Achieving tax compliance with e-invoicing regulations

The future of e-invoicing is fast approaching. As e-invoicing mandates are implemented in nations across the globe, it’s critical your business adopt an e-invoicing solution to keep up with changing rules and requirements. 

Tax and invoicing practises are constantly evolving. With the move to e-invoicing on the horizon for many businesses, it’s important to keep pace with new regulations and requirements to protect against noncompliance.  

In this article, we’ll explore how your business can leverage tech solutions to keep operations running smoothly and (most importantly) stay compliant when e-invoicing.

The regulatory nature of the e-invoicing process varies across countries around the world. The legislation governing e-invoices can seem confusing — particularly for cross-border businesses that must deal with multiple sets of regulations. So, let’s consider e-invoicing for three separate EU nations.

The French government’s main aim is to work against VAT evasion and ensure the effectiveness of transaction processes. The country first mandated the use of e-invoices for all business-to-government (B2G) transactions from 2020 onwards, using the public platform Chorus Pro to provide e-invoice clearances. 

However, new e-invoicing reforms are on the way. E-invoicing will be mandatory for select large enterprises as of July 1, 2024, then for smaller companies starting January 1, 2025, and finally on January 1, 2026, for small businesses. From these dates, e-reporting will be compulsory for all transactions — even those conducted with an individual not liable for VAT and cross-border sales with exempted entities — using Chorus Pro or other state-certified solutions.

Meanwhile, Spain has mandated the use of e-invoices for B2G transactions from 2015 onwards. But the law is changing: soon, all e-invoices and other relevant accounting records will need to be sent through Spain’s national platform, FACe. Spanish legislation also states that all invoices should be made electronically available to all the recipients for a period of at least four years. Failure to comply means the organisation will be charged with an administrative offence. There isn’t a finalised deadline for this mandate (as of November 2023), so keep an eye out for further news. 

Finally, Poland has mandated e-invoicing for all transactions from January 1, 2024, onwards. To that end, the country has also launched a national e-invoicing platform called Krajowy System e-Faktur (KSeF). In addition, all Polish taxpayers are required to submit a Standard Audit File for Tax (SAF-T). All taxpayers have to submit a SAF-T every month to the Polish tax authorities.

Although more nations are starting to make e-invoicing compulsory, the legislature behind the required reporting is not standardised and can vary significantly. This can be a pain point for any businesses that want to avoid the risks and penalties of noncompliance, which include:

• Financial penalties: Monetary fines for noncompliance range from fixed amounts to a percentage of the invoice value, to be remitted to the national financial authorities.
• Legal repercussions: Lawsuits or prosecution from legal authorities also come loaded with associated penalties and court costs.
• Reputational damage: A noncompliant business is more likely to lose the trust of their suppliers, customers, or partners, who may be made anxious by the organisation’s noncompliance. 

Complying with e-invoicing rules has notable benefits, such as improved relationships with tax authorities (which also reduces the risk of audits). Acting as a contributor to international tax compliance can go a long way towards ensuring your business is able to operate across borders, reducing the chances of penalties and legal complications that go hand in hand with noncompliance.

Automated solutions are not only useful for helping companies stay compliant with current regulations; they can also assist organisations in maintaining ongoing compliance as legislation around the world shifts and changes. 

For example, e-invoicing became mandatory in India as of October 2020 for companies with a combined annual turnover exceeding INR 500 crore. In January  2021, this was extended to companies with a turnover of more than INR 100 crore. In April  2021, it was extended again to companies with an annual turnover exceeding INR 20 crore, and once again in 2022 for taxpayers with an annual turnover of more than INR 10 crore. These frequent changes can prove challenging for businesses to face when it comes to maintaining compliance with internal processes. Automated solutions can help ecommerce traders adapt swiftly to such regulatory shifts, helping companies remain compliant without manual intervention or constant oversight.

All of the factors above neatly demonstrate why real-time reporting is the way forward for the majority of businesses that want to achieve stress-free tax compliance in all the countries in which they operate. 

Real-time reporting — providing tax authorities with invoice data immediately or shortly after the invoice is issued — can help businesses enhance their overall compliance.  

While the two are closely related, there are differences between e-invoicing and live reporting. E-invoicing refers to the exchange of an invoice in a structured, computer-readable data format which allows it to be processed digitally. Meanwhile, real-time reporting is the reporting of relevant invoice data to the tax authorities themselves. 

In both cases, the transfer of this valuable information depends on secure and reliable data transfers. Placing the burden of the transfer itself on the shoulders of a trusted partner (like Avalara) helps protect sensitive financial information and makes reporting more accurate with techniques like encryption and secure transfer protocols.

Furthermore, Avalara’s own e-invoicing solutions can help facilitate secure and compliant connections with tax authorities through:

• Encryption to safeguard invoice data
• Reliable data transfer protocols to prevent corruption
• Automating reporting between countries with changing e-invoicing regulations

When it comes to e-invoicing, nothing is ever simple, and the status quo changes constantly. Businesses of all sizes have an obligation to anticipate and respond to legislative changes, if their objective is to achieve full compliance with their invoicing.

If you’re looking for digital compliance solutions to help support your business, Avalara E-Invoicing and Live Reporting can help. It’s a cloud-based, flexible solution that can help your business comply with current, ongoing, and future e-invoicing mandates and live reporting requirements. 

So, if you’re interested in staying compliant and significantly improving your financial capabilities, then contact our team for more information.