E-invoicing: how France puts pressure on Europe with new rules from 2024

France will require e-invoicing from 2024 to recover billions of euros lost in the tax gap. Suppliers and foreign entities must comply. It sets a precedent that can give ideas to other European countries such as Belgium and the Netherlands.

First a little history to create a clear picture before we go deeper into the matter. Specifically, European countries lose billions of euros in annual revenue in what is generally tax gap Called. In the European Commission’s latest study, European countries lost a total of $ 134 billion in VAT revenue.

In Belgium, 4.44 billion euros are lost every year, which means that we are doing worse than the Netherlands with 2.67 billion euros. Italy is the biggest loser with 30.11 billion euros ahead of Germany (23.44 billion euros) and France (13.86 billion euros).

Many elements contribute to the formation of such tax gap: fraud, evasion, bankruptcies and optimizations. Another important factor is administrative errors. Specifically, a mountain of free money awaits every European country, for some more than for others.

Tax gap = free money

Free money is something governments can spend en masse as budget deficits rise after two years of fighting the coronavirus. How can you claim that money? To a large extent by implementing e-invoicing in large companies and SMEs. This makes the entire billing and payment chain transparent, and organizations can meet their VAT obligations in real time. At the same time, it also provides less work for companies once the system is active, but also for the public sector.

This is where France comes in with an ambitious plan to make e-invoicing mandatory for businesses in the near future. “By July 2024, in a first phase, only the largest French companies should join the network,” says Jens Närger, Product Marketing Manager at Basware.

By July 2024, in a first phase, only the largest French companies were to join the network

Jens Närger, Product Marketing Manager at Basware

We’ll pick him up tax gap to translate into human language, something they like to give themselves time for at Basware. When a country makes e-invoicing mandatory, the company wins. Suddenly one no longer has to evangelize why, but one has to fight for a place among the great (national) competition.

Ambitious French deadline

According to Närger, France has set a very ambitious deadline for such a drastic project. “The ball has been passed since the end of last year, but the certification program for the PDP (Plateforme de Dématérialization Partenaire) will not start until September 2023. It gives providers very little time to comply with the requirements.”

According to Mekki Ben Othman, Senior Product Manager at Basware, there are many PDP providers showing interest. “Today we see that more than 80 service providers are showing interest in offering a solution. How many come to the finish line to be ready for the certification process I can not predict, but I expect that will fall a lot. The requirements are very demanding and require great expertise. ” He alludes to the strengths of his employer, who has more than 35 years of experience in the industry.

“One must keep in mind that large companies have many international customers and a local presence in many countries, each with their own national rules for invoicing and payments. The last thing you want is to embrace dozens of PDP providers to cover everything worldwide. Then major players like Basware are interesting, covering most of the countries and creating added value globally. ”

Start with B2G, then B2B

The deadline from July 2024 applies to national and international B2B e-invoicing and B2C e-reporting at any French company. With regard to outgoing invoices, only the large companies have to comply. Specifically, this means that all French companies must choose a PDP platform or the government platform PPF in order to be compatible in terms of sending and receiving invoices.

This gradual roll-out in combination with a pilot phase focusing on large companies makes the first roll-out somewhat easy. That gives France time best practice to collect for the next stage. “It’s the best approach as far as I’m concerned,” Othman emphasizes. “Such things are very complex, implementing them quickly and making mistakes results in an economic disaster.”

As a first step, governments should always experiment with e-invoicing for public procurement.

Mekki Ben Othman, Senior Product Manager at Basware

According to him, governments should always experiment with e-invoicing for public procurement as a first step, something that has been happening in France for some time. You can gain a lot of experience with such B2G transactions, which you can translate into a more concrete expansion towards B2B in the future.

It can be more extreme

France is giving in, but it is not the first country in the EU. Italy already mandates e-invoicing today and has been in the final phase since this year, where small businesses must comply with the latest rules. In Poland, they start with the obligation for e-invoicing from 2023.

Närger also mentions two special examples of foreign e-invoicing projects. “In Mexico, they even go a step further, and the state has 100 percent visibility into any company’s bank account. They send organizations the tax returns where everything is already filled out at once. There you have to motivate yourself in the event of a change, completely the inverted world. ”

He takes another example from the African continent of Malawi. “The B2C invoice volumes are much larger than the B2B invoice volumes. Result: the government provides national payment terminals that are directly linked to the procurement. It is a very elegant solution that requires political courage. ” In the latter, he gets into the main challenge by realizing e-invoicing in other countries.

Political courage required

With Italy, France and Poland in Europe, e-invoicing has started to rise. According to Othman, the technology is already being discussed in Belgium. “Such decisions require political courage. On the other hand, not all countries are ideally placed to simply embrace e-invoicing. “As a German, Närger addresses this with an example from his own country.

Such decisions require political courage. On the other hand, not all countries are ideally placed to simply embrace e-invoicing.

Mekki Ben Othman, Senior Product Manager at Basware

“In Germany you have 16 states. At the federal level, all B2G transactions must be done via e-invoicing. At the state level, this is not necessary, except in Bremen or Berlin. In addition, they use different formats because the tax administration’s setup is a little different. You hear it already: As long as nothing can be decided centrally, it is a pure nightmare. ”

In any case, we can not avoid e-invoicing in the future. Commitments within Italy and soon France and Poland are causing an important shift. Vendors must already take extra steps to comply with the rules, and companies in other countries headquartered in one of these three must embrace e-invoicing completely. The technology is clear, only the political courage is lacking. At least until the lure for free money becomes too big.

This is an editorial in collaboration with Basware. You can find more information about their solutions here.

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