, to invoicing and payment processing.