- International e-invoicing market 2011 - Legal framework - Evolution towards 2013

1. Indirect Tax Apero
Electronic invoicing and
archiving
March 2012
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2. Contents
Introduction
► Background
► International e-invoicing market 2011
► Legal framework
► Evolution towards 2013
Practical questions and sharing of
experience
► General questions
► Accounts Payable
► Accounts Receivable
► Intercompany
Closing remarks
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3. Section A
Introduction
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4. Background
► EU Member States
► Invoicing Directive (2001/115/EC)
► Council Directive (2006/112/EC)
► Council Directive 2010/45/EU of 13 July 2010
► Implementation due by 1 January 2013 throughout the EU
► Explanatory Note – November 2011
► Non-EU countries
► Local rules remain in place
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5. International e-invoicing market 2011
Source: Billentis
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6. Belgian legal framework
E-invoicing & e-archiving
Current DRAFT 2013
E-Invoicing E-Invoicing
Article 53octies of the Belgian VAT code Belgian VAT Code
► Authenticity ► Definition electronic invoice
► Integrity ► Acceptance by the customer
► Authenticity, integrity & readability as of
Royal Decree no.1 29 December 1992 issuance until end of storage period
article 1, ► Taxable person determines how (!)
§2 … (acceptance by the customer)
► Definition authenticity
§3 … (cancelled as of 1 January 2010)
§4 … (cancelled as of 1 January 2010) ► Definition integrity
Royal Decree
E-Archiving
► Electronic invoicing provisions abolished
Article 60, §3 of the Belgian VAT code
► Authenticity, integrity & readability
E-Archiving
► Location
► Location
► Format (circular letter 2008/16)
► Format (tolerance)
► Period
► Period
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7. EU legal framework
Electronic invoicing (replacement art. 232)
Current Directive 2010/45/EU
Invoices issued pursuant to Section 2 may The use of an electronic invoice shall be
be sent on paper or, subject to acceptance subject to acceptance by the recipient
by the recipient, they may be sent or
made available by electronic means
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8. EU legal framework
Electronic invoicing (replacement art. 233)
Current Directive 2010/45/EU
Invoices sent or made available by The authenticity of the origin, the
electronic means shall be accepted by integrity of the content and the legibility
Member States provided that the of an invoice, whether on paper or in
authenticity of the origin and the integrity electronic form, shall be ensured from the
of their content are guaranteed by means point in time of issue until the end of the
of: period for storage of the invoice
► Advanced electronic signature … Each taxable person shall determine the
► Electronic data interchange (EDI) … way to ensure the authenticity of the
origin, the integrity of the content and the
► [If accepted by member state] other legibility of the invoice. This may be
electronic means achieved by any business controls which
create a reliable audit trail between an
invoice and a supply of goods or services
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9. EU legal framework
Electronic invoicing (replacement art. 233) [CONT’D]
Directive 2010/45/EU
“Authenticity of the origin” means the
assurance of the identity of the supplier or
the issuer of the invoice
“Integrity of the content” means that the
content required according to this
Directive has not been altered
Other than by way of the type of business
controls …, the following are examples of
technologies …:
► An advanced electronic signature …
► Electronic Data Interchange (EDI) …
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10. EU legal framework
Electronic archiving (replacement art. 247)
Current Directive 2010/45/EU
[Optional, TBD by Member State] 1. Each Member State shall determine
1. Limitations as to the place of storage the period throughout which taxable
2. Limitations as to the original format
persons must ensure the storage of
invoices …
3. Storage: non- harmonized period
2. Member State may require that
invoices be stored in the original form
in which they were sent or made
available, whether paper or electronic
…
3. The Member State may lay down
specific conditions prohibiting or
restricting the storage of invoices in a
country with which no legal instrument
exists relating to mutual assistance …
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11. Evolution towards 2013?
How to audit authenticity and integrity?
ESP (optional)
Archive
invoice
Prepare Create Send
Delivery
Seller
invoice invoice invoice
Prepare Validation
Receive Technical
Order Reception for and
invoice validation
processing processing
Archive
Buyer
invoice
Scope current legislation
Scope new legislation
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12. Section B
Practical questions
and sharing of
experience
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13. General questions

14. When invoicing cross-border,
in which Member States do
the e-invoicing rules apply?
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15. Ernst & Young | 14

16. Ernst & Young | 15

17. Which formats can be
considered as VAT
compliant electronic
invoices?
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18. <cac:PaymentMeans>
<cbc:PaymentMeansCode>46</cbc:PaymentMeansCode>
</cac:PaymentMeans>
<cac:TaxTotal>
<cbc:TaxAmount currencyID="AUD">1.68</cbc:TaxAmount>
</cac:TaxTotal>
<cac:LegalMonetaryTotal>
XML
<cbc:LineExtensionAmount currencyID="AUD">18.61</cbc:LineExtensionAmount>
<cbc:TaxInclusiveAmount currencyID="AUD">18.61</cbc:TaxInclusiveAmount>
<cbc:PayableAmount currencyID="AUD">18.61</cbc:PayableAmount>
</cac:LegalMonetaryTotal>
<cac:InvoiceLine>
<cbc:ID>1</cbc:ID>
<cbc:InvoicedQuantity>1</cbc:InvoicedQuantity>
<cbc:LineExtensionAmount currencyID="AUD">3.61</cbc:LineExtensionAmount>
<cac:Item>
<cbc:Description>Mouse Trap</cbc:Description>
Pdf
</cac:Item>
<cac:Price>
<cbc:PriceAmount currencyID="AUD">3.61</cbc:PriceAmount>
<cbc:BaseQuantity>1</cbc:BaseQuantity>
</cac:Price>
</cac:InvoiceLine>
<cac:InvoiceLine>
<cbc:ID>2</cbc:ID>
<cbc:InvoicedQuantity>1</cbc:InvoicedQuantity>
<cbc:LineExtensionAmount currencyID="AUD">7.50</cbc:LineExtensionAmount>
<cac:Item>
<cbc:Description>Light globe</cbc:Description>
</cac:Item>
<cac:Price>
<cbc:PriceAmount currencyID="AUD">7.50</cbc:PriceAmount>
<cbc:BaseQuantity>1</cbc:BaseQuantity>
</cac:Price>
</cac:InvoiceLine>
<cac:InvoiceLine>
<cbc:ID>3</cbc:ID>
<cbc:InvoicedQuantity>1</cbc:InvoicedQuantity>
<cbc:LineExtensionAmount currencyID="AUD">7.50</cbc:LineExtensionAmount>
<cac:Item>
<cbc:Description>Light globe</cbc:Description>
</cac:Item>
<cac:Price>
<cbc:PriceAmount currencyID="AUD">7.50</cbc:PriceAmount>
<cbc:BaseQuantity>1</cbc:BaseQuantity>
</cac:Price>
</cac:InvoiceLine>
</Invoice> <cac:Contact>
<cac:OtherCommunication>
<cbc:Channel>UBL.XML.org</cbc:Channel>
<cbc:Value>http://ubl.xml.org/users/jazza</cbc:Value>
</cac:OtherCommunication>
</cac:Contact>
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19. If an e-invoicing service
provider shows me a VAT
compliance report from a
third party, I can be
confident that the solution
will be VAT compliant?
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20. Ernst & Young | 19

21. Accounts payable

22. Example
Scanners
RS Interprete Ebydos SAP
Online cockpit core
2
6 Verification + post invoice
Data capturing 7 Start workflow
via templates
(background) 3
4 S
1 RS transfer + Online SAP A
connector plug-In Archive Online
On site Link P
Pdf
SAP Outlook
Outlook
Outlook Content
Server
8
Collector XML Workflow in
5 Invoice outlook with
hyperlinks to
Image storage
sFTP SAP
HQ
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23. Can I accept a PDF invoice
attached to an e-mail from
my supplier?
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24. If we receive a PDF invoice
attached to an e-mail, can
we print the attachment and
delete the original e-mail?
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25. If we receive a PDF invoice,
can we export the data to
another format (e.g. XML)
for automatic processing?
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26. If the electronic invoices have
been signed with an
electronic signature, I can
accept them because it is a
commonly accepted
method?
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27. Is it allowed to scan paper
purchase invoices and to
destroy the original paper
invoices afterwards?
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28. Accounts receivable

29. Example
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30. Do we need the upfront
written agreement of the
customer?
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31. Can I issue a PDF invoice
attached to an e-mail to my
customer?
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32. Can I post the data of the
invoice on a web portal?
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33. Can I accept electronic self-
bills issued by my
customer?
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34. Intercompany

35. Example
P.O. P.O.
1 IC
5
3 invoice 1
Order
Procurement Sales
Opco
Company Company
Order
Invoice 2 confirm.
Order Invoice
Invoice
confirm. Production
Company
2
5 6 4
3
Vendor 4 Customer
Third party order process Cross company sales process
Electronic invoices
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36. Can we consider the files
exchanged by our ERP
(e.g. iDoc in SAP)
as VAT compliant e-invoices?
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37. Section C
Closing remarks
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38. No or little specific rules and
guidelines on auditability.
Therefore, business is responsible
for being in control.
You should:
► Document
► Identify
► Validate & Test
► (Obtain Ruling)
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39. How can you show you’re in control
Document Identify the Validate & Test
your process risks & controls your controls
A P A ccountant HC A ccounting FPS Cash Purchase Invoice approver
and Bank order creator
A /P Receive
invoice
A /P Order of
goods/services
(receipt in
SA P )
A /P
Invoice
f ulf ills
legal No
A /P requirem ents?
Receive
Y es
invoice A /P Send invoice
back to vendor
A /P
No A /P
Invoice
Hydrocarbons
to be
invoice? A /P HC
scanned?
Invoice
identif ied
A /P Execptions No
Y es
(m anual postings &
approval)
A /P Payment
A /P
Does No
invoice
m ention
a PO?
Y es
A /P MM Queue A /P FI Queue &
ERS advise
A /P Scan, I nterpret A /P Scan, I nterpret
and V erif y and V erif y
A /P
Does
vendor
exist?
No
Y es
A /P Create vendor
A /P Price
Y es
and
quantity
ok?
A /P Final posting in A /P Payment Y es
SA P
No
Y es
A /P P rice
A /P Blocked and/or
posting in SA P & quantity
start w orkf low to delta
PO creator approved?
No
A /P
Wrong Y es
posting
by
accounting? A /P Correction A /P Payment
No A /P Contact
supplier f or new
invoice or credit
note
A /P Enter PO
num ber
Y es
A /P
No A /P Park docum ent
A /P ERS Does P O
in SA P & start
advise? num ber
w orkf low
exist?
Y es
No
A /P Link image to A /P Payment A /P
ERS invoice Price/quantity
ok?
A ccounting
alloc.
correct?
Y es
No
A /P Payment A /P Final posting in
SA P
A /P Change A /P
Y es
accounting Wrong
allocation accounting
allocation?
No
A /P Final posting in A /P Payment
A /P Contact
SA P
supplier f or credit
note/new invoice
▶ Document your process ▶ Clearly document the risks ▶ Audit your documentation and
(people, process, technology) and the controls within the process (or have it audited)
▶ Use of flowcharts to improve process ▶ The more independent the
understanding ▶ What could go wrong testing, the more credibility it
▶ Documentation provides a questions may help will have towards VAT
basis for communicating a ▶ Do not forget the IT General administration
process (under control) to Controls (in particular access
those responsible for management)
monitoring (e.g. VAT admin.)
Is your process is (partly) outsourced?
Obtain an ISAE 3402 (former SAS 70) or similar with the right scope from your supplier
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40. How can I convince the
various stakeholders that
my solution is VAT
compliant?
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41. Approach
Phase 1 – Drafting of the solution description
Objective Deliverable
► Validation whether the design of your ► Following our review, we will provide you with
electronic invoicing and archiving solution a complete and clear solution description which
would lead to VAT compliant electronic will be used as the basis for our VAT
invoicing and archiving. compliance assessment.
Approach
► Following the receipt of a solution description
of the in-house e-invoicing and archiving
solution of your company with regard to its
electronic invoices, EYwill validate the
completeness of the solution description.
A B
You provide EY with a
Ernst & Young reviews You provide
solution description
initial description and comments and Ernst &
(based on EY template
identifies areas that Young provides final
with example
require additional input solution description
description)
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42. Approach
Phase 2 – VAT review of the solution description
Objective Deliverable
► On the basis of the final solution description, ► Following our validation, we will provide you with a
perform a validation of the electronic invoicing and VAT compliance report on the solution. This VAT
archiving solution and confirm whether it is compliance report will contain the solution
compliant with the VAT legislation. description provided by you, the country’s VAT
requirements and our validation/comments.
Approach
► You send us a request to perform a validation for
one or more countries.
► If it would appear that the solution description is in
line with the country’s VAT legislation, Ernst &
Young will draft a confirmation letter.
► However, if it would appear that the solution
description is not in line with the country’s VAT
legislation, we will draft a VAT compliance report
and list the shortcomings, as well as
recommendations.
C D E
Ernst & Young Ernst & Young Ernst & Young You decide to
Ernst & Young provides a proceed in
validates the solution provides you with an
inventarises the confirmation letter or making the
description against e-mail containing the
VAT legislation draft VAT compliance solution VAT
the VAT legislation main findings
report compliant
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43. More info?
Our e-invoicing flyer Our article in Indirect Tax Briefing
Available in the room Issue April 2011, available via EY Insights app
Ask for it in Apple and Android app stores
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44. Let’s talk individually
If you have an e-invoicing project or are moving towards such
a project, we would be pleased to act as your sounding
board in a one-hour meeting free of charge.
If you are interested, we have foreseen time slots to meet
with you in our offices in Ghent, Antwerp and Brussels.
Please note your preference down on the evaluation forms.
Enjoy the “Apero”
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45. Our EY EMEIA Center of Excellence
Engagement partner ► We use a multidisciplinary team, i.e. with representatives
from both Tax and Advisory, led by Marc Joostens,
partner Indirect Taxes.
Marc Joostens Quality Assurance
► Within VAT, Marc has specialized in electronic invoicing
and archiving. Giving his experience and expertise, Marc
leads an E-invoicing Center of Excellence, a central hub
of e-invoicing subject matter resources from both VAT
Andy Deprez
and Advisory that support EY teams globally.
Project Manager + VAT fieldwork ► Marc has advised a large number of Belgian and
international clients in validating the VAT compliance of
their e-invoicing and e-archiving solutions. Next to this,
Matthias Penninck Marc has played a leading role in advising policy makers
in this matter, both on a European and Belgian level. In
this respect, Marc has facilitated and lead the study that
has been performed for the European Commission with
regard to the European rules on e-invoicing and e-
Business Process Fieldwork archiving.
► In order to guarantee a smooth execution of the project,
Marc will from a VAT side, be assisted by Matthias
Tim Wulgaert Penninck, Senior Manager VAT, and one or more (senior)
consultants. Over the past decade, Matthias also has
advised a large number of Belgian and international
clients in validating the VAT compliance of their e-
invoicing and e-archiving solutions.
► From the advisory side, Tim Wulgaert, Director, and
Andy Deprez, Partner, are both part of the E-invoicing
Center of Excellence and have extended experience in
supporting clients with their IT (security), project and
process issues with regard to e-invoicing.
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44

46. Ernst & Young Marc Joostens
Tel.:
Assurance | Tax | Transactions | Advisory Email:
+32 2 774 91 11
marc.joostens@be.ey.com
2012 Ernst & Young Transaction Advisory Services
All rights reserved.
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