Cross-border invoicing – the real challenge for multinational projects

Global approach with local adjustments

Nowadays, a significant majority of enterprises cooperates with foreign business partners. What’s more, an increasing number of organisations have been changing their document flow from paper to digital formats to optimise processes in the supply chain. Thus, there has been growing demand for solutions enabling onboarding of partners worldwide, exchanging the whole set of messages in the supply chain (order-to-cash / procure-to-pay) and guaranteeing legal compliance, project management and local support. Let’s explore the electronic invoicing process in particular, since it is an essential part of the efficient B2B collaboration.

Various legislations in force

In Europe, the Council Directive 2010/45/EU has been implemented in the Member States in 2013 which treats paper and electronic invoices equally. Also, it is widely known that each taxable person shall determine the way to ensure the authenticity of the origin, the integrity of the content and the legibility of the invoice.

However, each Member State defines its rulings on electronic invoicing and in spite of progress, even within the EU there are significant differences. For instance, in Portugal, the taxable person has to use certified invoicing software (assuming the annual turnover of more than EUR 100 000). What is common for both Portugal and Hungary is that the solution should be able to present the data for audit purposes in the country’s defined SAF-T formats. When considering the form to assure authenticity and integrity, besides business controls, EDI and electronic signature should be considered. Then local requirements differ for outsourcing of invoice issuance (unilateral or bilateral, written, with some content requirements), notifications of tax administration, the obligation of EDI agreement based on EU 1994 Recommendation, system documentation describing software and procedures, to name only a few.

In the archiving area, the unification is even lower. Besides various retention periods and tax authorities’ notification obligation, Italy requires an invoice preservation process, France has ‘partner file’ and ‘summary list’ functionalities, while in Germany, the law introduces three access mechanisms known as Z1 (direct access to electronic data), Z2 (indirect) and Z3 (through the transfer of extracted data).

Challenges to approach just outside EU borders

Assuming that all peculiarities were analysed (mostly thanks to the EU documentation available in many languages) and technical design and implementation were done, yet, even within Europe further adjustments are needed. For instance, take into consideration Norway’s restrictions of storage, Switzerland’s requirement for the service provider to be registered in the local commercial register and the fact that electronic invoices have to be ensured by electronic signature.

Of course, the European model, called post-audit, does not rule worldwide. Beyond the EU borders, the regulations are more complicated. In Turkey or Russia, there is a clearance model implemented in which an electronic invoice must be sent to the tax administration or licensed, certified providers for authorisation before, during or just after issuance as an original tax invoice. LATAM has implemented the model and observes high penetration of electronic invoice usage.

Thus, the cross-border invoicing issuance for companies with subsidiaries worldwide is a real challenge where the law is applicable (i.e. country of establishment, place of VAT registration, transport, invoicing goods or services).

Electronic invoice still on the rise

Despite the legal and technical obstacles, enterprises’ awareness of process automation with electronic invoicing and cost reduction has been steadily increasing. Most of them would take the decision to start e-invoicing shortly if the legislation would be clearer and standardised. On the other hand, the governments are aware of the scale of the VAT fraud and are looking for tools to seal the system – unfortunately, each country is trying to find its own way.

However, it is highly unlikely that the EU will implement the clearance model; there are several initiatives to speed up the process. The Member States decided to organise multi-stakeholders forums to implement a European Standard for e-invoicing (expected in 2017) and increase the interoperability among service providers. Hopefully, the Directive 2014/55/EU on electronic invoicing in public procurement will prove to be a significant milestone resulting in the mass adoption of electronic invoices in the structured form (not PDF invoices) and public authorities will realise the benefits of e-invoicing and hasten the implementation of common, understandable and unified legislation on cross-border e-invoicing.

In a nutshell, the stage of market education and convincing towards adopting automated invoices processing is coming to an end. Most of the enterprises have launched or consider the implementation of e-invoicing at a country level in the short term. Currently, the biggest challenge is to enable the smooth extension of their projects on the transnational level.

Finding a service provider with vast international experience is essential. Comarch EDI enables compliance with all local legal requirements. Its membership in organisations such as the GS1 or the European E-Invoicing Service Providers Association (EESPA) guarantees that the company is a reliable partner. Comarch EDI has cooperated with GS1 and EESPA for many years in several countries to make sure that our services are of the highest quality and the solution is compliant with national and international requirements.

About Bartlomiej Wójtowicz

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 the company

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.

This article is part of the B2B Fintech: Payments, Supply Chain Finance & E-invoicing Guide 2016, an overview of the global insights on the B2B payments, supply chain finance & e-invoicing market. Read what industry experts have to say about the potentially untapped opportunities in cross-border B2B payments, how banks are innovating, what are the latest innovations in SMB financing, what are the most important regulatory updates and many other topics by downloading your free copy here.