E-invoices: A New Legal Field for European Counsels

By Héloïse Devoret, Virginie Guerineau, Marion Lagrange, and Clara Marco, University of Montpellier, Centre du Droit de l'Entreprise, Program of Master 2 "Droit du Commerce International"

Overview

Electronic invoicing, also known as e-invoicing, may be defined as the electronic transfer of invoicing information - billing and payment - between business partners in an integrated electronic format.

EU Regulatory Framework of E-invoicing

1.1. European environment for specific e-invoice

The European Commission wishes e-invoicing to become the prevailing form of invoicing in Europe, especially regarding VAT and public procurement matters.

Therefore, the current regulatory environment regarding e-invoices within the EU is composed as follows:

- Council Directive 2010/45/EU on the common system of value added tax regarding the rules on invoicing, amending Directive 2006/112/EC: this Directive provides for three main technological means that insure the authenticity and the integrity of e-invoices: the Electronic Data Interchange system (hereinafter referred to as EDI), the advanced electronic signature and the reliable audit trail system. Pursuant to Directive 2010/45/EU, all EU Member States had to provide the same legal status to electronic invoices as for paper invoices as of January 1st, 2013. This Directive promotes an efficient cross-border creation, validation, transmission, acceptance, storage and retrieval of e-invoices through five key elements:

- Council Directive 2014/55/EU on electronic invoicing in public procurement: this Directive introduces a European standard on electronic invoicing, facilitating the sending and receipt of e-invoices between systems based on different technical standards. Consequently, once this Directive has been transposed into national laws of all EU countries (the deadline being November 27, 2018), electronic invoices will be able to flow freely across the EU.

1.2. European environment for electronic signature

The advanced electronic signature is one of the three technological means recognized by the EU as providing for both authenticity and integrity of electronic invoices. Directive 1999/93/EC on a Community framework for electronic signatures allowed the establishment of common EU standards for the electronic signature. Unfortunately, the Directive did not allow a sufficient degree of harmonization as to talk about a European electronic signature.

Regulation 910/2014/EU on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC will enter into force on July 1st, 2016. It will finally provide full harmonization as it will apply uniformly to EU Member States.

Technological means to guarantee e-invoices recognized by the EU

2.1. E-invoices guaranteed by unstructured formats

The non-structured formats that may guarantee e-invoices are the advanced electronic signature (2.1.1) and the reliable audit trail (2.1.2).

2.1.1. The advanced electronic signature

An electronic signature may be defined as "data in electronic form which are attached to or logically associated with other electronic data and which serve as a method of authentication."

To be considered as an advanced electronic signature, it must comply with the following requirements:

Certification-service-providers accredited by the Member States and which fulfill the requirements set up in Directive 1999/93/EC shall certify the authenticity of advanced electronic signatures. Every EU Member State shall issue a list of the national accredited certification-service-providers called the "Trusted List".

2.1.2. The reliable audit trail

Since Directive 2010/45/EU, e-invoices guaranteed by an unstructured and unsigned format may have a probative value on VAT matters if their authenticity and integrity are guaranteed through the establishment of a reliable audit trail.

Business controls shall create reliable audit trails by providing a documented historic of the e-invoice and the business transaction related to the latter. Every business subject to VAT that chose to guarantee its e-invoices through the reliable audit trail system has the responsibility to constitute, document, secure and control its own reliable audit trail in accordance with the law.

In France, the possibility to insure the integrity and authenticity of e-invoices through a reliable audit trail system was transposed in Article 289 VII 1° of the General Tax Code. This article states that such trail shall be established through documented and permanent controls organized by the companies themselves.

2.2. E-invoices guaranteed by structured format

The EDI system is a structured format through which e-invoices may be guaranteed. EU Member States recognize EDI systems as defined in Recommendation 1994/820/CE of the European Commission since Directive 2001/115/CE. Article 2 of this Recommendation provides that Member States shall acknowledge EDI systems if they guarantee the authenticity and the origin of the data. Member States may still provide for additional requirements and require a summary document in paper format though.

In France, the EDI softwares are made in accordance with electronic exchange standards acknowledged by the French tax administration. Decision of April 10, 2015, modifying the standard agreement dealing with tax data transfer operations, sets that the electronic data interchange system shall be conform to the EDIFACT standards (Electronic Data Interchange for Administration Commerce and Transport). These standards are defined by the UN Economic Commission for Europe as "a set of internationally agreed standards, directories, and guidelines for electronic interchange of structured data, between independent computerized information systems ."

Regarding the opportunity to choose EDI system instead of electronic signature or reliable audit trail system to certify electronic invoices, two aspects shall be considered: even though EDI systems ease both storage and research of information (name of the client, ordering number, amount of VAT, etc.), their use represents higher costs.

Legal issues related to cross-border e-invoices

3.1. Cross-border e-invoices within the EU

Even within the EU, cross-border e-invoices may be subject to different domestic laws raising issues regarding their content (3.1.1) and record-keeping rules (3.1.2).

3.1.1. Legal issues regarding the content of e-invoices

Directive 2001/115/CE states that it is necessary to "draw up a list, harmonized at Community level, of the particulars that must appear on invoices (....) and to establish a number of common arrangements governing the use of electronic invoicing and the electronic storage of invoices, as well as for self-billing and the outsourcing of invoicing operations."

Differences between domestic laws transposing this Directive lead to difficulties. Cross-border businesses are subject to national accounting, commercial and tax laws that still differ from one EU Member State to another. The consequence is additional complexity for companies and individuals. Thus, one issue coming from the aforementioned lack of harmonization concerns the form of the advanced electronic signature. Fortunately, this issue has been partially settled by Regulation 910/2014/EU that harmonizes trust services requirements. From now on, the legal effect of an electronic signature shall not be denied even if it does not meet the requirements to be a qualified electronic signature. Nevertheless, the legal effect of such a signature is defined by national rules and this situation still leads to legal uncertainty for the receiver of the invoice.

3.1.2. Legal issues regarding record-keeping rules

Another issue concerns the record-keeping of e-invoices for VAT matters. Indeed, archiving periods and contents differ from one EU Member State to another. For instance, according to the European Commission website, Austria requires a storage period of 7 years whereas Croatia requires a 10 years period.

3.2. Cross-border e-invoices with the US

If e-invoices contain personal information, meaning information coming from an identified or identifiable natural person, Directive 95/46/EC on the protection of personal data will apply to them.

Article 25(4) of Directive 95/46/EC provides that if a third country does not present the "adequate level of protection" (that is an equivalent level of protection to the European one), Member States shall prevent any transfer of personal data to this third country. The European Commission recognized the US as one of the third countries having an insufficient protective legislation for personal data.

An international agreement entitled Privacy shield is currently being negotiated, between the US Commerce Department and the European Commission. It is composed of a set of principles relating to the protection of personal data and shall be implemented quickly after a vote of the European Parliament. This Privacy shield agreement aims at ensuring the "adequate level of protection" required by the Directive in a less burdensome way than the existing alternative techniques.

 

CONCLUSION

Additional Resources