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VAT News E-invoicing In order to eliminate the current barriers to e-invoicing, it is proposed to treat paper and electronic invoices equally, and abolish the obligation that e-invoices must be accompanied by an advanced e-signature or must be issued by means of EDI. Storage of invoices Invoices would have to be stored for a period of six years in all EU Member States and paper invoices may be converted into electronic invoices for storage purposes. If the proposal is adopted, Member States must comply with the new invoicing rules from 1 January 201 . IP/09/1 2 of 28 January 2009 and COM(2009) 20 and 21 final. Invoicing rules – Frequently asked questions On 28 January 2009, the following frequently asked questions as regards the review of the VAT invoicing rules were published on the European Commission’s website. Why is there a need to change the VAT invoicing rules? The current national VAT invoicing rules are excessively complicated and disparate, which has not only facilitated VAT carousel fraud but has also led to unnecessary administrative burdens on businesses operating cross border. In particular, the current rules have hampered the uptake of electronic invoicing. The proposal puts forward much simpler and more modern comprehensive rules that also provide effective means of control to tax administrations. The view that the current invoicing rules have shortcomings is shared by businesses, as evidenced by the replies to the public consultation and by the opinion of the High Level Group of Independent Stakeholders (HLG). There is thus clearly a need to further simplify, modernize and harmonize the existing invoicing rules. What are the main changes to the rules on invoicing? The proposal on invoicing contains numerous changes. They are aimed at reducing burdens on businesses, promoting SMEs, increasing the uptake of electronic invoicing and helping Member States tackle fraud. The changes affect mainly the conditions for issuing invoices, the content of VAT invoices, electronic invoicing and the storage of invoices. Does this proposal help to tackle fraud? Yes. The proposal helps to tackle VAT carousel fraud that involves cross-border transactions (see IP/08/4 4) in several ways. Firstly, the proposal ensures that the date of supply of an intra-Community transaction coincides with the date of chargeability of the tax on the subsequent intra-Community acquisition. Currently, those dates do not coincide. The date of chargeability of the tax on the intra- Community acquisition is set, at the latest, on the 1 th day of the month following the date of supply. Fraudsters abuse this rule by systematically reporting the transaction to the national tax authorities the month after it has taken place so as to avoid timely controls. The proposed measure supplements the change from the quarterly to the monthly business reporting to tax administrations agreed in December 2008 (see MEX/08/121 , 10th item). Secondly, where the supplier is required to issue an invoice, the customer will be required to hold that invoice in order to claim input tax. Member States will have the possibility to require a valid invoice, even if taxable persons claim VAT that they have accounted for under the reverse charge mechanism. Thirdly, any business claiming deduction of VAT must hold an invoice that contains the supplier’s VAT identification number. How will this proposal make electronic invoicing easier? The Commission believes by treating paper and electronic invoices equally, the VAT obstacles that hamper the use of electronic invoicing will be removed. The current rules for e-invoicing requiring either use of an advanced electronic signature or transmission of the invoice through EDI (electronic data interchange), which, together with the various optional arrangements that the Member States are allowed to make and their non-harmonized interpretation of the formal rules, make electronic invoicing difficult to implement, especially in cross-border situations. These optional conditions will be removed. What are the benefits for small and medium-sized enterprises (SMEs) from this proposal? This proposal forms part of the Small Business Act adopted on 2 June 2008. 11 There are a number of measures contained in the proposal that are specifically aimed at SMEs. These measures include the option for Member States to introduce an accounting scheme based on cash receipts and the use of simplified invoices, especially in respect of transactions with a low value. The more technical questions are the following: What are the changes that affect the conditions for issuing an invoice? The conditions for issuing an invoice can be summarized as follows: (a) Self-billing. Customers continue to be allowed to issue VAT invoices. However, the requirement of having a prior agreement with the supplier and the required acceptance by the supplier of each invoice 11. IP/08/100 . 140 INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 © IBFD
under conditions determined by each Member State are withdrawn. These conditions are replaced by the requirement that the clause “self-billed invoice” is mentioned on the invoice. (b) Summary invoices. The option for Member States to set the conditions for summary invoices is removed. Instead, all businesses may issue summary invoices, provided that all the details required for an individual invoice are included, and that the period to which the summary invoice relates is not longer than one calendar month. (c) Exempt supplies. The option for Member States to allow that an invoice must not be issued for exempt supplies is removed. Instead, full VAT invoices are required in respect of zero-rated supplies, and simplified invoices in respect of exempt supplies. This distinction is based on the fact that the risk of fraud is higher when the supplier can claim input VAT in relation to the supplies he has made. Also, zero-rated supplies are typically exports, in respect of which the supplier would normally, for commercial reasons, issue a full invoice, and in respect of which most Member States require a full invoice. The proposed measure harmonizes the rules across the European Union. (d) When an invoice must be issued. If required, all businesses must issue an invoice by the 1 th day of the month following the date of the supply. (e) Outsourcing of invoicing to third parties outside the European Union. The option for Member States to impose conditions on businesses that outsource invoicing to third parties outside the European Union is deleted. (f ) Simplified invoices. Member States have the option to require a simplified invoice in respect of B2C (business-to-consumer) supplies. In respect of B2B transactions, businesses can issue simplified credit notes and simplified invoices for low-value (less than EUR 200) and exempt transactions, with the exception of cross-border transactions. (g) Full VAT invoices. Full VAT invoices are required in respect of all B2B supplies, unless the issue of a simplified invoice is allowed. (h) Distance sales. The requirement to issue an invoice for distance sales in all cases is removed. A simplified invoice may be required in a Member State if an established business is required in that Member State to issue an invoice for a similar supply. (i) Payment on account preceding a supply. The current rules require that in respect of payments on account for a future intra-Community supply of goods an invoice is issued. The invoice then creates a chargeability to tax. The proposal only requires an invoice to be issued after the supply is made removing any ambiguities in invoicing for an intra-Community supply that has not yet been made. © IBFD INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 VAT News What are the changes that affect the contents of an invoice? These can be summarized as follows: (a) Amendment to an invoice (credit and debit notes). The contents of credit or debit notes are harmonized and the details required are those of a simplified invoice, provided that the credit or debit note makes reference to the original invoice. (b) The currency of the VAT amount. The amount of VAT will continue to be required to be expressed in the currency of the Member State where the tax is due. Amounts of VAT expressed in any other currency will have to be converted on the basis of the exchange rates published by the European Central Bank. (c) Simplified invoices. Simplified invoices must contain all the following details, which are largely those contained in the proposed Art. 2 8(2) of the VAT Directive: – date of issue; – VAT identification number of the supplier; – description of the goods or services supplied, and their value; – the amount of VAT to be paid or credited, or the information needed to calculate that amount. (d) Full VAT invoices. Full VAT invoices contain the details listed in the proposed Art. 22 of the VAT Directive. Such invoices must contain the following details: (1) date of issue; (2) sequential number that uniquely identifies the invoice; ( ) supplier’s VAT identification number; (4) customer’s VAT identification number; ( ) supplier’s full name and address; ( ) customer’s full name and address; (7) description of the quantity and nature of the goods supplied or services rendered; (8) date on which the tax becomes chargeable (due to the Treasury); (9) applicable VAT rate; (10) amount of VAT payable; (11) specification of the amount of VAT payable per VAT rate or exemption; (12) unit price of the goods or services, exclusive of tax, discounts or rebates (unless included in the unit price); There are two changes as compared to the current rules. Firstly, the customer’s VAT identification number (indent 4) must be mentioned under all circumstances. Currently, that obligation is limited to intra-Community supplies of goods, transactions in respect of which the customer is liable to account for the VAT and, at the discretion of the Member States, the obligation also applies in respect of domestic transactions. Secondly, the date on which the supply is made is replaced by the date on which the tax becomes chargeable (due to the Treasury) 141
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