E-Invoicing Regulations: The Future of E-Invoicing

Many countries and the EU (European Union) have established either voluntary or mandatory E-invoicing regulations for issuing electronic format invoices to customers with systems that provide government transparency to reduce tax fraud and shortfalls in VAT or GST collection. 

E-invoicing mandates include E-invoicing compliance with regulations for electronic invoicing standards and may include applicability to cross-border transactions. Electronic invoicing regulations often apply to business (B2B) and government transactions. E-invoicing requires systems that provide electronic invoice management with document storage for visibility and government access to ensure tax compliance on invoices. 

What is Electronic Invoicing (E-Invoicing)?

Electronic invoicing (E-invoicing) is the issuance and electronic exchange of a digital invoice that is transmitted between a supplier and buyer in a structured format that complies with the e-invoicing regulations of a specific country or an EU member state and performs digital reporting to governments.

One purpose of e-invoicing is to reduce VAT fraud and increase tax compliance, giving the government more visibility in transactions through digital reporting. 

EDI (electronic data interchange) and specialized E-invoicing systems (like PEPP0L.com) with interoperability are used as an E-invoicing solution. They can transmit e-invoices in XML or other approved data formats for global E-invoicing. One common XML data format standard in EDI and E-invoicing is Universal Business Language (UBL). 

E-Invoicing Benefits

E-invoicing benefits for governments include reducing tax fraud and evasion by increasing transaction visibility by government agencies responsible for taxation, enabling them to collect more VAT taxes on sales transactions. 

E-invoicing has added benefits for adopters and their trading partners receiving E-invoices as buyers. Businesses can capture electronic invoices in accounts payable automation systems that provide touchless supplier-automated invoice processing for cost savings from efficiencies and fraud and error reduction from stronger financial controls. 

E-invoices replace paper invoices that may otherwise require time-consuming manual data entry into accounting and ERP systems. AP automation software using E-invoices also provides automated payment status to suppliers. 

Why Are E-Invoicing Mandates Being Put into Place?

E-invoicing mandates are being used by countries that want to improve VAT tax compliance for government revenue collection and reduce fraud. E-invoicing mandates include legislation with specific format standards and system requirements including digital invoice storage with document management. These systems give governments more visibility into transactions in real-time, generating tax revenue increases for the countries. 

E-invoicing mandates are regulations by countries or governing organizations like the EU for its member states that require electronic invoicing of transactions between businesses on a B2B level (and sometimes also B2C) or between companies and governments. E-invoicing regulations apply to taxpayers within a country and also to businesses operating in countries with e-invoicing regulations. 

E-invoicing compliance may include businesses conducting cross-border transactions with countries with e-invoicing mandates.

Which Countries Have Implemented E-Invoicing Mandates?

Countries that have implemented E-invoicing mandates include:

• European Union (EU) for its member states 
• Turkey
• United States: California only for state contractors
• Latin American countries (listed below)
• Australia
• New Zealand
• Some Asian countries
• Some Middle Eastern countries
• Some African countries

The 27 EU member countries (member states) are:

1. Austria
2. Belgium
3. Bulgaria
4. Croatia
5. Cypress
6. Czech Republic
7. Denmark
8. Estonia
9. Finland
10. France
11. Germany 
12. Greece
13. Hungary
14. Ireland
15. Italy
16. Latvia
17. Lithuania
18. Luxembourg
19. Malta
20. Netherlands
21. Poland
22. Portugal
23. Romania
24. Slovakia
25. Slovenia
26. Spain
27. Sweden

Some EU member countries have established their own regulations in addition to the EU E-invoicing requirements. 

These EU countries have additional country-based E-invoicing regulations:

• France (implementation is delayed beyond the original 2024 date)
• Germany (rollout launched and mandatory effective January 1, 2025)
• Poland (launched but mandatory for all commercial transactions beginning February 1, 2026)
• Greece (B2G e-invoicing launched; VAT e-invoicing may start in 2025, new legislation will mandate B2B transactions e-invoicing later)
• Belgium (business-to-government (B2G) e-invoicing launched; only B2B e-invoicing) becomes effective January 1, 2026)

Latin American countries with E-invoicing regulations include:

• Chile
• Mexico
• Brazil
• Colombia
• Costa Rica
• Ecuador
• Paraguay
• Uruguay
• Peru
• Panama
• Bolivia
• Dominican Republic

Some Latin American countries with E-invoicing regulations, including Mexico, Chile, Brazil, and Colombia, apply them to domestic and cross-border transactions. 

In North America, neither the U.S. or Canada mandate E-invoicing. The U.S. encourages E-invoicing but a mandate by the county isn’t in effect because the United States doesn’t have VAT or GST taxes and its states and local jurisdictions manage sales tax, with regulations varying by state and local government entity. 

Asian countries with E-invoicing mandate implementation or plans include:

• Singapore (only B2G is mandatory)
• Hong Kong
• Taiwan
• Indonesia
• Vietnam
• Philippines
• Mongolia
• Azerbaijan
• Kazakhstan

Some Asian countries that don’t promote electronic document exchange (EDI) don’t have widespread implementation of e-invoicing. Examples are Japan and India. China doesn’t mandate e-invoicing but allows voluntary e-invoicing for certain industries. In China, Beijing only mandates e-invoices for large telecommunications industry companies that use them for VAT declarations. 

Middle East countries with e-invoicing mandates or plans include:

• Israel (phased implementation beginning May 5, 2024 for the net amount of large invoices above NIS 25.000 before VAT, with phased implementations through 2028)
• Saudi Arabia
• Egypt
• Oman (mandatory for large companies operating in Oman in October 2024, followed by other timelines)
• United Arab Emirates (UAE) (e-invoicing legislation Q2 2025, with Phase 1 launch in 2026)
• Bahrain (planned implementation)
• Jordan (planned implementation)

Next, e-invoicing regulations for a few of these regions and countries are covered in more detail. 

EU

The EU E-invoicing mandate is intended to reduce shortfalls in VAT collection for EU member states. 

Overview

EU E-invoicing projects include PEPPOL and ViDA, which are intended to reduce the VAT gap, which is a shortfall in collecting VAT taxes for all sales transactions. The VAT GAP study measures and reports “the difference between theoretically expected VAT revenues and the amount actually collected.”

The EU Commission’s 2023 annual study, VAT GAP (reporting 2021 results) applies to VAT under-collection and a proposed cross-border B2B E-invoicing and digital reporting system under the ViDA project initiative:

This year’s report covers 2021 and shows that Member States lost around €61 billion in VAT in that year, compared to €99 billion in 2020. This figure represents revenues lost mainly to VAT fraud, evasion and avoidance, non-fraudulent bankruptcies, miscalculations and financial insolvencies, among other drivers.

The EU’s 2023 VAT GAP study executive summary also states:

As part of the 2022 VAT in the Digital Age proposals, currently under discussion between Member States in the Council, the Commission has notably put forward plans for a move to a cross-border digital reporting system based on e-invoicing for business-to-business transactions. The new system would make sure that Member States’ authorities are fully informed of transactions in almost real time, allowing them to immediately address instances of VAT fraud, especially missing trader or carousel fraud.

Peppol (formerly PEPPOL)

From the EU, Peppol (Pan-European Public Procurement Online), is a standard and e-Invoicing platform network for e-invoicing. PEPPOL defines open standards for document exchange for transactions for procurement between public administrations and businesses (B2G) or between businesses (B2B). 

Peppol.com is the system for E-invoicing that was originally developed by the EU. The PEPPOL.com E-invoicing system can be an ERP integration working with your ERP system. 

Besides the EU member state countries in Europe, many other countries have adopted Peppol for their e-invoicing initiatives, including New Zealand, Australia, Singapore, Mexico, and UAE. Users from other countries with voluntary E-invoicing or cross-border transactions also use Peppol. 

The EU has issued an e-invoicing mandate and the European standard on electronic invoicing with specifications, based on Directives of the European Commission.

ViDA (VAT in the Digital Age) Project

The EU has also launched a ViDA (VAT in the Digital Age) initiative project for e-invoicing and digital transformation. ViDA’s planned implementation date is 2030. 

The ViDA project has three pillars:

1. Digital Reporting Requirements (DRR): to provide standards for digital reporting (E-reporting) and e-invoicing for transactions in member states within the European Union. 
2. Platform Economy: enhancing the role of digital platforms in VAT collection for short-term rental of accommodation and passenger transport services
3. Single VAT Registration: reducing requirements for VAT registration in the EU by making the scope larger for One Stop Shop (OSS) for imports and reverse charge for B2B transactions

Estonia, an EU member, is not in favor of the Platform Economy pillar of ViDA, slowing down ViDA project acceptance. 

UK

Because the EU is no longer an EU member state, the United Kingdom currently encourages e-invoices for businesses and government but e-invoicing isn’t mandated yet. But UK has begun the process of establishing electronic invoicing standards and requirements for E-invoicing as a mandate. 

The UK took the first steps in September 2024 with the announcement of a public comments consultation on electronic invoicing to governments and businesses that will be published in early 2025 by the UK Chancellor. This HMRC consultation will establish e-invoicing standards and is intended to increase e-invoicing adoption to reduce VAT fraud. This begins a lengthy process that is expected to result in a United Kingdom e-invoicing mandate by 2029.

Mexico

In Mexico, the electronic invoice in Mexico is referred to as the CDFI, which is in XML format and structured with a print format. The issuer must sign the invoice. A Digital Seal, affixed after validation by a SAT-accredited PAC (Authorized Certification Provider), is also required. After affixing the Digital Seal, the PAC performs digital reporting of the e-invoice document to the SAT (Mexican tax authority), which then makes the electronic invoice accessible by the issuer and recipient in their tax portal. 

The Impact of E-Invoicing on US Companies Operating Globally

E-invoicing impacts US companies that operate globally because some E-invoicing mandates apply not only to businesses in the country but also to businesses from other countries that conduct business there, which may include cross-border transactions. 

Businesses can use invoicing and payment software to achieve their E-invoicing objectives. The E-invoicing software, such as PEPPOL.com, needs to comply with E-invoicing regulations. Global payments software is part of touchless invoice processing in AP automation software used to pay supplier E-invoices or digitized invoices captured through AI-assisted OCR. 

What are the Rules of E-Invoicing?

The rules of e-invoicing vary by country and region, like the European Union. 

E-invoicing rules include:

• Using standard data formats, such as specified XML-based formats
• Including required data fields, as specified in regulations
• Transmitting invoices electronically through a government-specified platform or a certified service provider without human intervention
• Digitally reporting the status of e-invoices
• Following the country’s or EU’s specific e-invoicing requirements (as applicable), which may include cross-border transactions

What are the Mandatory Fields of an E-Invoice?

EU Directive 2014/55, Article 6 defines the core elements (mandatory fields) of an electronic invoice:

1. Process and invoice identifiers
2. The invoice period
3. Seller information
4. Buyer information
5. Payee information
6. Seller’s tax representative information
7. Contract reference
8. Delivery details
9. Payment instructions
10. Allowance or charge information
11. Invoice line item information
12. Invoice totals
13. VAT breakdown

E-Billing vs E-Invoicing

E-billing and E-invoicing are different processes. E-billing by suppliers is sending customers digital invoices through an accounting or ERP system in a paperless format, such as PDF. In contrast, E-invoicing is a regulated process for sending and receiving electronic invoices that comply with E-invoicing standards, store documents electronically, and perform digital reporting to governments. 

Get Ahead: Adopt an AP Solution with E-Invoicing

Because your company operates globally and regulations may be different in countries, it needs a solution for compliance with each country’s e-invoicing regulations that includes cross-border payments. If these countries haven’t launched their E-invoicing mandates yet, many anticipate finalizing E-invoicing regulations or launching within the next few years. It’s imperative to be proactive in E-invoicing adoption by using an AP solution using supplier E-invoices that can deliver cost reduction benefits. 

Tipalti AP automation software is an ERP integration that provides benefits, beginning with self-service supplier onboarding and validation. 

Tipalti AP automation software includes:

• Data capture of e-invoices by header and line items
• Paperless invoice processing, purchase order and receiving data matching 
• Automated GL coding using AI 
• Electronic document storage
• Global regulatory compliance
• Guided approval workflows
• Efficient global payments using different types of EFTs 
• Automated payment status notifications 
• Error and fraud reduction using supplier validation and applying 26,000+ payment rules
• Spend visibility and analysis with Ask Tipalti AIâ„  for business intelligence
• Automated real-time payment reconciliation 
• Simplified tax compliance preparation reporting

With scalable Tipalti finance automation software, your business can reduce its hiring needs through staff efficiencies and take its lucrative early payment discounts on time to lower costs and gross margin and improve cash flow management. 

Summing It Up

Countries in every continent of the world have either implemented E-invoicing regulations or plan to implement e-invoicing voluntarily or through electronic invoicing mandates. 

Electronic invoicing (E-invoicing) is issuing invoices using defined standard formats to either businesses or government entities, depending on each country’s legislation. E-invoicing and digital reporting requires using government-approved systems like PROPPEL.com to transmit the invoices and manage electronic invoice document storage for invoice management. 

Sometimes middleman companies (PACs in Mexico) validate e-invoices, affix Digital Signatures, and digitally report e-invoices to the government having an e-invoicing mandate. 

Accessing e-invoices, AP automation, with accounting software or ERP integration, provides AI-driven supplier invoice data capture, end-to-end touchless invoice processing from self-service supplier onboarding through global payment, and automated payment reconciliation. Read the eBook to learn more about AP automation using supplier E-invoices.