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Issue with legal requirements

Monitoring legal requirements for cross border e-Invoicing and Recommendation of changes in the legal environment

This Interim CEN Workshop Agreement, ‘Monitoring legal requirements for cross border e-Invoicing and Recommendation of changes in the legal environment’ is very specific in focusing on the legal requirements of intra EU cross border trade and recommending changes in the legal set up in favour of facilitating electronic invoicing. It covers two of the main tasks of WG2; namely:

Task 3: Monitoring the legal requirements in member states as regards cross border exchange of electronic invoices;
Task 4: Recommendation of changes in the legal environment for electronic invoicing.

It was not the intention of WG2 to invite VAT administrations to respond to an extensive questionnaire, but to take a more direct approach. Namely, based on a list of real issues and problems drawn up by business experts and participants from VAT Administrations, WG2 proposes that recommendations of business justified changes and clarifications be addressed to VAT Administrations in specific Member States or to all Member States as relevant.

Issues whose resolution is seen as requiring European level input will be addressed to the Commission Directorate General (DG) Taxation and Customs Union (TAXUD), DG/Internal Market (MARKT) and DG/ Enterprise and Industry (ENTR) Expert Group on Electronic Invoicing, or other EU groups undertaking similar work, with a view to their being considered in time for a proposed revision of the VAT Directive.

The interim CWA consists of a report, accompanied by two annexes:

Annex 1: A control list of the issues
Annex 2: Templates with a detailed documentation of the issues in question and the recommendation to the VAT Administration of the relevant Member States

The Templates and procedures for their organization and maintenance are also be placed on this portal being developed by Work Group 1 (WG1). The aim is to open the issues for discussion and inviting interested parties to submit their issues to WG2 SG2 for inclusion.

This Interim CEN Workshop Agreement is work in progress and out for review as part of CEN/ISSS e-invoicing Phase II. The issues being identified in this CWA are in the process of being agreed by WG2 SG2 with the aim of being addressed to VAT Administration in Member States. Although some apply to all Member States, a few apply only to specific Member States. They reflect problems being encountered by business in the areas of electronic signatures and the recognition of qualified certificates, procedures surrounding self billing operation, outsourcing to third party service providers, cross border inconsistencies of practice and regulation, etc..

Download the Interim Report (CWA) here (.pdf, 380kb)
Download here the Annex 3 (ODETTE Self Billing Europe 2000) (.pdf)

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Issue List documents on the website
Following you will find all issues from the interim report. Every issue item contains a set of documents. These documents also will be found in the interim report.

Archiving

Both parties must store the original invoices for a period determined by applicable law. During the mandatory storage period of an invoice, the competent tax administration has the right to audit stored invoices. Country specific requirements concerning e.g. format, media, process, security and location should be taken into account.
Buyer Requirements

Unlike paper invoice, where the seller is not required to have an acceptance from the buyer before sending him a paper invoice, electronic invoicing requires some sort of acceptance by the buying party before an electronic invoice may be sent to him. The directive is not clear on the form or degree of acceptance and Member State regulation is not specific.
Cross border
Cross border inconsistencies

The issues under the heading Cross border inconsistencies are not specific to electronic invoicing, but are included as clarifications is being requested.
Electronic Signatures and Qualified Certificates

Member States are at variance on the question of electronic signatures and qualified certificates. Apart from the Member States that do not require electronic signatures, several require Advanced Electronic Signature and a few require additionally a Qualified Certificate. While the Directives 2001/115/EC and 1999/93/EC, do not have restrictions on the EU location of the Certified Authorities, some restrictions are being imposed by Member States not recognising certificates issued in other Member States.
Form and format of archiving

The e-Invoices are to be archived in the form they have been issued. They have to be made available or access provided to the pertinent authorities within a reasonable time. There is some debate on the legality/admissibility of transforming invoices and archiving them as originals: - Transforming paper invoices into digital format for archiving - Transforming e-Invoices onto to a paper medium for archiving (less of a burden for small organisations)
General
Hybrid forms, self billing and conventional invoicing

Hybrid forms, in the context of self billing, are where not all the supplies of a supplier to one and the same customer are administered under ‘Self Billing’ procedures. A part, possibly for services or miscellaneous and non production material are invoiced by the supplier and not self billed by the customer.
Invoice process requirements and invoice content

Issues that are related to the process, content or form of data in an electronic invoice, such as rules for cancelling an invoice before it is made available to the customer, standardised codes for common text required to be placed in an invoice, e.g. VAT exemptions, rounding rules for amounts,
Location of archiving e-Invoices

The location of archiving of e-Invoicing is not restricted and may be in another Member State than that of the sender or receiver. Notification may be required if it is: - In another Member State - If it is not in an EU Member State
Mandatory storage period of invoices for VAT

The mandatory storage period of invoices for VAT varies per Member State between six years and eleven years. In some member states, the mandatory storage period may be different and less than the period required for company law and or commercial law.
Other methods to ensure integrity

This concerns the management of technology, policies, documentation and processes addressed at the assurance and long-term evidencing of integrity and authenticity of e-invoices. When public key certificates are involved in such technologies and processes, activities may involve the request, retrieval, operation, renewal, revocation, suspension, look-up, validation, publication and other processes that may be required during the life-cycle of such public key certificates, as well as concomitant processes such as generation, activation, protection, use and back-up in relation to the associated private keys.
Outsourcing

More and more organizations are outsourcing their business processing and e-Invoicing to third party service providers. While the Directive 20001/115/EC mentions that service providers may be used by trading partners, they are not explicit in terms of what is required of the service provider.
Outsourcing of archiving

The regulation concerning Archiving, given in section 4.4. are also valid for Outsourcing of archiving. In addition, the legal responsibility remains with the VAT registered person. It is in the interest of the VAT registered person for service level agreement contracts, to set out that the service provider must enable the VAT registered person to comply with his obligations.
Outsourcing of buyer functions

In order that the whole end to end flow of the electronic invoicing exchange can be controlled, the requirements imposed for guaranteeing the authenticity and integrity of the data received by the service provider and later passed onto to the invoice recipient must be guaranteed. In terms of an organisation to which the whole or a part of the electronic invoicing process is outsourced by a business, the regulations are relatively straightforward in that the legal responsibility remains with the VAT registered person. It is in the interest of the VAT registered person for service level agreement contracts, to set out that the service provider must enable the VAT registered person to comply with his obligations. (Transferred to WG2/SG1 Good Practices for Service Providers).
Outsourcing of e-Invoicing processes

In terms of an organisation to which the whole or a part of the electronic invoicing process is outsourced by a business, the regulations are relatively straightforward in that the legal responsibility remains with the VAT registered person. It is in the interest of the VAT registered person for service level agreement contracts, to set out that the service provider must enable the VAT registered person to comply with his obligations. (Transferred to WG2/SG1 Good Practices for Service Providers).
Outsourcing of invoice issue

The formal life cycle of the e-invoice starts with the act of issuing an e-invoice; hence, this step ordinarily coincides with the application of specific controls enabling the verification of ongoing integrity and authenticity until the end of the mandatory storage period. Often, the application of such controls is a strong indication that the Supplier or in the case of self billing the customer, or e-Invoicing Service Provider intended to formally issue the invoice. Upon issue, the e-invoice may no longer be disposed of or altered; the e-invoice now formally exists in VAT terms and both parties to the underlying sales transaction are responsible for guaranteeing its integrity and authenticity.
Self billing

Self billing is an approved invoicing procedure whereby the buyer, rather than the supplier, issues the invoice based on receipts of material and or services from a supplier. Self billing invoices may also be issued by a service provider.
Self billing - further

Self billing invoices, generated by the customer or a service provide on behalf of a supplier is a concern to VAT administration. There is a risk if the administrations of both parties are not working in sync to avoid invoices being issued for the same delivery, whereby the customer may recover input VAT twice. While the Directive requires that parties accept e-Invoicing, the form and procedures of acceptance of self billed invoices is at variance in the Member States. In jurisdictions where each self billed invoice has to be explicitly accepted by the supplier, it is possible to argue that these risks are much better mitigated than where such invoices do not have to be explicitly accepted, but explicit acceptance is effectively a mandated procedural control and is much more burdensome than an effective system control. The electronic implementation of such explicit acceptance is likely to be equally burdensome. The recommendations on this issue are intended to provide on the one hand the necessary assurance to Member State VAT administration, while on the other hand to minimize the burden on the trading partner.