The new world of electronic invoicing

March 2019

European Union member states have differing standards for electronic invoicing, most of which are incompatible with one another. On several occasions in the past, the European Council has stated that further development of cross-border online trade, and the modernisation of public administrations, should include a move to electronic invoicing. 
Directive 2014/55/EU on electronic invoicing in public procurement aims to remove barriers caused by differing standards by introducing a European standard for electronic invoicing in public procurement across member states. The directive defines an electronic invoice as one that ‘…has been issued, transmitted and received in a structured electronic format which allows for its automatic and electronic processing’. 
While Directive 2014/55/EU set a deadline of 18 April 2019 for introducing the standard, Italy was quick to make the change. In Italy, electronic invoicing in public procurement has been mandatory for ministries, tax agencies and national security agencies since June 2014, and all public entities since 31 March 2015. Companies have also had the option to use e-invoicing for private business transactions since January 2017. 
Taking electronic invoicing to another level, the Italian government asked the European Council for specific authorisation to oblige all Italian operators to use electronic invoicing for all business-to-business and business-to-consumer transactions. From 1 January 2019, this applies to all transactions between entities and persons established or resident in Italy. It also applies to foreign taxable persons with a permanent establishment in Italy. 
Sistema di Interscambio (SDI)  is an electronic platform managed by the Italian Revenue Agency. The SDI receives invoices and delivers them to their intended recipients, while storing them electronically for ten years. An electronic invoice must be issued in XML format. The electronic signature of the person issuing the invoice, and its transmission through the SDI, guarantees its authenticity and integrity. An invoice issued in a different format, paper or otherwise, or not transmitted through the SDI, is considered not issued and penalties may apply. 
Everyone using electronic invoices either has a recipient code or a certified electronic mail address (PEC) to which the SDI sends invoices. All resulting transactional information is held by the Italian Revenue Agency, which may use it for checking and audit purposes. 
Electronic invoicing does not apply to operators or consumers outside Italy, who will continue to receive and issue invoices in the traditional way, even if they’re registered for VAT in Italy. In fact, the new electronic invoicing requirements have no effect at all on the VAT rules that apply to transactions between Italian and European operators.  
It is, however, possible for foreign entities to register with the SDI to get a recipient code so they can have the option to receive and issue electronic invoices voluntarily. This may be a worthwhile option for companies in the same group where one of them is established in Italy.
Introducing electronic invoicing, once fully operational, will simplify business transactions and help compliance. It is destined to have a significant and beneficial impact on the day-to-day running of businesses.  

Author: Luca Borella, Magagnoli & Associati, Bologna, Italy and Roberta Righi, Modena, Italy

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