Are your electronic invoices VAT compliant?

Out-Law News | 23 May 2006 | 9:15 am | 1 min. read

Companies that send electronic invoices in Europe are faced with differing local VAT laws that make compliance a challenge. Mistakes may result in e-invoices being classed as non-compliant, triggering penalties such as fines and even imprisonment.

E-invoices were first accepted as legal VAT documents by all EU Member States in 2004. But while all member states accept e-invoicing, the detail of legislation varies from country to country, with some being far stricter than others. And according to Accountis Europe, a provider of secure financial document exchange and payment systems, confusion looms.

For companies in the UK, there are no penalties for non-compliance, but they will lose the ability to deduct VAT. But organisations in Ireland can be fined €1,520 for each non-compliant e-invoice, plus an additional personal penalty of €950. Organisations in Sweden face some of the harshest penalties, with non-compliant e-invoicing or storage incurring a criminal penalty of up to two years in prison.

“Trying to keep track of the different country regulations can be a major headache for companies who trade internationally,” said Rhys Jones, managing director of Accountis. “All e-invoices must comply with VAT rules stipulated in the place of supply."

So an e-invoice generated for goods sent out from an office in Spain must comply with Spanish law, even if the organisation is registered in Germany. "As a result," says Jones, "a company needs to be fully conversant with legislation in all the countries from which they supply.”

To ensure that e-invoices are compliant throughout Europe, it has been suggested that companies use a pan-European e-invoicing service which operates a proven European transaction network.

Electronic invoice presentment and payment (EIPP) systems have the expertise and local knowledge to make sure all e-invoices are VAT compliant. This eliminates the risk of being penalised for exchanging non-compliant e-invoices. They also offer additional features to help facilitate smooth international trading, such as multicurrency and multilingual support.